Europe as Solution: Facts and Myths

Extracts from a January 2013 speech delivered in Portugal by José Manuel Durão Barroso, President of the European Commission

I sincerely believe that, in spite of the difficult economic situation we are experiencing, we Europeans have the means to confidently rise to the challenges of globalisation, because, among other reasons, we have an instrument that is essential to that end in the process of regional integration which is currently coming to fruition in the European Union.

The European Union as a solution to the problems which our continent are going through: the need to make this case is all the more pressing at times like the present, when many are seizing on this crisis to call the European project into question and some are even predicting its end.

That is why it is worthwhile beginning by giving the lie to some of the myths in circulation that portray Europe as a problem, and then setting out some facts on Europe as a solution.

Myth number 1: Europe and the European Union caused this crisis. Not so. The crisis was born on the far side of the Atlantic, caused by practices in the financial sector that were irresponsible – in some cases even criminal – which in a second stage spread to Europe by virtue of the global nature of the banking and financial system. And what started as a problem of the high-risk subprime sector degenerated into a crisis for the real economy that then exposed the various weaknesses of the banking system and of some European countries' economies and in particular the intolerable excessive indebtedness and their lack of competitiveness.

"... Europeans have the means to confidently rise to the challenges of globalisation ..."

Myth number 2: Europe is the 'sick man' of the global economy. Not so. If we look at the debt-to-GDP ratio, the European average (of 82.5% in spite of this crisis) is decidedly better than the United States' (almost 103%) or Japan's (almost 230% of GDP).

Something which fewer may know is that, for the first decade of the twenty-first century, in spite of the redistribution of power and the emergence of extremely competitive new economies, Europe's share of the world market remained stable at 20%, while the USA's and Japan's recorded significant falls, to 13% and 9.5% respectively.

Myth number 3: The euro caused the crisis. Not so. Our currency did not cause the crisis. I remind you, moreover, that the European country in which the financial crisis took on the greatest proportions from the outset was Iceland, which is not even a member of the European Union (although it is currently a candidate for membership). The euro has remained strong and stable and is still a reference currency globally.

The so-called euro crisis should not be confused with what is in fact certain Member States' sovereign debt crisis. The euro is, I repeat, a stable, strong, credible currency.

Myth number 4: The European institutions did not act in time. Not so. There should be no confusion regarding the role of the European Institutions, which is to propose solutions, with the role of the Member States with which the final decision on these very matters lies. One of the problems that this crisis revealed and which we are now seeking to correct was precisely the lack of powers at European level to correct the imbalances which began to emerge.

Let us remember that banking supervision was conducted at national level and that there were no powers at European level. Let us remember that the mechanisms for applying the Stability and Growth Pact were weak, particularly the preventive part. And, should we wish for a more specific example, let us recall that the Member States did not approve a Commission proposal, made at the very start of my first term of office, to give Eurostat additional powers to investigate and collect data directly, without going through the national statistical bodies, which would for example have permitted us to identify serious irregularities in the Greek accounts.

Myth number 5: Europe has not shown solidarity with the countries in crisis or, in another common variant, 'We need a new Marshall Plan'. Not so. If we take the example of Greece, even excluding the new plan recently approved for the country, the total European and international assistance (including loans, private debt write-offs and funds from the Community budget) amounts to 380 billion euros. That is the equivalent of 177% of Greek GDP, or around 34, 000 euros per Greek citizen. The Marshall Plan corresponded to some 2.1% of the GDP of the countries it supported, and was therefore on an entirely different scale to the 177% of Greek GDP.

Myth number 6: The European Union – or membership of the euro – is imposing austerity on the Member States and their citizens. Not so. Policies to reduce public deficits are inevitable and have to be pursued regardless of whether countries are in the euro zone or not, although their rhythm will obviously depend on each country's economic and financial health. Even the countries which do not belong to the euro and are not bound to balance their budgets by the recent Treaty on Stability, Coordination and Governance in the MEU are following similar policies. This is yet further proof that the problem is not specific to the euro. Take the example of the United Kingdom, which recently approved one of the most rigorous budgets in its history. That is what would normally be called a real austerity budget. And, let me say it again, it has nothing to do with either the financial assistance programme or belonging to the euro.

And I could go on. These explanations are needed because it seems to me that there is very often a lack of awareness and poor information: in some cases one might even say that there is a degree of intellectual dishonesty in many of the comments and analyses - more comments than analyses - being made concerning the current situation.

This does not mean that developments at European level have not also revealed shortcomings in the management of the crisis; they most certainly have revealed shortcomings, some of which are serious. On top of the structural imbalances that persisted for far too long – particularly where the deficit is concerned – the financial crisis has laid bare the inadequacies in the design of the economic and monetary union.

It became clear that it was an imperfect construction; that while we had a shared currency, we did not have any truly coordinated economic policies; and that we did not have the necessary tools to deal with situations of financial instability. In other words, we had a ship that was fit for calm waters, but proved far too fragile when the storm came. Fundamentally speaking we had - and still have - a system where the Member States are no longer able to take autonomous action to resolve their problems on their own and where Europe as a whole is still not fully equipped to address the same problems effectively. This is the state of flux in which we currently find ourselves and which explains many of today’s anxieties.

The response currently being given at European level is intended to make good these shortcomings: we are building a ship with greater capacity and power in the middle of the storm. And I think we can all agree that it is no easy task to build a ship in the middle of a storm.

"In Ireland, long and short-term interest rates are now lower than those of countries that did not require assistance programmes."

Therefore, if we wish to return to sustainable growth, I would reiterate what I have stated many times: the solution lies in growth itself. If we wish to return to sustainable growth it is essential that we take action on no fewer than three distinct fronts: in the Member States, by making structural reforms that will enable them to balance their public accounts and increase the competitiveness of their economies; in the euro zone, by taking specific measures that will make it possible to improve the governance, action and effectiveness of the budgetary policies of the various countries; and in the 27/28 Member States, by reinforcing the accountability and solidarity mechanisms, which will include a deepening of the Economic and Monetary Union as well as progress towards a political union, with heightened scrutiny and democratic control of the new functions attributed at European level.

Even though the pace of the decisions is slower and their ambitions lower than the Commission would like – and I would note here that I am the first person in the European Council to point out the urgency of taking action and the need for a greater community spirit, greater ambition and greater solidarity, we must also note that democracies operate at an entirely different rhythm from the markets. Take the recent example of the protracted debates about the fiscal cliff in the USA. It was demonstrated once again that discussions of expenditure and revenue, redistribution and restraint are never easy, even within a single country. This has also become clear from the debates on-going in some European countries concerning intra-regional solidarity and transfers from and to central governments. It is interesting to note that, in some cases, the ones who call for more solidarity from Brussels are not prepared to practise this same solidarity within their own countries. Here, as on the European level, greater consistency in discussions of specific forms of solidarity would certainly be most beneficial.

But despite a slow start — as it was necessary to consolidate the idea that the solution would only be possible with responsibility and solidarity policies — European determination is beginning to produce results. It is thus important not to devalue what has already been done and the significant steps that have been taken. Financial assistance programmes were approved for three countries: Greece, Ireland and Portugal. And a specific programme was approved for the banking sector in Spain.

An Assistance Fund was created in the shape of the European Stability Mechanism. The financial capability of this fund for intervention in the euro zone is no less than the IMF’s total financial capacity for the entire world (approximately one trillion dollars if we include the funds coming through the EFSF). Significant legislation was adopted to reinforce the powers of the European instances — and of the Commission in particular — when it comes to budgetary control at national level. And the new Treaty reinforcing budgetary discipline came into force two days ago. The foundations are being laid for the essential banking union which — for some time now — both I personally and the Commission have been calling for. The adoption of the Commission’s proposal for a common supervisor of the euro zone financial system was, in fact, of great importance here. This essential agreement not only enabled us to resolve one of the issues that the “markets” considered most important, but also set a pattern for future decisions with a view to taking concrete action reflecting the need to deepen the integration of the euro zone while maintaining the integrity of a European Union with 27 or 28 Member States.

The European Central Bank announced its programme – Outright Monetary Transactions – providing for unlimited intervention in the secondary sovereign debt market, wherever necessary, under specific conditions. And we are taking steps to deepen the Economic and Monetary Union in line with what is known as the “report of the four Presidents” (the President of the European Council, the President of the European Commission, the President of the Eurogroup and the President of the European Central Bank), an exercise to which the European Commission contributed its own ideas and proposals in greater detail in the “blueprint” adopted in November last year.

And the more vulnerable States are also continuing to roll out their adjustment programmes with some encouraging results, although a few cases still give cause for concern. Greece is now taking decisive action to implement its reforms, and funding for the second programme has now been released. I would emphasise this point because, as you are no doubt aware, the vast majority of analysts and commentators were predicting that Greece would not only default but would leave the euro during 2012. They were wrong, and should at least concede that they were wrong.

In Ireland, long and short-term interest rates are now lower than those of countries that did not require assistance programmes. The Irish economy will show positive growth this year. The unemployment rate remains high, but the country now has a current account surplus.

In Portugal’s case, short- and long-term interest rates on debt have fallen significantly. For instance, long-term interest rates on debt fell from around 20% to below 7%. The current account is gradually becoming balanced (according to figures from the Banco de Portugal and from the INE the country has, for the first time in many years, achieved trade balance). And the reforms and these positive results have been recognised by the outside world, contributing to the country’s credibility at European and global level. For example, in the latest World Bank Doing Business Report, Portugal has risen from 48th to 30th position.

However, it is true that, both in Portugal and in other countries, these results and efforts do not immediately translate into improvements to the daily lives of the man and woman on the street. This year, Europe’s GDP is expected to contract by 0.3%, and for [next] year the European Commission forecasts that it will rise slightly, by 0.4%. As you are aware, it is difficult to make correct predictions during times of great financial instability, but they have been made nonetheless.

Levels of unemployment will, unfortunately, remain high. It was inevitable that consolidation measures would result in the economy contracting. Adjustment programmes have a recessionary effect in the short term but create the conditions for more solid, sustainable growth in the medium and long term. Not artificial growth, like that we experienced for a long time, stimulated by the issue of public debt and easy credit, but growth rooted in a solid foundation: growth in the framework of a more competitive economy. And regaining confidence is truly essential. Without it, there can be no possibility of investment, and without investment growth will be no more than a mirage.

It is true that this situation manifests very differently from one Member State to another. And in some, such as Portugal, we must call it as we see it: there is a genuine social emergency. It is therefore vital that we manage the costs of the economic downturn, in particular its impact on people, in a sociably responsible manner. Because this, as well as the social imperatives, it is also important for the success and acceptability of any adjustment programme. We must invest selectively in a range of sectors of the economy, shoulder the burden equally, and adopt a policy to combat the scourge of unemployment — all of which are also European priorities. The European Commission is of course willing to analyse the completion of programmes and to make the adjustments and fine-tuning necessary to minimise social costs. I would recall here that the country has already been given an additional year to achieve its deficit-reduction objectives, thereby slowing the pace of adjustment for 2012 and 2013.

There is also an additional key political issue. For adjustment programmes to be successful they require sustainable political and social conditions and, in turn, prudence is needed in political decision-making and in the way that those decisions are communicated. Such prudence can and must go hand in hand with determination.

Where necessary, compromises must be made and consensus must be sought at all times – either between the main institutions and the politicians or among the social partners. I repeat, the key conditions for ultimate success are political and social conditions.

Such an approach is of paramount importance if the programmes are to be successful, along with speedy implementation. The 'front loading' of adjustment offers a greater chance of success than delayed implementation.

Let us take Greece, for example, which is heading into its sixth year of recession. The problems were caused by the programme's implementation, which was tentative, piecemeal or, sometimes, non-existent. For example, in terms of structural reforms and privatisation there was no implementation at the start of the programme, the Greek authorities focused solely on the budgetary side. In addition we were faced with a long-standing political crisis, the threat of a referendum on the euro, two general elections and highly unstable coalitions. It is only with the current government, in place since the summer, that Greece is starting to regain the partners' trust.

On a broader European level, our objective is to reform the social market economy in order more effectively to protect it and to meet the demands of a new, far more competitive, world. There are those who say that the European social model is dead. This is not our opinion. This is not my opinion.

I feel we must do all we can to maintain our social market economy whilst acknowledging that, in a much more competitive context, reforms are required if we want to maintain the 'social State', a vital component, especially at a time of great social tension. I also feel that the reforms and the shouldering of responsibility that we have seen at national level must be mirrored by greater solidarity at European level. Responsibility and solidarity are two sides of the same coin. This is what I have been fighting for at European level: for a project of reform and solidarity. This is the European Commission's policy, a policy of solidarity.

This solidarity must be reflected in aid programmes for countries in difficulty; it must also, in a financial framework, foster greater investment in the areas of the future such as science, education and investment in social and territorial cohesion as one of the cornerstones of our Union. It must be solidarity that underpins the programmes launched by the Commission such as the European Globalisation Adjustment Fund (which I had the honour of launching), which helps workers who have been made redundant find new jobs, the Food Aid Programme for the most disadvantaged, which has been a major source of support for national food banks – unfortunately under threat from some governments – and the 'Youth Guarantee', which will seek to ensure that all young people up to the age of 25 are offered jobs, or the opportunity for further study, apprenticeships or work placements within four months of completing their education or becoming unemployed, partly financed by the European Social Fund.

It is true that there are times when I do not see such a commitment on the part of European governments, a vital commitment to this dimension of solidarity and to supporting investment for growth. This was demonstrated in the recent discussion on the future EU multiannual financial framework. We cannot argue in favour of growth and at the same time hinder the chances of such growth with an unambitious budget that actually limits public development. In terms of the powers that have been conferred on the Community, there is in reality an imbalance between control and discipline mechanisms and cohesion and solidarity instruments. These must also be strengthened at European level if Europe itself is to maintain vital support. European leaders cannot be surprised to see a decline in support for the European project if all they are seen to be doing is imposing discipline and inflicting punishment, or if they continue to project the idea that any successes are national and any failures European. Europe – as I have said on countless occasions – means all of us,

Despite the criticism and despite its shortfalls, Europe has been an anchor of stability and cohesion. And the task of building a closer Europe needs to continue. I say this not just out of a sense of duty or because of my personal beliefs; I am saying it because I am convinced that the European project is the solution to many of the problems facing our societies and countries today. I say this on the basis of analysis of the facts, and observation of trends and realities. Let us move on to the facts and realities of Europe as a solution.

Fact number 1: Interdependence between European Union Member States is very strong. The internal market is one of the biggest assets of each country of the European Union. To give some examples: before the crisis Spain exported to Portugal more than double of what it sold to all Latin American countries together. The United Kingdom exports more to Ireland than to all the BRIC countries. I mention this because sometimes journalists, particularly from outside of Europe, tend to underestimate the level of interdependence in the European Union. This may be the reason for the errors of analysis made by some.

Fact number 2: In a world of giants, size matters. The European Union as a whole has the biggest economy in the world with 26% of global GDP, followed by the US with 23% and China with 9% (although the Chinese economy is growing rapidly). However, if considered separately, Germany as the largest European economy merely comes in fourth place. And in 2050, judging by the growth rates in recent years, no single individual European economy will be among the top ten world economies. It seems obvious to me that we must work together as one.

Fact number 3: As power is dispersed between States and regions of the world, it is more necessary than ever to have a European pole in the multipolar international system of the future. This necessity becomes clear when we talk to our partners in Asia, Africa and Latin America who are asking for more, not less, Europe.

Fact number 4: Power is currently shifting not only between States, but also over and above those States. The internationalisation of the financial sector, for example, shows that only supra-national regulation (which for Europe would be through the EU) can restore real decision-making power to European citizens. The key is to exchange formal sovereignty for real influence. Those who believe that democracy can only work at national level have not grasped that we are now in the 21st century. Nor do they realise that national democracies alone do not possess the necessary tools to regulate the international financial system, for example.

Fact number 5: As I mentioned, many of the great challenges of the 21st century are not confined to national level. Climate change, energy security, scarcity of natural resources – all these issues can be tackled more effectively at continental or global level. On the other hand, only the critical mass that the European Union gives each of its Member States can make the difference in multilateral negotiations, whether it be on financial regulation issues in the G20, trade issues in the WTO, or environmental and climate change concerns in the context of UN conferences.

Fact number 6: Other continents are seeking to develop regional integration projects, although without the depth and breadth of the European project. From CELAC and UNASUR in the Americas to ASEAN in South-East Asia, from regional economic African communities to the African Union, the other regions of the world too are forming regional and even continent-wide projects in order to overcome many national limitations.

I could continue to list individual arguments, but it is more important not to lose sight of the fact that the European Union is a project of peace, freedom and democracy: which makes it an irreplaceable project. This is what the Nobel Committee noted on awarding the 2012 Nobel Peace Prize to the European Union. The 60 years of peace, reunification of the continent and promotion of values such as freedom and democracy which continue to reverberate throughout our southern and eastern neighbourhoods. Despite all of the difficulties, the European Union is still a beacon of freedom and prosperity, whose light shines far beyond our borders.

The year 2012 ended on a positive note for the euro area and, consequently, for the European Union as a whole. I believe it is fair to say that there is no longer a perception of the risk that the euro area will fall apart. Once and for all, and not before time, investors have realised that when European leaders say that they will do everything possible to safeguard the integrity of the euro they mean it. Does this mean that the problems have been overcome and that we can rest on our laurels? No: far from it. Reforms and adjustment must be pursued with determination, without overlooking the important aspect of social justice.

We must rebalance policies of responsibility with mechanisms and measures of solidarity. It is necessary to have balanced public accounts and to consolidate reforms in order to ensure competitiveness. But in order to attain sustainable economic growth it is also necessary to invest in the sectors that will allow us to rise to the challenge of globalisation.

History belongs to those who advance it with the conviction of the decisions made in the present day and not to those who nostalgically hold on to it, often idealising the past and almost always giving up on the future. The best chapters of European history, I am convinced, are yet to be written.


Global FDI Recovery Stalls in 2012

Macroeconomic fragility and policy uncertainty for investors has led to an 18 per cent decline in global foreign direct investment (FDI) inflows last year, to an estimated $1.3 trillion, the United Nations said in a new report released on January 23rd.

[caption id="attachment_2946" align="alignright" width="160"] James Zhan[/caption]

The Global Investment Trends Monitor, published by the UN Conference on Trade and Development (UNCTAD), added that the 2012 figure is close to that of 2009, when FDI flows reached their lowest level of just slightly over $1.2 trillion.

Global FDI had started to recover, reaching $1.6 trillion in 2011, according to the agency, which noted that it peaked in 2007, when it was close to $2 trillion.

“We thought it was a healthy, steady recovery and now we feel that it will take longer than we expected for the recovery of FDI,” said James Zhan, Director of UNCTAD’s Division on Investment and Enterprise, who added there was “cautious optimism” for this year and next.

“Our estimate is that in 2013 global FDI may grow by around 7 to 8 per cent and in 2014 something like 17 per cent,” he told a news conference in Geneva, “Having said that, we really feel that the risks are quite strong. Many macroeconomic problems have been contained but not resolved, and they can pop up anytime.”

The report – which covers FDI trends in developed, developing, and transition economies, as well as in major developing regions and recipient countries – states that FDI flows fell “drastically” in developed countries to values last seen almost 10 years ago.

“FDI declined sharply both in Europe and in the United States. In Europe, Belgium and Germany saw large declines in FDI inflows,” UNCTAD pointed out in a news release.

At the same time, FDI flows to developing economies remained resilient in 2012, reaching $680 billion, the second highest level ever recorded. Developing economies absorbed an unprecedented $130 billion more than developed countries.

FDI inflows to developing nations in Asia fell by 9.5 per cent as a result of declines across most sub-regions and major economies, including China, India, Republic of Korea, Singapore and Turkey.

However, 2012 inflows to Asia were still at the second highest level recorded, accounting for 59 per cent of FDI flows to developing countries. FDI flows to China declined slightly but the country continues to be a major FDI recipient – the second largest in the world.

Latin America and the Caribbean as well as Africa witnessed positive growth in FDI in 2012, the agency added.


Africa: Determined to Consolidate Gains

Africa is already the world’s second fastest growing economy after expanding 5% a year in the past two years, well above the global average, and Africa’s GDP is on track to grow by 5.3% this year, a televised debate this week with the presidents of Nigeria and South Africa and business leaders reported at the World Economic Forum Annual Meeting in Davos.

“If certain bottlenecks were taken out, I can easily see that doubling,” said Graham Mackay, Chairman, SABMiller, United Kingdom. The global brewer was established in South Africa more than a century ago and has extensive investments across the continent. Mackay singled out infrastructure development as probably the key driver to Africa’s continued economic progress.

"... Africa’s GDP is on track to grow by 5.3% this year ..."

Jacob G. Zuma, President of South Africa, stressed that the countries that comprise Africa are determined to consolidate their gains. “We realize that intra-trade is not enough and are working hard on that,” he said. Africa is not consumed with conflict, he added. “We are also dealing with the economic issues. We’ve just discussed and agreed to integrate three of the five economic regions, creating a free trade area of more than half a billion people.”

There are risks for investors wherever you invest in the world, said Goodluck Ebele Jonathan, President of Nigeria. But in Africa, political instability is no longer one of them. “Presently, about three African states have conducted successful elections two times,” he said. “Most African states have stable political systems.”

[caption id="attachment_2984" align="alignleft" width="201"] Jacob G. Zuma[/caption]

Africa’s leaders recognize that there are risks, but they said they are dealing with them. Nigeria, for example, is diversifying beyond oil into commercial agriculture to avert economic damage from volatile commodity prices. On recent labour unrest in South Africa, Zuma said solutions are being discussed by all sectors, including the government, labour unions, businesses and civil society.

Louise Arbour, President and Chief Executive Officer, International Crisis Group (ICG), Belgium, warned about the risk of the current armed unrest in Mali destabilizing West Africa, but said that the fight against terrorism should not obscure equally important underlying issues that Africa must address, which are governance, political and economic exclusion and very weak institutions.

“The narrative in Africa is changing and changing very fast,” said Sunil Bharti Mittal, Chairman and Group Chief Executive Officer, Bharti Enterprises, India. “There is no question that you are seeing more and more countries moving on to the democratic process and moving up the growth curve.” Bharti has been very successful in setting up telecommunications companies on the continent.

“From the standpoint of investors and people coming into Africa, I think what is important to see is commitment from the political leadership to secure investments, ensure there are no major fallouts of any terror activities which have recently developed, and, importantly, manage foreign exchange in a manner which does not deliver shocks,” he added. Mittal also called for repatriation of business profits becoming the norm and development of Africa’s financial system.


CFI.co Meets Hisham Alrayes

[caption id="attachment_2991" align="alignright" width="229"] Hisham Al Rayes[/caption]

Hisham Alrayes has been Acting Chief Executive Officer of Gulf Finance House since April 2012. He is responsible for overlooking the overall performance of the Bank, setting the Bank’s strategic direction, management of the Bank’s assets and liabilities, and managing the communications with shareholders. His responsibilities also include the Bank’s direct operations, subsidiaries and investments under management.

Mr. Alrayes first joined Gulf Finance House in May of 2007 and has also served as Chief Investments Officer. In that position, he was responsible for building, growing and maintaining GFH’s investment banking brand internationally and regionally, in addition to identifying investment opportunities, sourcing and negotiating various investment deals and overseeing the execution of due diligence, private placement memorandum development and fund raising processes. With over 13 years of extensive experience in the banking industry, he specifically focused on start-up investment projects.

Prior to joining GFH, Mr. Alrayes founded and acted as General Manager of Invita B.S.C., a business process outsource (BPO) company where he was recognized for developing the Company’s investment opportunities through establishing key alliances with leading technology and consultancy providers in the United States and Europe, thereby supporting operations and future company growth. Prior to that, Hisham was part of the Bank of Bahrain and Kuwait’s senior management team.

In addition to his current role at GFH, Mr. Alrayes also holds directorships in several companies including Chairman of Cemena Holding Company, Gulf Holding Company and Al Khaleej Fund & Investment Company. He is a board member of Balexico, Naseej, G Capital and a number of other companies.

Some of the projects Mr. Alrayes was recently involved in include the Tunis Financial Harbour and the recent acquisition of Leeds United, a leading English football club. He is currently serving as a board member for both projects.

Mr. Alrayes holds a bachelor’s degree with honours in Electrical and Electronic Engineering from the University of Bahrain and a master’s degree with honours in Business Administration from the University of De Paul, Chicago, USA.


Banco Interacciones - Preparing For the Future

Banco Interacciones is a success story which was born 19 years ago among Mexico’s worst economic crisis. Established in 1993, the bank has stayed ahead of its competitors by focusing just in those market segments where it has several competitive advantages.

Leveraged by its corporate values of teamwork, quality control, trust, commitment, loyalty and responsibility, Interacciones has been able to offer quality products to its clients, becoming in few years a respected institution in its target market, playing a major role in the public sector financing business, lending to the three government levels: federal, state, and municipal government; as well as state-owned firms and other public companies.

"By being experts in the structuring of infrastructure projects, financial advisory and project finance consultancy, Banco Interacciones is an ideal partner for international firms interested in investing in Mexican public infrastructure."

Following a clearly defined strategy of leveraging its core competencies, the bank has been a major player in market segments that demand a high degree of specialization and knowledge in designing flexible financing mechanisms.

Interacciones has a main and distinctive approach to business: a flexible strategy (the bank does not provide a standard product; it has an ability to offer custom-made services); as well as a short time to market in assisting with financial solutions for its clients.

This strategy has led to major recognition by its peers and clients as experts in supporting governments and related companies, and participating in eligible infrastructure projects. The bank supports different kinds of projects which can help it grow, be it organically or inorganically, all inside the guidelines set by its strategy.

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Mexican Banking System

Place

Total Assets
11th

Credit Loan Portfolio
9th

ROE
5th

Delinquency Rate
2nd Lowest

Even with the success the bank has experienced recently, in the last couple of years, Banco Interacciones has emphasized a need for high returns, constantly ranking among the top 3 in ROE in the Mexican banking system, but at the same time without taking unnecessary risks. The bank has significantly improved its funding structure; its liquidity has increased, reducing gaps – increasing the duration of its liabilities and decreasing the duration of its assets, and improving its ratios to better levels than expected. At the same time, the quality of its credit assets has also widely improved (with a delinquency rate well below the industry average), consistent with a policy of maximum return with the minimum risk possible.

Now, Interacciones has a better structured balance sheet, with an attractive growth of its assets that has been driven essentially through a greater assets turnover that in turn has generated a higher fee income. The key to its profitability, like it was in 2011, is an attractive profit margin that along with a high asset turnover has generated the sufficient fees to increase the bank’s total income and foster growth in the shareholders’ value.

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Banco Interacciones has kept intact its business fundamentals, encouraging growth in its financial results and rewarding performance and reliability, all of this under its current model and value propositions:

Even with the rapid growth the bank has experienced in recent years, the management has been careful of maintaining a healthy portfolio, measured by its low default rates, high capitalization index and low exposure to credit and market risk.

The bank has always been concerned with solving its customers’ needs by listening carefully to their goals, in order to develop high quality tailor made solutions. Interacciones has been an important partner for many Mexican governments, helping them with financial solutions that allow them to keep improving its infrastructure as well as improving the life of its citizens.

Summarizing, Banco Interacciones is still looking forward, keeping its value drivers focused towards Infrastructure projects, financing to sub sovereign entities and factoring in the government value chains.

Banco Interacciones is a success story which was born 19 years ago among Mexico’s worst economic crisis. Established in 1993, the bank has stayed ahead of its competitors by focusing just in those market segments where it has several competitive advantages.

Leveraged by its corporate values of teamwork, quality control, trust, commitment, loyalty and responsibility, Interacciones has been able to offer quality products to its clients, becoming in few years a respected institution in its target market, playing a major role in the public sector financing business, lending to the three government levels: federal, state, and municipal government; as well as state-owned firms and other public companies.

"By being experts in the structuring of infrastructure projects, financial advisory and project finance consultancy, Banco Interacciones is an ideal partner for international firms interested in investing in Mexican public infrastructure."

Following a clearly defined strategy of leveraging its core competencies, the bank has been a major player in market segments that demand a high degree of specialization and knowledge in designing flexible financing mechanisms.

Interacciones has a main and distinctive approach to business: a flexible strategy (the bank does not provide a standard product; it has an ability to offer custom-made services); as well as a short time to market in assisting with financial solutions for its clients.

This strategy has led to major recognition by its peers and clients as experts in supporting governments and related companies, and participating in eligible infrastructure projects. The bank supports different kinds of projects which can help it grow, be it organically or inorganically, all inside the guidelines set by its strategy.

Mexican Banking System

Place

Total Assets
11th

Credit Loan Portfolio
9th

ROE
5th

Delinquency Rate
2nd Lowest

Even with the success the bank has experienced recently, in the last couple of years, Banco Interacciones has emphasized a need for high returns, constantly ranking among the top 3 in ROE in the Mexican banking system, but at the same time without taking unnecessary risks. The bank has significantly improved its funding structure; its liquidity has increased, reducing gaps – increasing the duration of its liabilities and decreasing the duration of its assets, and improving its ratios to better levels than expected. At the same time, the quality of its credit assets has also widely improved (with a delinquency rate well below the industry average), consistent with a policy of maximum return with the minimum risk possible.

Now, Interacciones has a better structured balance sheet, with an attractive growth of its assets that has been driven essentially through a greater assets turnover that in turn has generated a higher fee income. The key to its profitability, like it was in 2011, is an attractive profit margin that along with a high asset turnover has generated the sufficient fees to increase the bank’s total income and foster growth in the shareholders’ value.

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Banco Interacciones has kept intact its business fundamentals, encouraging growth in its financial results and rewarding performance and reliability, all of this under its current model and value propositions:
Even with the rapid growth the bank has experienced in recent years, the management has been careful of maintaining a healthy portfolio, measured by its low default rates, high capitalization index and low exposure to credit and market risk.

The bank has always been concerned with solving its customers’ needs by listening carefully to their goals, in order to develop high quality tailor made solutions. Interacciones has been an important partner for many Mexican governments, helping them with financial solutions that allow them to keep improving its infrastructure as well as improving the life of its citizens.

Summarizing, Banco Interacciones is still looking forward, keeping its value drivers focused towards Infrastructure projects, financing to sub sovereign entities and factoring in the government value chains.


CFI.co Meets Kayode Falowo

[caption id="attachment_3022" align="alignright" width="180"] Kayode Falowo - Managing Director/CEO of Greenwich Trust Limited[/caption]

Greenwich Trust Limited is a boutique Investment Bank focused on creating value for its various stakeholders. The firm was incorporated in 1992 and commenced business in 1994.

Greenwich Trust Limited has various subsidiaries involved in different aspects of the Capital Market. These subsidiaries include:

Greenwich Securities Limited

Greenwich Asset Management Limited

GTL Properties Limited

Greenwich Nominees Limited

Greenwich Trust Limited is duly registered with the Securities & Exchange Commission (SEC) of Nigeria and its subsidiary, Greenwich Securities Limited, is a Dealing Member of The Nigerian Stock Exchange (NSE). Over the years, the Bank has evolved to become a strong player and market leader in the financial sub-sector of the Nigerian economy.

Mr. Kayode Falowo, is the Managing Director/Chief Executive Officer (CEO) of Greenwich Trust Limited. He attended the Government College Ibadan and proceeded to the University of Ife, now Obafemi Awolowo University, where he obtained a Bachelor’s Degree in Engineering. Falowo obtained a Master’s Degree in Business Administration and commenced his career with the Nigerian Agriculture & Cooperative Bank Ltd, then moved to North-South Bank Plc before establishing Greenwich Trust Ltd.

Mr Falowo is a Fellow of the Chartered Institute of Stockbrokers (CIS) Nigeria, a Fellow of the Association of Investment Advisers and Portfolio Managers and a Member of the Institute of Directors (IoD) Nigeria. He currently serves as the Chairman of the Capital Market Committee on Products and Business Development, Member of the Technical Committee of the National Council on Privatization, and also in the recent past, served as the Chairman of the Association of Issuing Houses of Nigeria (AIHN).

"Over the years, the Bank has evolved to become a strong player and market leader in the financial sub-sector of the Nigerian economy."

In his capacity as the Group Managing Director/Chief Executive Officer of Greenwich Trust Ltd, Falowo oversees the formulation of policies and implementation of the Board’s decisions, with the main objective of providing leadership and directing the organization towards achieving its mission of creating wealth for its stakeholders.

Following the 2008 Global recession, the Nigerian economy, in particular the Capital market, suffered a major crash which resulted in the collapse of various Capital Market Operators. In spite of the tough operating environment, Greenwich was able to cut its losses and reverse its negative balance sheet position while also ensuring that clients’ portfolio positions were positively reversed.  As a result of the economic downturn, Greenwich also learnt the significance of mitigating risk by adhering to Enterprise Risk Management policy.

Greenwich are very happy and proud to report that they are well on their way to realizing a vision to be the leading financial solutions provider. In their respective business functions, which include Financial Advisory, Issuing House, Securities Dealing and Asset Management, Greenwich has proven over the years, to be a top contender in the Nigerian financial market space.

Greenwich has always been able to provide bespoke financial solutions to clients seeking Advisory and Capital Raising Services. One such milestone includes the Bond Issuance Programme embarked on, to settle the Federal Government of Nigeria Local Contractors Debts. The standard and timely manner with which mandates are executed has led to the retainership of Greenwich by some State Governments and notable organizations as their Financial Advisers.

On the Securities Dealing arm, Greenwich is one of the ten equity and fixed income Market Makers in Nigeria. It is worthy to note that this is the only Investment Bank making market in both equity and fixed income.

At Greenwich, the ability to deliver transactions timely, empathy with clients, business ethics, professional and personal integrity as well as good relationship management has made the Bank distinct from their competitors. Greenwich has a Board that has been able to shape the quality and character of the company through its leadership, caring for its employees and emphasizing the need for a work-life balance. Greenwich has also been very fortunate to have a good, dedicated and focused Management team who are very passionate about the Company.

Greenwich always strives to create value for clients by providing solutions specific to their needs, working closely to identify the best execution route and providing advice from start to finish. Greenwich leverages on its track record as a leading Investment Bank and also its existing relationships with local and foreign investors to ensure clients’ strategic objectives are actualized.

Greenwich takes the view that the Nigerian Capital Market has the propensity to outperform other markets around the world in 2013. The anticipated performance of the Nigerian Capital Market in the coming year is based on the developments and reforms currently taking place in Nigeria. These developments include:

Equity Market - The demutualization of the NSE, establishment of the NASD trading platform, proposed listing of communication companies and anticipated decrease in transaction cost is expected to increase stockbroking activities.

Fixed Income - The inclusion of FGN bonds in the Barclays Bank Emerging Markets Bond Index is expected to stabilize the Bond Market as Greenwich expects current FGN bonds to be re-priced leading to increased activities on the fixed income desk.

Business opportunities are being created for the Financial Advisory division by leveraging on the power sector privatization as the Bank envisages offshore investment appetite in the Energy Sector.

The embrace of Public Private Partnership (PPP) by State governments also envisages more developmental and infrastructural mandates by State Governments and Parastatals.


Prospects for Freer Exchange of China’s Currency

[caption id="attachment_3033" align="alignright" width="259"] Lawrence Summers[/caption]

China’s currency, the renminbi (RMB), will probably not supplant the US dollar as the world’s reserve currency, except possibly “in the very long term”, said Lawrence H. Summers, Charles W. Eliot University Professor, Harvard University, and a former US Treasury Secretary, in a televised session at the World Economic Forum Annual Meeting on January 26th.

While the RMB will continue to internationalize, “the centrality of the dollar is unlikely to change in a major way,” Summers said, adding, “just as there is a basic inertia in languages of communication, there’s a basic inertia in mediums of exchange.”

John Zhao, the Chief Executive Officer, Hony Capital, however, expects freer exchange of the RMB “will come much sooner than most of us expect.” He cited the Chairman of China’s Communist Party Xi Jinping’s recent trip to Shenzhen, during which he visited Qianhai, a special zone set up for experimentation in RMB internationalization, as a sign of China’s intent to globalize its currency.

“the centrality of the dollar is unlikely to change in a major way”

- Lawrence Summers

Summer also spoke of “the reality that China holds some trillions of dollars of liquid financial assets around the world, on which it is earning an extremely low rate of return, while at the same time there are important shortages of investments in key sectors of the world”. Huge amounts of capital flowing from poorer countries to richer countries is “unprecedented territory”, he said, and will require important deliberations.

The panellists discussed how an ascendant China needs to communicate its intentions to the world. China’s world power status arrived decades earlier than expected. “It has been a bigger surprise to China than probably to the rest of the world,” said Kevin Rudd, Member of Parliament, Australia, and a former prime minister of that country. He cited a speech given by Xi, in which he spoke of China’s “rejuvenation”, and the lack of clarity of what that means. China has benefitted from an international rules-based order; the international community “would like to know soon if [China] would like to make changes to the rules,” he said.

Gordon Brown, the UN Special Envoy for Global Education, and Prime Minister of the United Kingdom (2007-2010), said that the rise of China is taking place in an interconnected world, a “totally different context than any other power in any other century”. He urged international communication among China and other countries.

China needs to develop a global agenda, said Zhao, “and learn very quickly how to play a good citizenship role in the new order which is being formed.” He cited two “certainties” in the world: politics is national and economics is global; the challenge countries face is to reconcile the two.

Communication and a redirection of focus are key. “We spent the last half-century trying to understand Washington,” said Rudd. Now it’s time to study and learn “how Beijing sees the world.”


Merkel: Convergence in Competitiveness Across the EU

In an address at the 2013 World Economic Forum Annual Meeting, German Chancellor Angela Merkel said that reforms implemented in European economies are achieving results, but their full effects have yet to be felt. Europe has to stay the course of reform and restructuring, she said. “We are not where we want to be. We are not yet out of the woods, but we are going in the right direction.” While the euro area is still growing only modestly, the situation should improve, she reckoned. “Consolidation and growth are basically the two sides of the same coin.” The goal: to achieve dynamism as well as resilience, said Merkel. “We do not want dynamism at any price but dynamism that can withstand shocks.”

Merkel stressed the need for Europe to conclude a pact that would drive convergence in competitiveness across the European Union. This would commit members to improve certain aspects of their economy that are not up to standard. In Europe, “we want to be as competitive as possible to ensure the prosperity of our people,” the German leader declared.

“We do not want dynamism at any price but dynamism that can withstand shocks.”

Europe must also focus on persistent structural problems such as unemployment, particularly among the youth. Merkel welcomed any investors who want to give a helping hand to young people.


Frontier Asia and Hopes for More Inclusive Growth

[caption id="attachment_3052" align="alignright" width="226"] Naoyuki Shinohara[/caption]

The International Monetary Fund (IMF) and the Japan International Cooperation Agency (JICA) on January 28th held a conference in Bangkok, entitled “Frontier Asia: Economic Transformation and Inclusive Growth.” The conference brought together ministers, central bank governors, other senior policymakers and academics from the region, along with staff from the IMF, JICA and other international financial institutions. Discussion focused on what is needed for Frontier Asia to continue moving up the development ladder, and to ensure that growth and job creation benefit all segments of society.

In welcoming participants, IMF Deputy Managing Director Naoyuki Shinohara said, “The theme of this conference is quite timely. While the world’s attention has tended to focused on the region’s largest economies, there has been another important development: the achievements of Frontier Asia. These are the nations that are on a path to writing a new Asian success story.”

The frontier economies participating in the conference were Bangladesh, Bhutan, Cambodia, Lao P.D.R., Maldives, Mongolia, Myanmar, Nepal, Timor-Leste, and Vietnam. The Kyrgyz Republic also participated in the event, and Prasarn Trairatvorakul, Governor of the Bank of Thailand, offered opening remarks.

“The process of economic transformation calls for accelerated reforms."

- Anoop Singh

With a combined population of more than 350 million people, Asia’s frontier economies are located in the world’s most dynamic region and have the potential to continue along a strong growth path and become part of the new generation of emerging markets. “In recent years, these countries have posted annual growth of 6 per cent or more—a true sign of success,” said Kiyoshi Kodera, Vice President of JICA. “This growth has produced a significant reduction in poverty, but might lead to rising income inequality, as witnessed in emerging Asia. Thus, the challenge the frontier economies now face is to make this growth more inclusive.” He recalled Japan’s experience in the 1960s, where progressive taxation and a strong social safety net were used to ensure that the benefits of strong growth were widely shared.

The conference also addressed Frontier Asia’s need to move toward more high value-added sectors, based on a new generation of reforms. Anoop Singh, Director of the IMF’s Asia and Pacific Department, said “the process of economic transformation calls for accelerated reforms. In particular, Frontier Asia will have to do more to improve institutions and increase investments in infrastructure. More emphasis also will have to be placed on improving regulatory and supervisory frameworks to keep up with the rapidly changing financial system.”


Rethinking Economic Growth in Arab Societies

After decades of skewed development policies, social injustice, and poorly managed economic liberalization, Arab countries must rethink their growth strategies, says a United Nations report released on February 5th, stressing the need for improved governance to achieve progress.

The report, produced by the International Labour Organization (ILO) and the UN Development Programme (UNDP), stresses that countries in the region must pay attention in particular to the social consequences of their economic policies, as the recent uprisings against various Arab governments have exposed a lack of social protection and dialogue between citizens and authorities.

“The real issue is the need for jobs with social dignity rather than jobs that come at the expense of dignity,” said Mohammad Pournik, Poverty Practice Leader at the UNDP Regional Centre in Cairo, Egypt, noting that one of the demands of Arab youth is having jobs without the need for intermediaries or connection, known as “Wasta.”

According to the report, “Rethinking Economic Growth: Towards Inclusive and Productive Arab Societies,” the Arab region had the lowest productivity growth rate of any world region between 2000 and 2010 except Latin America, with 1.5 per cent for North Africa and 1.2 per cent for the Middle East against a world average of 1.8 per cent.

“The real issue is the need for jobs with social dignity rather than jobs that come at the expense of dignity”

Policies pursued over the past two decades enabled countries in the region to tackle debt and inflation and create jobs, but growth lagged behind the rest of the world, and new jobs were concentrated in low productivity sectors. Meanwhile, the private sector remained among the least competitive globally due to low rates of investment, a poor regulatory environment, and widespread nepotism and corruption.

“In 2010, Arabs were more likely to find work than they were two decades ago,” said the lead author of the report, Zafiris Tzannatos. “But the question is what type of work? Workers were increasingly educated but the jobs being created were low-skilled and low-paid. In most countries, workers could not make their voices heard through trade unions or the ballot box.”

The report argues that economic growth in the next decade hinges on good governance, which must improve to attract investment and enable structural and institutional reforms.

“Arabs need an inclusive development model that is grounded in social justice,” said the ILO’s Regional Director for the Arab States, Nada al-Nashif. “This requires macro-policy coherence that can enhance productivity and wages, reformed labour relations to enable workers and employers to participate effectively in decision-making, and expanded social protection systems that provide employment and livelihoods security.”

Policy areas requiring more specific attention include migration management, employment policies and active labour market programmes, as well as greater access to quality education and training.


CFI.co Meets Dr. Naseer Shahir Homoud

[caption id="attachment_3069" align="alignright" width="228"] Dr. Naseer Shahir Homoud - Founder and Director, The Wall Investment & Real Estate Development[/caption]

Born in 1963 at Irbid, Jordan, Naseer Shahir Homoud is a multi-dimensional personality - primarily a real estate developer but also well known as an author and philanthropist. A dentist by training, Dr. Homoud has made significant contributions in many diverse fields during the past two decades.

After graduating from Damascus University, he established a dental centre in Amman in 1994. This centre achieved a very good reputation and, continues to provide the highest quality of dental service. Dr Homoud served the Jordanian Dental Association as its head of Education and Media Commission for six years. During his tenure, the Association became renowned throughout the country.

In 2001, Dr. Homoud chose the State of Qatar as his new base. He set up the Consultant Dental Centre in Doha which is now well established as a dependable source of dental health care in the capital.

Dr. Homoud’s success story mirrored the economic progress of the State of Qatar as growth in the production of liquefied natural gas, expansion of infrastructure and hosting of major international sporting events complimented and supplemented one other.

Eager to diversify his business activities and become involved in other aspects of the economy, Dr. Homoud entered the real estate sector by establishing “The Wall Investment & Real Estate Development”.

Dr. Homoud believes that the name “The Wall” captures the spirit of his company – emphasising protection and durability for his valued customers. His involvement in this sector has resulted in many great achievements. This career path has not only enabled him to contribute to the growth of Qatar’s economy but has also helped create strong and meaningful associations with industry leaders in this sector in Qatar.

“The Wall” is now moving to service the affordable housing sector. Dr. Naseer takes the view that there is a huge demand for low cost housing projects in region and accordingly, the company is set to announce some significant new projects in near future. He has already started working in this sector in Jordan and will soon be launching affordable quality house projects in Saudi Arabia.

A Spanish International Business and Trading Center (SIBTC ) was established by Dr. Homoud in 2008 to promote bilateral trade between the Middle East and Spain.

Dr. Homoud’s involvement in charitable work goes back many years as philanthropy is dear to his heart. The Wall’s founder is currently serving several humanitarian organisations. He was the Goodwill Ambassador and Regional Director (Middle East) for the Inter-Governmental Institution for the Use of Micro-Algae Against Malnutrition (IIMSAM) for 3 years. Dr. Homoud has also helped in the development and renewal of one of the most important historical forests in Jordan.

Ideon Charity Association, which provides both financial and medical aid to needy families, a centre housing a mosque and a school to teach children the Holy Qur’an and deliver modern education in the Irbid Governorate are some of the other cherished projects undertaken by Dr. Homoud.

"Dr. Homoud’s involvement in charitable work goes back many years as philanthropy is dear to his heart."

The International Jordanian Athletes Cultural Association honoured Dr. Homoud for his support and sponsorship of a mega sporting event for veterans held in Amman last May. He also serves as Honorary President of Al- Hussein Club, one of the oldest and highly acclaimed clubs in Jordan, which was founded in 1964 in the city of Irbid.

Dr. Homoud has received several prestigious awards. In 1997, the late King Hussein bin Talal of Jordan honoured him for medical services provided to orphans. Dr. Homoud was placed 16th in the Arabian Business Qatar Power List for 2012 and 53rd on Arabian Business Power 500 – The World’s Most Influential Arabs List (2012). His standing in the construction and real estate sector was also recognised when he was placed in 84th position in the list of the 100 Most Powerful in Gulf Construction (Construction Week’s Annual Power 100 listing). He was also conferred with the CEO (Middle East) award this year in September by ITP Group.


Developing Countries Face Higher Trade Costs

Although the international economy has integrated considerably in recent decades, a new database developed jointly by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and the World Bank reveals that trade costs fall disproportionately on developing countries.

Although developing countries are becoming more integrated into the world trading system in an absolute sense, they are starting from a higher baseline and their relative position is deteriorating because the rest of the world is moving more quickly.

The new Trade Costs database uses an innovative method to estimate trade costs in agriculture and manufactured goods, opening new analytical possibilities for policymakers and researchers interested in trade integration. According to the research, trade costs are influenced to varying degrees by distance and transport costs, tariff and non-tariff measures, and logistics. The new data, which cover the time period 1995-2010, stress the importance of supply chains and connectivity constraints in explaining the higher costs and lower levels of trade integration observed in developing countries.

“Technological factors are responsible for a significant share of the differences in trade costs around the world”

One of the key findings triggered by the database is that two areas amenable to policy interventions—maritime transport connectivity and logistics performance—are very important determinants of bilateral trade costs, with an effect comparable to that of geographical distance.

“Technological factors are responsible for a significant share of the differences in trade costs around the world,” says Ravi Ratnayake, Director of ESCAP’s Trade and Investment Division, which partnered with the World Bank on the project. “From a policy perspective, reforms in areas such as infrastructure, core trade-related services sectors, and private sector development can thus have significant benefits for countries in terms of lowering trade costs.”

The global database shows the pattern of trade costs across countries and through time by offering a comparison of pairs of countries, and an identification of those trade costs that are high. As such, the dataset can be used to examine the policy factors and “natural” factors that contribute to the levels of trade costs observed around the world. One telling trend: for upper middle income countries, it is easier to trade with high income countries than among themselves.

“Neighboring countries in regions like the Middle East and North Africa often have higher trade costs with each other than with the more distant Southern European markets,” says Jean François Arvis, a senior economist at the World Bank’s International Trade Department and one of the database’s principal architects. “This disparity serves to hold back ongoing efforts at regional integration in such areas.”

In an increasingly globalized and networked world, trade costs matter not only as a determinant of the pattern of bilateral trade and investment, but also of the geographical distribution of production. Although tariffs in many countries are now at historical lows, the evidence suggests that trade costs remain high for developing countries struggling to gain a lasting foothold in international supply chains.

Trade costs are therefore of great importance from a policy perspective, since they are an important determinant of a country’s ability to take part in regional and global production networks. The Trade Costs database allows policymakers to highlight high trade costs at a bilateral level, identify the key determinants of those high costs, and focus their efforts on the reduction of those costs. Of course, experiences vary greatly from one developing region to another. East Asia, for example, has experienced much lower levels of trade costs than others, such as Sub-Saharan Africa.

A clear implication of the research is there is much for developing countries to learn from each other in terms of the set of policies that work effectively to reduce trade costs. This new dataset can be a powerful tool for practitioners and policymakers to do so, especially in combination with other methodologies, data sources, and expertise on the ground.


THE UN and Water Management

[caption id="attachment_3110" align="alignright" width="183"] Ban Ki-moon[/caption]

The United Nations has launched the International Year of Water Cooperation, which seeks to provide a platform for countries to collaborate in the management of this precious resource in the interest of peace and development.

“Water is central to the well-being of people and the planet,” Secretary-General Ban Ki-moon said in his video message for the International Year of Water Cooperation 2013. “We must work together to protect and carefully manage this fragile, finite resource.”

More than half of the world’s people depend daily on water resources shared by more than one country and 90 per cent of the global population live in countries that share river or lake basins. However, 60 per cent of the world’s 276 international river basins lack any type of cooperative management framework.

Mr. Ban stressed that with rising demands and changing climate conditions, it will be crucial for countries to work together to ensure every person has access to quality water.

“We must work together to protect and carefully manage this fragile, finite resource.”

“Each year brings new pressures on water,” Mr. Ban said. “One-third of the world’s people already live in countries with moderate to high water stress. Competition is growing between farmers and herders; industry and agriculture; town and country. Upstream and downstream, and across borders, we need to cooperate for the benefit of all – now and in the future.”

The General Assembly proclaimed 2013 International Year for Water Cooperation in 2010, following a proposal from Tajikistan. The Year will serve to raise awareness and prompt action on the multiple dimensions of water cooperation, such as sustainable and economic development, climate change and food security.

“Overexploitation, management, financing of water resources, all of these aspects are incredibly important and cooperation at different levels is therefore critical,” UNESCO Science Specialist Ana Persic said during a press conference to mark the start of the Year at UN Headquarters in New York.

Ms. Persic added that the benefits of intensifying cooperation include poverty reduction, equity, economic growth, and the protection of the environment. “We know water is critical for human life, but it is also critical for life on Earth if we want to protect and sustainably manage the planet we have.”

The UN representative of the World Meteorological Organization (WMO), Paul Egerton, underlined the link between climate change and water, stressing that extreme weather events result in desertification or extreme flooding in different areas and hinder development and access to safe water.

“Water scarcity triggers migration, refugees, situations where basic human rights are weakened or threatened,” Mr. Egerton said, adding that fewer resources can also trigger conflict and governments need to address these risks immediately.

The official launch of the Year took place today at the UN Educational, Scientific and Cultural Organization’s (UNESCO) Headquarters in Paris, France. Opened by the agency’s Director-General Irina Bokova, the event gathered representatives from inter-governmental organizations, non-governmental organization (NGOs), scientists and policymakers from around the world to discuss

themes such as existing mechanisms for water cooperation and regional, national and local cooperation around river basins.

As part of the launch, an exhibition entitled “Water at the heart of science” was inaugurated at UNESCO, and students from Japan travelled to meet their French counterparts to share their experiences related to water and prepare a youth declaration on water cooperation to be presented to the other participants.

Cooperation on water issues will also be the theme for World Water Day, observed on 22 March.


IMF Support for Sri Lanka’s Economic Reform Programme

[caption id="attachment_3121" align="alignright" width="205"] Colombo[/caption]

An IMF staff mission visited Colombo January 30 – February 13 to discuss possible financial support for Sri Lanka’s economic reform agenda under an Extended Fund Facility. The mission met with government and Central Bank officials, as well as representatives of civil society and the private sector. The mission issued the following statement at the conclusion of its visit:

“Sri Lanka has achieved notable progress on a number of economic fronts over the past few years: growth has been robust, inflation has declined from high double digits, fiscal and external consolidation is underway, and the Standby Arrangement was successfully completed. The economy continues to adjust to the bold policy measures undertaken by the authorities early last year to address emerging imbalances. Credit growth and domestic demand have slowed to a more sustainable pace, the trade deficit has narrowed, and a small balance of payments surplus was achieved last year. At the same time, external demand was undermined by continued weakness in the global economy, and agriculture production was hampered by drought that prevailed for much of 2012. As a consequence, real GDP growth is estimated to have slowed to 6 per cent last year, and inflation rose to upper single digits.

"The economy continues to adjust to the bold policy measures undertaken by the authorities early last year to address emerging imbalances."

Real GDP growth is projected to increase to around 6¼ per cent in 2013. The recovery will likely be constrained by the need to continue fiscal consolidation; high inflation, which limits the room for near-term monetary easing; and a continued slow recovery in Sri Lanka’s main trading partners, particularly the U.S. and E.U. An excess supply gap is expected to emerge, which should contribute to reducing inflation pressures through the year. The mission agreed with the authorities that lowering inflation to mid-single digits in coming years would bolster macroeconomic stability. This, along with structural reforms to enhance productivity and competitiveness, would support robust growth over the medium term.

The mission welcomed the authorities’ commitment to continued fiscal consolidation, given public debt levels remain elevated. In 2012, the budget deficit was kept close to the target of 6¼ percent of GDP through expenditure restraint and delays in cash payments. The plan to reduce the deficit to 5¾ percent of GDP this year is appropriate. However, tax revenues have now fallen to below 11½ percent of GDP, among the lowest in the region, reflecting slowing activity, falling imports, exemptions and issues with tax administration. In the view of the mission, measures are needed to broaden the revenue base and strengthen administration to support fiscal consolidation, which would otherwise rely too much on reductions in spending, especially capital spending, which would have the potential to undermine medium-run growth. The mission also emphasized that social-sector spending should continue to be protected. The mission discussed the financial performances of the Ceylon Electricity Board and Ceylon Petroleum Corporation, which were adversely affected by last year’s drought, and emphasized the need to move toward cost recovery pricing to place them on a sustainable footing.

The mission and the authorities explored the possibility of a new IMF program designed to build on Sri Lanka’s achievements under the SBA. Productive discussions took place on a number of issues, including further fiscal and related reforms that would consolidate and extend these achievements. The authorities agreed on the broad thrust of reforms, and noted that they already had plans which they would undertake at the appropriate time.


Banque Misr Liban: Committed to Excellence in Service Poised for Strong and Sound Future Growth

[caption id="attachment_4489" align="alignright" width="199"] Mr. Hadi Naffi[/caption]

A number of factors help Banque Misr Liban to stand out in Lebanon’s relatively crowded and competitive banking sector. It is one of Lebanon’s oldest banks as it was established in 1929 and ranks number 3 on the official historical list of banks in Lebanon. It is 92.44% owned by the Banque Misr Group, which is one of the largest banking groups in the Arab world with total assets exceeding USD 30 billion in 2011 and a network of branches and affiliate banks in the United Arab Emirates, France and Germany, a Rep Office in Turkey, and interests in 135 projects worldwide. The group is presently fully owned by the Central Bank of Egypt, which thus makes BML the only commercial bank in Lebanon backed by the credibility and resources of a central bank. Most important perhaps, BML has been totally reengineered along modern banking lines since 2007 and as a result is poised today to continue its long tradition within the Lebanese banking sector, and has the vision, financial soundness and resources for solid future growth.

At a time when competition, whether in the retail or corporate/commercial business, takes place on the basis of the type and quality of the product or service provided, as well as pricing and client loyalty, BML’s primary vision is to be the preferred bank for its customers and it is working hard to achieve this vision through an emphasis on personalized service that only a smaller bank can provide, and a corporate culture of excellence, team spirit, integrity and professionalism. All this is allied with the application of the latest risk management guidelines, and the highest standard of corporate governance.

The process of reengineering that started in 2007 and set BML on a new path of growth and development has encompassed a complete internal restructuring; the renovation and modernization of all its facilities; an expansion of the branch network; the redevelopment of its human resource base, and the creation of a full complement of services and products that are offered by a modern universal commercial bank. All this was supported by a 140% increase in its paid-up capital in 2010.

[caption id="attachment_4495" align="aligncenter" width="573"] BML Fiscal Highlights[/caption]

Today, BML’s corporate loans and trade finance services are highly flexible and tailored to meet all institutional requirements. Its evolving retail services and products include all types of deposit accounts; personal loans, consumer loans, housing loans, tuition loans and car loans; plastic cards of all types; insurance programs and products, and other modern services and products. Private banking investment services are provided through a small qualified team to ensure timely information, and fast response and execution.

BML presently has a network of 18 branches, strategically located in the major cities and regions of Lebanon and supported by a network of in-branch and external ATM machines. The expansion of the branch network is an ongoing process dictated by business targets and market considerations.
BML also has plans to expand its activities regionally such as to take full advantage of synergies with the regional and international network of the Banque Misr Group. But these plans have been put on hold since 2011 awaiting a return of stability to the region after the events of the “Arab Spring” that are not yet fully resolved.

Reflecting the success of its development and expansion plan, BML grew rapidly between 2007 and 2012, with assets rising nearly 129% up to the end of November 2012, customer deposits by 128%, and loans and advances to the private sector by a whopping 204% The average annual rate of growth in all three aggregates was faster than the sector and peer bank average. In parallel to that, BML’s shareholders’ equity rose 171% during the same period.

Needless to say, BML’s achievements over the last five years or so are particularly impressive given that the domestic market for banking services is highly competitive, that the rate of market penetration in Lebanon is very high compared with the other Arab countries and emerging economies, and that the 10 largest banks in the country, making up 15% of the total number of banks, control more than 80% of the banking market. i


DESERTEC Foundation Endorses DESERTEC Power for Kingdom of Saudi Arabia

DESERTEC Power was established to advance the energy supply in the Kingdom of Saudi Arabia. This follows the direction of the Kingdom to significantly increase the sustainable power generation from renewable energy sources with viable, feasible, efficient, and sustainable solutions that address the current and forthcoming needs in the country. It is endorsed by the German DESERTEC Foundation and its anticipated merits are welcome by experts at Saudi Arabian KA-CARE.

Acting as a regional facilitator DESERTEC Power addresses the in-kingdom needs for both renewable energy and desalinated water production. Lead by Supervisory Board Chairman Dr. Ahmed Al-Malik, former Vice Governor of the Saudi Arabian Monetary Agency (SAMA), its activities will include the planning, realization, ownership, and likely the operation of renewable power plants as well as associated matters of education and employment.

“The DESERTEC Concept is visionary. The knowledge-driven DESERTEC Foundation, shareholders, and partners from inside and outside the Kingdom are welcome to join into this effort.”

DESERTEC Power is supported by the DESERTEC Foundation, which will provide the conceptual framework, thereby collaborating closely with Saudi experts from science, industry, and public sector. Dr. Thiemo Gropp, Director of the DESERTEC Foundation: “The Kingdom of Saudi Arabia has the potential to be a championing nation in power generation from renewable energy sources and to advance in global climate friendly development. The DESERTEC Foundation highly appreciates the opportunity to encourage the intended development through concrete projects.”

Ever since its founding in 2009, the DESERTEC Foundation has been supporting the establishment of the framework conditions for cost-effective and sustainable power generation committed to ecology and social development especially by enabling knowledge transfer, scientific collaboration and fostering business co-operation. Dr. Al-Malik emphasizes that “The DESERTEC Concept is visionary. The knowledge-driven DESERTEC Foundation, shareholders, and partners from inside and outside the Kingdom are welcome to join into this effort.”

KA-CARE

The King Abdullah City for Atomic and Renewable Energy (KA-CARE) was established as scientific city with the aim to contribute to the sustainable development in the Kingdom through the utilization of science, research, and industries. It acts as development agency in the Kingdom of Saudi Arabia in the field of the generation CO2-neutral power, with a particular focus on renewable energy sources. Science, value-oriented research, and technology-driven industries shall perform to raise the living standards and quality in the Kingdom. It fosters knowledge-based development and scientific research, supports the localization of technologies and coordinates the activities of numerous scientific research institutions and centers in the Kingdom. Furthermore, it organizes local conferences and participates in international conferences to strengthen the knowledge exchange, in particular with focus on solar, to build a scientific and technical base for sustainable power supply such as in energy-efficient potable water production.

DESERTEC Foundation

The DESERTEC Foundation is a civil society initiative to shape a sustainable future. Until today it has built up a large community of supporters and a network of partners, which is active around the globe. It grew out of a network of scientists, politicians and economists, who developed the DESERTEC Concept, a comprehensive solution to combat global warming, to ensure reliable energy supply, and to support regional development. Core of the concept is the idea of a renewable energy grid, integrating all forms of renewable energies, located and used where they are at their most abundant. Arid regions and desert regions hold enormous potentials, which are mostly untapped but perfectly complement the energy mix by permanent available renewable base load energy. The aim of the Foundation is to advance the fast implementation of the DESERTEC Concept especially by providing information, enabling knowledge transfer and scientific cooperation. Furthermore, it accompanies sustainable projects that are exemplary piloting. It has developed first criteria to evaluate such projects.


Thanks for giving us Space, Juan

There were some very good reasons that the Industrial Revolution happened in Britain. Of course, natural resources were plentiful but that was equally true elsewhere in Europe and the world at large. The same can be said of people with big ideas since many of the best engineers and scientists of the time were residents of continental Europe. So the question is this: What allowed entrepreneurship to flourish in Britain, facilitating the Industrial Revolution and bringing so much change and progress to the world?

In some ways the industrial revolution can be seen as the birth place of modern entrepreneurship - when smart ideas could translate into large scale businesses over relatively short periods. The differentiating factors that enabled the revolution in Britain were simple. The British, more so than their European counterparts, believed in the rights of the individual to create wealth and there was a legal system that backed up those rights. The size of the economy was not fixed and capital markets encouraged investments. The government allowed for locally planned commercial infrastructure, did not micromanage people and ideas and maybe above all else believed in free international trade.

"There is a new generation of these global entrepreneurs and Juan Diego Calle is an interesting example."

We are now living through an information revolution whose birth can be traced to Britain with the invention of the computer and the internet - but now entrepreneurship is truly global. There is a new generation of global entrepreneurs and Juan Diego Calle is an interesting example. We here at CFI became aware of Juan because he had managed to make DOT CO a top level domain available to global business. He is providing a simple and effective solution to the next generation of entrepreneurs looking for an alternative to DOT COM (which has become overcrowded). We made the switch to becoming a DOT CO allowing us to simplify our domain to cfi.co. This probably would not have been possible without Juan’s entrepreneurial drive.

There is much debate as to whether entrepreneurs are born with their skills or learn them. In Juan’s case there is little doubt that he came into the world with the entrepreneurial gift. Born and raised in Bogotá, Colombia his first business venture was selling sandwiches to fellow students. The young Juan quickly came to understand the need for scalability, employing a friend to keep up with demand. Security in Bogotá in the early nineties was not good (although thankfully the position is now greatly improved) and the young Juan was forced to flee the country with his parents, brother and sister. They relocated to Miami. The children went into the US education system and his father continued operating his Colombian business out of Miami. The security situation in Bogotá improved after a couple of years and his parents returned, but Juan and his siblings remained in the United States. At high school he started another business this time creating custom-built stereo systems. But it was at the University of Miami as part of a university business project that Juan identified an internet opportunity – for a new search engine. Raising capital from friends and family, Juan was drawn into the dot-com bubble. The business failed at first, but showing the tenacity that is a must for all true entrepreneurs, it was rebuilt with his partners and the team created one of the largest search-advertising networks in Latin America - which in 2005 was acquired by Yahoo for an undisclosed sum.

"The young Juan fully understood the need for scalability quickly needing to employ someone to keep up with demand."

After the company was sold, Juan enrolled at Harvard taking up the Owner-President Management programme. While studying, he ventured into real estate which proved to be a largely disappointing experience, but Juan’s understanding of digital real estate - in the form of premium domain names – proved to be a boon. It was probably this that triggered his interest in commercialising domains. Hearing from a colleague that the Colombian government was considering how best to commercialise the DOT CO domain beyond Colombia, Juan realised how appealing a .co suffix would be to businesses looking for a global address. By this time the supply of meaningful DOT COM suffixes was almost exhausted. It took two years of hard negotiations to finally strike a deal with the Colombian government - having seen off competition from the far larger Versign - and in August 2009, the Colombian Ministry of Communications awarded the contract to Juan’s company .CO Internet.

Juan’s intuition - another essential ingredient of an entrepreneur - has been proved to be correct with the .co suffix gaining momentum as the world continues to globalise. One has to wonder how long it will take before DOT CO finds itself in the same place that DOT COM is in now, that is to say out of space. Like their British industrial revolution predecessors, entrepreneurs such as Juan see the world as their oyster. And so, if he does run out of space he will probably be smart enough to create some more. But in the meantime, we here at cfi.co in common with many other businesses across the world are very thankful to entrepreneurs like Juan.


Corruption: Eating at the Fabric of Afghan Society

[caption id="attachment_3149" align="alignright" width="210"] Bamiyan Valley, Afghanistan[/caption]

The total cost of corruption in Afghanistan has significantly increased over the past three years to $3.9 billion, according to a United Nations survey released this month, which says that in spite of fewer people paying bribes, the practice is still having detrimental effects due to its frequency.

In 2012, half of Afghan citizens paid a bribe while requesting a public service and nearly 30 per cent of them paid a bribe for a private sector service, states the survey on trends and patterns of corruption produced by the High Office for Oversight and Anticorruption and the UN Office on Drugs and Crime (UNODC).

While these figures are high, there is evidence of progress, as 59 per cent of the adult population had to pay at least one bribe to a public official in 2009. However, the frequency of bribery has increased from 4.7 bribes to 5.6 bribes per bribe-payer and the average cost of a bribe has risen from $158 to $214, a 29 per cent increase in real terms.

“The bribes that Afghan citizens paid in 2012 equals double Afghanistan’s domestic revenue or one fourth of the Tokyo pledge,” said the UNODC Regional Representative, Jean Luc Lemahieu, referring to the international donors’ conference held in Japan in July, in which $16 billion was pledged for Afghanistan’s economic development in the next four years on the condition that the Government reduce corruption before receiving all of the money.

“Nobody doubts the seriousness of the issue, the art is to design the correct strategy to remedy the situation,” said Mr. Lemahieu.

While corruption is seen by most Afghans as one of the most urgent challenges facing their country, it seems to be increasingly embedded in social practices, with patronage and bribery being an acceptable part of day-to-day life.

The survey, which was based on a sample of 6,700 Afghan citizens over the age of 18 across the country, stated that 68 per cent of those interviewed considered it acceptable for a civil servant to top up a low salary by accepting small bribes from service users. Similarly, 67 per cent of citizens considered it sometimes acceptable for a civil servant to be recruited on the basis of family ties and friendship networks.

In most cases, bribes are paid to obtain better or faster services, while in others bribes are offered to influence deliberations and actions such as police activities and judicial decisions, thereby eroding the rule of law and trust in institutions.

In particular, the survey points to the education sector as one of the most vulnerable to corruption, with the percentage of those paying a bribe to a teacher jumping from 16 per cent in 2009 to 51 per cent in 2012.

“Afghans know that corruption is eating at the fabric of their society,” said Mr. Lemahieu. “The solution is not only to be found within the Government but also within the wider community.”


UN Initiative to Eliminate Energy Poverty

Supermodel and United Nations Goodwill Ambassador Gisele Bündchen is joining former United States Vice President Al Gore to urge support for UN Secretary-General Ban Ki-moon’s initiative to achieve universal access to modern energy services by 2030.

In ads that started airing this week, Ms. Bündchen and Mr. Gore stand with the head of the United Nations Industrial Development Organization (UNIDO), Kandeh K. Yumkella, to advocate for the Secretary-General’s Sustainable Energy for All Initiative.

“Energy can transform economies, lives, continents, our planets. We have a historic chance to eliminate energy poverty,” say Mr. Gore, Mr. Yumkella and Ms. Bündchen, who is a UN Environment Programme (UNEP) Goodwill Ambassador.

“Let’s bring energy to all - for power, women, progress, growth, our future, energy for all.”

Worldwide, almost 3 billion people rely on traditional biomass for cooking and heating, and about 1.5 billion have no access to electricity, according to the UN Environment Programme (UNEP).

The Sustainable Energy for All Initiative aims to achieve three inter-linked global targets by 2030: universal access to modern energy services; the doubling of energy efficiency; and the doubling of the share of renewable energy in the world’s energy mix.

“Let’s bring energy to all - for power, women, progress, growth, our future, energy for all.”

At the Rio+20 Conference last year, the Sustainable Energy for All Initiative received over $50 billion in commitments towards actions under the initiative.

“Now it is down to making sure commitments are transformed into kilowatt hours for the people, and to support governments to do for the energy sector what they did for mobile phones - deregulate or unbundle the sector and incentivize private sector participation,” said Mr. Yumkella.

Last week, UNEP released new studies showing that countries which switch from lamps, candles, flashlights and other traditional lighting systems to solar power can recover the costs in less than one year depending on the cost of the LED [light-emitting diode] system and the local price of kerosene.

Supporting both sustainable off-grid and on-grid lighting support can bring about major financial savings in a short time, as well as additional educational, health and environmental benefits, according to UNEP.

Ensuring environmental sustainability is one of the eight Millennium Development Goals (MDGs), anti-poverty targets world leaders have pledged to achieve by 2015.


WTO Reaches Out to the Business Community

At an event held  for the business community at the WTO headquarters on 21 February 2013, the organisation announced the results of a recent survey of businesses and launched a dedicated web area for business on the WTO website. It also launched an electronic newsletter targeted specifically at the private sector.

At the event, Mr Stefano Bertasi, from the International Chamber of Commerce (ICC), provided an update on the ICC’s World Trade Agenda initiative, and Mr Carlos Braga of the Evian Group gave his perspective on the relations between business and the WTO.

“This meeting is the first of what we hope will be a series of encounters between the WTO and the business community through which we hope to strengthen our dialogue and our interaction,” said Mr Keith Rockwell, Director of the Information and External Relations Division at the WTO.

The aim of the web page for business (www.wto.org/) is to make key information for the private sector, such as trade statistics and trade monitoring news, easily accessible in one dedicated area.

The newsletter, which will be issued on a regular basis, includes the latest business-focused trade news from the WTO. It will be circulated electronically to all business representatives who have registered on the WTO online Database.

The introduction of both initiatives was supported in the WTO’s business survey, which also suggested a number of other ways of improving co-operation between the WTO and the business community.