UNCDF: Enabling Transformation - Investing in the Local Needs of Women

[caption id="attachment_8272" align="alignright" width="357"] Copyright: Mauricio Mireles / MDG-F / Sustainable Development Goals Fund[/caption]

In 1990, in the first Human Development Report of the United Nations Development Programme (UNDP), Pakistani economist Mahbub Ul Haq wrote, “The real wealth of a nation is its people. And the purpose of development is to create an enabling environment for people to enjoy long, healthy, and creative lives. This simple but powerful truth is too often forgotten in the pursuit of material and financial wealth.”

Mr Ul Haq’s words eloquently speak to a paradigm shift that has taken place in the field of development. This new orientation called the Human Development and Capabilities Approach, saw development as a process of expanding the real freedoms and rights that people enjoy.

Based on the premise that expanding economic growth alone is an inadequate measure for development or quality of life, the new model puts people and their opportunities to actualize their capabilities as its central focus. Unlike other previous paradigms, the Human Development and Capabilities Approach is concerned with bridging inequalities and addressing uneven distributions among different groups.

“Taking into consideration the fact that the majority of the world’s poor are women, it is imperative that development strategies and interventions are targeted towards the needs and priorities of this group.”

Amongst these vulnerable groups, women are especially affected. For many years the predominant development policy was to boost economic growth in order to aid the poor. However, limited recognition of the synergies between the freedom and capabilities of people, gender equality, economic growth and poverty reduction led to the development of policies that failed to take into consideration the differentiated and specific needs and responsibilities of women and men.

More recent research demonstrates that policies focused on economic growth alone insufficiently reduce poverty or address gender inequalities. Strong evidence shows that enhancing women’s economic participation improves national economies, increases household productivity and living standards, enhances the well-being of children with positive long term impacts, and can increase women’s overall empowerment.

To increase their economic opportunities, women need access to more and better jobs, a business climate that supports them in starting and doing business, a financial sector that gives them access to financial services tailored to their needs, and greater livelihood security in times of food and fuel crises. This is especially true for women living in rural areas and vulnerable environments.

As a consequence, it is now recognized that the impact of growth on reducing poverty and enhancing gender equality in developing countries is correlated with the pro-poor inclusive and equitable public policies in place. Crucially, such policies create an enabling environment that determines how resources are channelled and distributed in the local economy.

Fundamental Shift

[caption id="attachment_8275" align="alignleft" width="351"] Copyright: MDG-F / Sustainable Development Goals Fund[/caption]

This increased recognition has led to a fundamental shift in the development encompassing policies and interventions that target the needs of the poor. As a result, approaches to development grounded in human rights, which specifically emphasise, inter alia, non-discrimination, equality, participation, and inclusion have gained in prominence, most notably within the UN System.

Taking into consideration the fact that the majority of the world’s poor are women, it is imperative that development strategies and interventions are targeted towards the needs and priorities of this group. Without such efforts, countries are unlikely to sustain any progress towards achieving the Millennium Development Goals (MDGs) set for 2015, or meet the ambitious Sustainable Development Goals (SDGS) in 2030, in the agenda post-2015.

Unfortunately, despite the important recognitions of the synergies between gender equality and poverty reduction, implementation of such policies has been uneven. The reasons for this range from cultural norms, lack of political representation, inadequate education, and severely unequal access to basic infrastructure and financial institutions.

In response, a forthcoming local development programme at UNCDF will aim to focus on the latter dimensions in the Least Developed Countries (LDCs). It is designed to identify and eliminate barriers to women’s economic participation at the local level and enable their way to economic emancipation.

By making use of innovative financing tools and well-established investment instruments, the United Nations Capital Development Fund (UNCDF) offers a unique combination of investment capital, capacity building and technical advisory services to promote Local Development Finance (LDF) and inclusive finance in the LDCs, with the overarching objective of accelerating poverty reduction through sustainable, inclusive and equitable local development.

The LD approach of UNCDF is about designing and testing mechanisms that mobilise, allocate, and invest resources for local development in an accountable and equitable manner.

Economic Growth Alone not Sufficient

[caption id="attachment_8282" align="alignleft" width="260"] Copyright: MDG-F / Sustainable Development Goals Fund[/caption]

The method recognises that economic growth is not sufficient to transform the economies and societies of poor countries and make them more resilient to shocks. It is put to work to integrate relevant development strategies to ensure that infrastructure and service delivery reach the entire population and provide employment to people who need it most, poor women and men.

In particular, UNCDF’s women’s economic empowerment programme, in partnership with UNDP and other UN Entities and through UNCDF’s financing tools will aim to create an enabling environment by responding to local barriers and bottlenecks that hinder women’s access to local economic opportunities and income-generating activities.

This programme begins its work based on its Local Economic Assessment tool (LEA), a methodology that allows a better understanding of the contextual situation on the ground, the state of the economy, the needs of the labour markets – formal and informal alike – the development partners already working on these issues, as well as a thorough cultural, and social behavioural understanding of the local population. The methodology for this analysis takes place in consultation with the communities involved and takes into consideration the differentiated needs and responsibilities of women and men.

Once these barriers have been identified and deemed possible to address, financially and physically, UNCDF puts its financing tools at work to tackle these bottlenecks to women’s economic empowerment.

For example, inadequate roads, poor transportation routes to markets, a lack of entitlements to agricultural land, restricted access to financial services, and an inability to use productive inputs such as fertilizers, seeds, and crops can all result in major obstacles to women’s economic activity, entrepreneurship, and empowerment.

In cases such as the above, the gender-focused programme identifies the most pressing interventions necessary to lessen the burden on women and tackle the legal, social and economic barriers preventing women from equally accessing basic local services and increase women’s local economic opportunities, including empowering female entrepreneurs in the development of their Small and Medium Enterprises (SMEs).

Hydro Power

[caption id="attachment_8286" align="alignright" width="395"] Distribution of Drinking Water Collection by Percentage in Africa.
(Source: WHO/UNICEF 2008)[/caption]

Currently, in the Iringa Region of Tanzania, UNCDF is supporting female entrepreneurs introduce a small hydro power to generate electricity in the rural areas of Tanzania, thus, potentially granting approximately one million dollar in domestic financing from a local bank to the project. The project is expected to close by the end of 2014, thereby generating 317 kW of hydro power for rural electrification which will be instrumental in expanding further opportunities for small scale enterprise development and jobs creation.

In addition to entrepreneurial support, UNCDF’s women’s economic empowerment programme tackles other difficulties that women frequently face. Women are often confronted with challenging decisions in their daily lives. When they spend the majority of their time in unpaid care work activities, such as cleaning, cooking, collecting wood, fetching water, and caring for the children and the elderly, it limits their opportunities to participate in the labour force or to engage in other economic activities. It also constrains schooling and participating in decision making processes.

Yet unpaid care work remains a largely unseen dimension of human well-being, in that it is not counted in gross domestic product (GDP). As a result, unpaid care is not recognized in economic planning, budgeting, and investment decision making. However, recognizing unpaid care work will not produce tangible benefits if it does not also result in interventions to reduce the burdens on women that are created by the way in which their work is distributed within their communities and households.

In this context, by examining time use surveys and socio-economic assessments of localities, UNCDF’s programme on gender economic empowerment, will aim to narrow the unique bottlenecks facing women by identifying capital investments that can reduce women’s unpaid care work activities.

From 1990 to 2010, more than 2 billion people gained access to safe drinking water, but 780 million people are still without clean drinking water. Where water supplies are not readily accessible, water must be carried from its source. According to 2006–2009 data from 25 sub-Saharan African countries, women there spend at least 16 million hours each day to collect water. Men spend 6 million hours, and children 4 million hours.

If women spend four hours a day fetching water, investing in infrastructure projects that provide access to water will save women considerable time, which can then be used to engage in economic activities.

The way in which unpaid care work is distributed between women and men can be argued to be one of the most pressing constraints inhibiting the achievement of women’s socio-economic empowerment in the LDCs. Much can also be said about policies pursued in the context of ideological models that fail to respond to the needs and priorities of women.

This programme works to enable women to participate in the labour market, if they choose to do so. As development practitioners, we have to be mindful of the complex system of development, the cause and effects, and lack of linearity of our actions on the ground.

Within a unique local context, this project - using its local finance development instruments - attempts to create an enabling environment for women to enjoy long, healthy and creative lives, as Mr UI Haq suggested in 1990, and as it continues to dominate the development discourse today.

About UNCDF

 UNCDF is the UN’s capital investment agency for the world’s 48 least developed countries. It creates new opportunities for poor people and their small businesses by increasing access to microfinance and investment capital. UNCDF focuses on Africa and the poorest countries of Asia, with a special commitment to countries emerging from conflict or crisis. It provides seed capital – grants and loans – and technical support to help microfinance institutions reach more poor households and small businesses, and local governments finance the capital investments – water systems, feeder roads, schools, irrigation schemes – that will improve poor peoples’ lives. UNCDF programmes help to empower women, and are designed to catalyze larger capital flows from the private sector, national governments and development partners, for maximum impact toward the Millennium Development Goals. For more information, please visit www.uncdf.org and subscribe for news, follow @UNCDF on Twitter and UN Capital Development Fund on Facebook.


CFI.co Meets the Executive Chairman of ISM Capital: Cliff Siegel

Cliff Siegel is executive chairman and co-founder of ISM Capital, a London-based investment bank that specialises in creating debt capital market-based funding solutions for mid-market companies around the world. Since its founding in 2008, ISM Capital has raised over $1.6 billion for mid-cap issuers across a wide range of sectors and jurisdictions via the international debt markets. The strength of the team Mr Siegel has helped build at ISM Capital has been recognised by readers of CFI.co and the Judging Panel, resulting in ISM Capital winning the award for Most Innovative Capital Markets Team UK, 2014.

Mr Siegel has over 30 years of experience as an investment banker. He joined the Cresvale Group in London in 1981, trading equity-linked securities, and went on to found Cresvale’s US business in 1982. He joined Jefferies & Company in New York in 1990, and in 1993 returned to London to become the CEO of Jefferies International. At Jefferies—one of the world’s most admired companies according to Fortune Magazine—Mr Siegel oversaw the opening of offices in London, Delhi, Paris, Zurich, and Tokyo. He also assisted in the creation of the Jefferies International Asset Management Convertible Fund, of which he was both chairman and CIO. Under Mr. Siegel’s leadership, Jefferies International grew from a small trading business in London into a global investment banking enterprise with seven offices and over 400 employees.

After retiring from Jefferies in 2007, Mr. Siegel co-founded ISM Capital to focus on mid-market companies that often fall below the purview of larger investment banks and have experienced increased difficulty in obtaining credit from traditional sources such as banks. Since inception, ISM Capital has completed more than a dozen debt transactions. The common denominator of these deals has been innovation.

“ISM Capital’s hallmark is our ability to find creative solutions to the financing needs of mid-cap companies, generally those with market capitalizations of between 250 million and a billion dollars. These companies are often underserved by the traditional investment banks and as a result lack access to the broader capital markets.“ As an example, ISM structured the first step down coupon for an Indian issuer, Sintex Industries, creating a sufficiently attractive deal to raise $140 million, allowing the company to refinance $125mm in maturing convertibles while complying with the cap on “all-in” financing costs established by the Reserve Bank of India. ISM successfully raised $150mm for Canadian-listed natural gas retailer Just Energy in the European markets, although the company, with revenues in excess of $3 billion, had never previously raised money outside of Canada. For Australian energy company Linc Energy, ISM helped the company to raise $265mm in the US high yield market by ringfencing the company’s US oil and gas assets, providing funds both for the development of the US oil and gas business and the repayment of debt at the parent level. Other than bank lines, Linc had never previously raised money outside of the Australian equity market.

Mr Siegel attributes the remarkable success of ISM Capital to the decades of experience among the bank’s senior professionals. “Collectively, we boast well over a century’s worth of experience,” says Mr Siegel, adding that the wealth of knowledge the investment bank has accumulated makes a huge difference when complex financial deals need to be hammered out or novel solutions are required for clients. “All of our senior team have worked at large investment banks, and find their ability to be creative at ISM hugely attractive. We invest the time to understand our clients’ businesses and financing needs, and strongly believe in covering all options and examining a broad range of different financing alternatives. We believe this dramatically distinguishes ISM Capital from its competitors. We also believe that this approach will only continue to gain traction with clients in the mid-cap space as companies find access to capital increasingly constrained.”


CFI.co Meets the Founder and CEO of Optimum Asset Management: Alberto Matta

It is difficult to find top-tier service levels in a small firm. Indeed, Optimum Asset Management offers an excellent level of service with the added benefit of flexibility and customised solutions. Mr Alberto Matta, the firm’s founder and CEO, briefly depicts his distinctive approach to investments.

Optimum has established a bespoke and unique approach, compared to the ones offered by larger funds. It is based on the firm belief that customised and integrated investment solutions are an exceptional way to create a solid and lasting partnership with investors. Thanks to his expertise with institutional clients and his unparalleled knowledge of their investment needs, Mr Matta has managed to create a firm that adheres to the highest standards and strives to create long-term value for its investors.

Currently managing more than EUR 1 billion in assets, the firm’s prime expertise and successful track record is in real estate with a focus on the most attractive markets in both Europe and the United States.

Optimum mainly raises equity from institutional investors such as pension funds, insurance companies and banks. As clearly depicted by Mr. Matta, these investors mostly have long term liabilities and, therefore, it is highly inefficient for them to go after liquid investments, which typically offer lower returns compared to those offered by illiquid assets of the same risk segment (real estate private equity funds).

The company indeed focuses on the latters, offering a unique approach that merges into one the positive aspects of both banking and asset management: it offers the flexibility and the tailor-made solutions typical of the former, while it adds the value creation and the alignment of interests expected from the latter one.

Optimum’s distinctive approach also encompasses its vertical integration of asset, property and facility management activities.Thanks to its deep knowledge, Optimum is able to identify even the most hidden off-market deals selecting undervalued properties and, through its effective and lean asset management structure, is able to minimise due diligence and acquisition times.

Thanks to its close integration with local and highly skilled professionals for property and facility management, Optimum guarantees the perfect execution and constant monitoring of the investment strategy designed for every property in order to fully exploit the potential of the portfolio.

Mr Matta founded Optimum Asset Management in 2009. He is the firm’s Chief Executive Officer. Headquartered in Luxembourg, the company expanded quickly and today has representative offices in Berlin, London, Malta and Miami. Optimum’s funds invest in Germany (Berlin), United States (New York, Miami, Los Angeles and San Francisco), Hungary (Budapest), Italy and Bulgaria. Additionally, the firm is well placed to leverage its already established network of international relationships and to source new investment opportunities almost anywhere in the world.

Optimum is planning to increase the investments in its current core markets, as well as to expand its geographic reach. Thanks to its impressive track record in the Berlin real estate market, the firm is currently in the fundraising phase for its third fund, focused on the German capital, and plans to launch a second fund dedicated to the United States within the next two years. The management team is also actively monitoring possible investment opportunities arising in emerging markets.

Leveraging the management team’s twenty-years of experience in the investment business, the firm has also successfully completed portfolio restructuring operations through its affiliated fund platform in Malta and its management company - Futura Funds SICAV and Futura Investment Management, respectively.

After obtaining his university degree in finance at North-Eastern University in Boston, Mr Matta first worked in New York and then in London at Merrill Lynch and Bankers Trust, contributing to the development of the derivatives business in the European market. Afterward, he moved to BNP Paribas, focusing on complex securitisation and structured credit derivatives transactions, being then appointed as European co-head of the Origination Business for Financial Institutions. He worked also on the distribution side of the investment business at ABN AMRO Bank and at Barclays Capital. In 2006, he became managing partner at BMB Investment, a non-regulated investment company based in Spain. In 2009, he founded the Luxembourg based Optimum Asset Management.


CFI.co Meets the CEO of Dunn Loren Merrifield: Sonnie Ayere

True leadership is often characterised by the capacity to translate strategic vision into reality and thus attain the positive impact desired. That is also the hallmark of Sonnie Ayere whose new thinking on investment and capital financing in Africa has opened new paths to prosperity.

Ayere is the founding chairman and group managing director of the Nigerian investment firm Dunn Loren Merrifield, a full service financial company established in 2009. As managing director and CEO of UBA Global Markets now UBA Capital, Ayere under the guidance of his mentor, Tony Elumelu successfully launched and directed the investment banking arm of UBA Group Plc between 2005 and 2009, raising and trading more than $6.4bn for both sovereign clients & corporations.

Prior to Ayere’s full business commitment in Africa, he had worked at the International Finance Corporation (IFC, a subsidiary of the World Bank) on the development of the Nigerian bond market. That market is now worth over NGN6.5trillion ($41.7bn). At the IFC, Ayere held the role of structured finance specialist for sub-Saharan Africa. He developed structured finance and securitisation transactions in addition to creating instruments that support value in debt capital markets.

Now accumulating over twenty one years of professional experience in corporate and structured finance, corporate banking and asset management, Ayere holds an MA (Hons.) in Financial Economics from the University of Dundee, Scotland from where he graduated in June 1993 with a 2:1. He is also an alumnus of the Cass Business School London where he obtained an MBA. That same year, Ayere successfully concluded the Executive Corporate Finance Programme at the London Business School. After his studies, Ayere gained valuable insights working at the BMO Nesbitt Burns, HSBC, Sumitomo Mitsui Bank and NatWest Bank all in London.

Fascinated by the alchemy of securitisation which he got introduced to in 1997, Ayere developed a keen interest in the means and ways of financing large corporate projects, private companies and government institutions. He felt instantly at ease devising innovative models of structured finance. Ayere believes that a high level of creativity – or out-of-the-box thinking – is an absolute necessity when aiming to strike the perfect balance between different asset classes and creating securities out of their cash flows – either basic or structured. This remains a guiding principle that unifies the team of over forty professionals Ayere now leads at Dunn Loren Merrifield.

As an institution operating in the financial markets, Dunn Loren Merrifield thrives on a culture of innovation. The firm keeps a sharp focus on the requirements of its clients and offers peerless services and world-class execution of orders. “Our purpose is to offer new and simple solutions to the sometimes complex financial needs of our clients. We aim to positively impact the financial market with unique investment products for the buy-side based on new thinking models,” says Ayere.

In February 2014, Ayere was confirmed as the inaugural CEO of the Nigeria Mortgage Refinance Company (NMRC), having served earlier as task manager for the setting up of the company. The Nigeria Mortgage Refinance Company is set up as a private company charged with the public purpose of developing the primary and secondary mortgage markets in the country. The NMRC is to raise long-term funds in the domestic capital market and later from foreign markets. This way, the company is expected to contribute to the encouragement of affordable housing in a country of 170 million people. The initiative was championed by the presidency under the auspices of the Co-ordinating Minister of Finance and the Economy; Dr. Ngozi Okonjo-Iweala, the Central Bank of Nigeria (CBN) with support from the World Bank, the International Finance Corporation (IFC), the UK’s Department for International Development (DFID) and other private sector partners – commercial and mortgage banks.

The NMRC is the first financial institution in Nigeria to be established under a public/private partnership agreement. It is also the first time that the World Bank had contracted to inject capital in a secondary mortgage institution in Nigeria. The World Bank is providing $250m as Tier 2 capital for the company. The IFC is also a Tier 1 equity investor.


CFI.co Meets the COO of National Petrochemical Industrial Company: Jamal Jamil Malaikah

Jamal Malaikah is the President and Chief Operating Officer of the National Petrochemical Industrial Company (NATPET). Mr Malaikah holds a Bachelor of Science in Industrial Management with a major in Business Economics from the King Fahad University of Petroleum and Minerals.

Mr Malaikah has held various senior management positions in the petrochemical industrial sector. He commands a vast experience across a wide professional field gained while working at major international companies such as Co Pak (Egypt) and the Saudi Carton Company, a subsidiary of Savola and Xenel Industries Ltd.

Prior to the current role, Mr Malaikah was the vice-president of marketing and sales at NATPET. Since then, he has been instrumental in shaping the organisation into one that has reached many milestones and is now operating a petrochemical complex in Yanbu, Saudi Arabia, to produce 400,000 MT per year of propylene and polypropylene.

Under his leadership, NATPET secured the runner-up position for Kingdom’s highly prestigious King Khalid Saudi Responsible Competitiveness Award. It has held this place for four consecutive years (2010-2013) in recognition of leadership, effective management, creative teamwork, and the ability to build social and environmental considerations into all the company’s operations.

Mr Malaikah can be said to possess a “global” mind set, which has accredited NATPET with numerous accolades across various platforms. He has a global acumen blended with well-entrenched local values; his understanding of international markets has consistently kept NATPET a step ahead.

Mr Malaikah is exceedingly careful in choosing and cultivating NATPET’s human capital and has transformed the company into a highly successful sustainable organisation provided with a well-balanced and competent team of motivated employees. Mr Malaikah leads by example and attaches great importance to the conduct of business by strict ethical standards. He considers this to be essential to the lasting success of any business venture and insists on following the highest ethical workplace practices.
Mr Malaikah’s openness has transformed the organisation’s working environment into a place where employees enjoy contributing to the overall success of NATPET. His unrelenting commitment to excellence and his dedication to the further improvement of overall performance are recognised by ISO and other certifications that NATPET has received.

ISO 9001:2008

ISO 14001:2004

OHSAS 18001:2007

ISO 22000:2005

Responsible Care – RC logo

RC 14001:2013

ISO 17025 : 2005

RoSPA 2013 Gold Award by the Royal Society for the Prevention of Accidents

REACH compliance

King Khalid SRC Award (2010,2011, 2012 & 2013)

Supply Chain Partner of Choice Award – Process Sector hosted by Frost & Sullivan

EBA (UK) Best Enterprise Achievements – 2014

Commitment with United Nation Global Compact on Human Rights

Recognized amongst the Top-10 Best Saudi Company to Work for 2012

Mr Malaikah is director of the board of the Al Ahli Takaful Company – a Saudi public company since 2013 - and sits on the Petrochemical Manufacturers Committee (PMC) since 2011.


Africa Awakening: A Continent on the Rise

The time for Africa is now. The continent is rising to unexpected heights as wars have ended and humanitarian crises subsided. Afro-pessimism – the deeply-rooted notion that Africa was essentially without hope – has suddenly been replaced with almost boundless optimism. Even The Economist took note: After dismissing the continent as “hopeless” ten years ago, the magazine just last year splashed Africa Rising across its cover, reporting extensively on the burgeoning economies of the continent previously deemed hopeless.

Though statistics can be misleading, the numbers coming out of Africa are nothing short of impressive. Of the fifteen countries in the world boasting the fastest-growing economies over the last five years, nine are African. According to the International Monetary Fund (IMF), sub-Saharan Africa this year may expect average growth rates of around 5.4% – almost double the global average.

The boom times have international consulting companies work overtime. Reports and studies on Africa’s exciting future and the many opportunities awaiting the industrious are published by the dozen. A new scramble for Africa is unfolding as businesses compete for a foothold on the continent. Nigeria is the top-prize: If you can make it there, Africa is yours for the taking – or so the comments go in boardrooms from London to New York to Beijing and everywhere in between.

"The boom times have international consulting companies work overtime."

As mentioned, statistics have their own shortcomings. Fourteen percent annual economic growth in Mozambique may seem very exciting but coming from a nominal per capita GDP of barely $650 means a modest gain of about $90. Even at this accelerated pace it will take a while for people in Mozambique to become avid consumers. The trend, however, is going in the right direction and will eventually transform the country.

Boom Time

A recent study by Bain & Company Consultants expects consumer spending in Africa to double by 2020 and reach $2 trillion as more Africans move out of poverty and into the middle class. The size of Africa’s middle class already doubled between 1981 and 2010 and its growth is picking up fast. Per capita consumer spending in an increasing number of African countries is already higher than that of both India and China. As a market, Africa is already significantly larger than either Brazil or Russia.

This holds true especially in the telecom sector. Africa now has well over 600 million mobile phone users – more than either the United States or Europe. Mobile Internet is becoming widely available and with it user gain access to services previously reserved for well-off urbanites only. The continent is already leading the global revolution in mobile banking. Thanks to the ubiquitous mobile phone, millions of Africans have gained easy access to financial services.

Foreign direct investment (FDI) in Africa has quintupled between 2000 and 2010. South Africa has lost its dominance and now receives only 3% of all investments made in Africa. Over the same period, Africa’s exports tripled thanks to strong demand for its riches from China and India.

Most countries pushed through reforms aimed at strengthening legal frameworks that promote good governance, improve political stability, and offer investors an added degree of security. The political risk previously associated with setting up shop on the continent has been sharply reduced. The cost of doing business in Africa has also fallen dramatically with corruption becoming the exception rather than the rule.

Democracy – and with it improved standards of governance – is on the march. Since Benin in 1991 set a precedent by having a peaceful transfer of power between two governments as dictated by the ballot box – something no other country on the continent had been able to accomplish in about thirty years – more than thirty governments have been democratically elected.

Sceptics may remark that the good times are to be ascribed largely to the commodity boom fuelled by China and its insatiable demand for raw materials. In order to get the ores it desires to port, China has indeed invested heavily in Africa’s infrastructure. It has also boosted the continent’s manufacturing sector to supplement its own. Africa seems poised to conquer a role in both the services industry – as, for example, an alternate host to call centres – and in light manufacturing. As intra-Africa trade expands, industry will see its potential customer base increase. Long hampered by tariff barriers and excessive paperwork, cross-border commerce is set to expand as regulations are relaxed and former rivals become friendly neighbours.

Though Chinese interest in all things African certainly does not hurt, the upswing of the continent is powered mostly by indigenous developments and drivers.

Sustaining the Momentum

Most experts tend to agree with the conclusions of a 2012 study by Roland Berger Strategy Consultants that identified a set of seven industries that will help sustain the growth momentum in Africa: Energy, telecommunications, transportation, manufacturing, consumer goods and retail, public services, and – perhaps most important of all – financial services.

Over the last decade, African banks have experienced unprecedented rates of growth. Balance sheets have grown at average rates of 42% annually while net income increased by as much as 54% per year. This astonishing expansion is by no means nearing its end. About 400 million Africans have yet to gain access to financial services while only an estimated 7% of the continent’s inhabitants are covered by a pension plan. Social security systems are virtually non-existent but most countries are already now in the process of setting up social safety nets.

According to a survey by the International Labour Organisation (ILO), pension coverage is highly differentiated across the continent. In North African countries such as Libya, Egypt, Tunisia, and Morocco around 80% of the labour force enjoys full pension coverage while in most sub-Saharan countries only between three and ten percent does.

As hordes of young and better-educated professionals enter the job market, and swell the ranks of the middle class, Africa’s much-touted demographic dividend will kick in. Governments will have a unique opportunity to introduce innovative social legislation drawing on the experiences of Western nations while avoiding the pitfalls of their now over-stretched systems.

However, politicians and officials must meet the challenge of allowing for the creation of an adequate number of meaningful jobs for the tens of millions expected to enter the workforce in the near future. Thanks to the commodities boom, and improved standards of governance, the resources are available to make this happen. Should the job fail to materialise, frustration will set in which in turn may lead to violence and political instability. The pay-off of a successful job-creation drive is immense. As the ratio between working people and dependents rises, economies will thrive just as they did during the three decades of Asia’s demographic dividend.

The time to cash in is now: Birth rates are already falling and will continue to do so as prosperity levels increase. By 2050, the 55+ demographic will have doubled in size opening up a whole range of opportunities for the financial and healthcare sectors but signalling the end of the demographic dividend. By this time, most countries in Africa should have reached reasonable levels of prosperity.

The Need for Industry

According to Rick Rowden, a US expert on industrial development, Africa cannot possibly expect to escape poverty without resorting to industrialisation: “Apart from a few tax havens and resource-rich places, there is no country that has attained a high standard of living on the basis of services or extractive industry alone. To really prosper, a country simply must put as many workers through factory doors as it can.”

Almost everywhere on the continent, the small but resilient industrial sector is holding onto its ground. Even with the commodities boom in full swing, industrial output in sub-Saharan Africa has managed to keep up at between 10 to 14% of GDP.

Big international names are slowly moving away from Asia to open manufacturing plants in Africa. The American General Electric conglomerate is investing $250 million in a new factory for electrical components in Nigeria. Clothing giants as Swedish H&M and Primark from Ireland are increasingly sourcing products from Ethiopia. A South African telecom has recently begun manufacturing cheap mobile phones for the African market with most components sourced locally.

The World Bank predicts that as many as 80 million jobs may leave China as wages increase. Most of these jobs will migrate to the world’s last economic frontier – Africa. Already low, manufacturing costs are declining even further as improved infrastructure reduces transportation and other logistics expenses. Moreover, productivity across Africa is rising at around 3.5% annually, significantly more than in the US (2.3%). As manufacturing in China becomes more expensive, Africa becomes ever more attractive.

World Bank economist Wolfgang Fengler is convinced that “Africa is now in a good position to industrialise with the right mix of ingredients. For this to happen, the continent will need to scale up its infrastructure investments and improve the business climate. Many [African] countries have already started to tackle these challenges in recent years.”

Though few expect the next South Korea to come from Africa, most economists agree that the continent will follow a more diverse path with a huge number of smaller scale companies providing most of the manufacturing output. Agriculture and the services industry will likely remain important and extractive industries will be a mainstay of African economies for the foreseeable future. This need not be an issue. India has managed reasonably well on agriculture and services while slowly building up its industrial base.

Issues Remain

Though the future looks bright, Africa has yet a vast range of issues to tackle. To begin with, not all countries fare equally well. Oil income may be powering economic growth in Angola and Equatorial Guinea, both countries have a long way to go toward the full implementation of good governance principles. Here, business may be booming, but so is corruption.

The Democratic Republic of Congo is barely governable and not quite as democratic yet as its name would seem to imply. The country remains in the grip of warring factions fighting to loot its riches. Zimbabwe is still the private domain of a stubbornly antiquated ruler who insists on blaming others for his country’s many ills. Even South Africa is tumbling from its pedestal with the ANC (African National Congress), entrenched in power and increasingly arrogant, openly considering land reform and the nationalisation of the mining industry. As the party mulls a swing to the left, the country is tainted by countless corruption scandals.

Learning from Past Mistakes

While most countries have learned from past mistakes, others insist on giving tried-and-failed policies yet another spin. Even in places that have now found the path to sustainable development, much work remains to be done.

Starting a business in most countries is an adventure into the bureaucratic unknown to be undertaken only by the exceedingly well-financed and out of reach for the common man. The selects few who do manage to launch a fully and properly document business are often taxed out of existence. Tax reform is urgently called for as are the means to collect taxes honestly. Property registration, the most mundane of issues, is also lacking. Opening up access to title deeds and registration for small-scale farmers and the urban poor has been shown to unlock credit that, once flowing, enables people to get ahead more easily.

But most of all, politicians and officials should be made to stop appropriating other people’s money. Corruption and the abuse of power are still rife and threaten to derail progress.

These blights will not disappear anytime soon. But they can be managed and even tackled as long as there is a political will to do so. This is where the importance of good governance comes in. Countries that are able to take themselves seriously and conduct their official business accordingly will be amply rewarded with solid growth and a sharp overall reduction in poverty levels.

It is no coincidence that the African countries most successful in combatting corruption, according to the annual tabulations by Transparency International, are the same ones that, according to the numbers of both the World Bank and the IMF, have the fastest growing economies of the continent.


Sir Timothy Berners-Lee: Catching the World in a Web

He may not have invented the Internet, former US vice-president Al Gore did that (…), but British computer scientist Sir Timothy Berners-Lee made the World Wide Web (www) as we know it today possible by coming up with the HyperText Transfer Protocol (HTTP) which enables websites to transmit data over the net.

HTTP constitutes a request-response protocol between servers and client computers. It was first used in November 1989 when “Tim” Berners-Lee and his colleagues at CERN – the European Organisation for Nuclear Research, then the largest Internet node in Europe –succeed in having a central computer serve up a webpage after receiving a GET request over the Internet from a user’s computer.

The page requested was written in HyperText Markup Language (HTML), a set of instructions that tells a client computer how to assemble a webpage and show it on the user’s monitor. HTML, also invented by Sir Timothy Berners-Lee and his team at CERN, still forms the basis of all websites and thus of the World Wide Web – another idea first proposed by the British scientist who, to cap it all, also built the first-ever web browser.

The world’s first website went live on August 6, 1991 at www.info.cern.ch. It explained the workings of the web, gave details about the people involved, and offered software free of charge for designing, hosting, and browsing websites.

It is hard to overstate the value of Sir Timothy’s work. Without it, the Internet as we know it would simply not exist. However, the fact that it does and changed life profoundly, may also be attributed to the decision made early on by Sir Timothy Berners-Lee to refrain from seeking monetary gain from his many inventions. He made all his ideas freely available and did not apply for any patents.

To manage the World Wide Web, Sir Timothy – now employed by the Massachusetts Institute of Technology – in 1994 founded W3C, the consortium that still is the international standards organisation for the web. W3C is made up of 385 representatives from business, academia, governments, non-profit organisations and individuals. Sir Timothy Berners-Lee remains the consortium’s director.

Currently, Sir Timothy is engaged in promoting the concept of net neutrality which holds that both Internet Service Providers (ISPs) and governmental authorities should treat all information travelling the Internet equally. “Threats to the Internet, such as companies or governments that interfere with or snoop on Internet traffic, compromise basic human network rights,” argues Sir Timothy.

The British computer scientist also lends his active support to initiatives that aim to improve access to official data. In the UK, he has been asked to help structure and launch data.co.uk, a government-sponsored project that seeks to make all data acquired for official purposes available to the public. “This project signals a wider cultural change in government based on an assumption that information should be in the public domain unless there is a good reason for it not to be – not the other way around.”

In October 2013, Sir Timothy Berners-Lee got the Big Four of the industry – Google, Facebook, Microsoft, and Intel – to join forces in the Alliance for Affordable Internet, an initiative that hopes to drive down network access costs in the developing world where still only 31% of the population is online. The alliance hopes to improve and broaden Internet access as well and has now adopted the target of the UN’s Broadband Commission which wants to see access charges limited to less than 5% of average monthly income in any given country.

Sir Timothy Berners-Lee did not just invent the World Wide Web and nearly all it entails; he was and remains instrumental in promoting and disseminating the web as a powerful tool for human development and progress.


Nigerian Stock Exchange Becomes a Full Member of World Federation of Exchanges

October, 2014, Seoul, Korea: The Nigerian Stock Exchange (“the NSE”), today, announced that it received a unanimous vote for admission as a full member in the World Federation of Exchanges (the “WFE”), the global trade association for the operators of regulated securities exchanges.

The NSE was elected as a Federation member during the 54th General Assembly and Annual Meeting of the WFE held in the capital city of Korea, Seoul, on 28 October 2014. The NSE is the first West African stock exchange to be granted full Federation membership status.

Mr. Oscar N. Onyema, OON, Chief Executive Officer of the Nigerian Stock Exchange commented: “We are very proud that the NSE has been granted full World Federation of Exchanges membership status. This is a positive step towards our integration with global financial markets. We put in a lot of hard work, and we have cultivated excellence in our day-to-day operations, which has earned us this recognition amongst our peers in this notable global trade association.”

The WFE’s vote for full membership came through a series of assessments. On September 15-16, the NSE was visited by a WFE inspection team in Lagos. The inspection team consisted of the Federation and member exchanges. The team met with the NSE’s management team and several key stakeholders, specifically the Securities and Exchange Commission (SEC) of Nigeria, the Central Bank of Nigeria (CBN), the Central Securities Clearing System (CSCS), two corporates and other market operators.

"We are very proud that the NSE has been granted full World Federation of Exchanges membership status."

- Oscar N. Onyema

Mr. Onyema added: “WFE membership is an important reference for many international investors. This membership status reflects the exchange’s commitment to implementing the highest standards of international best practices. Our ambition is to become the foremost Stock Exchange in Africa, and today is an important step in that journey.”

Ms. Nicky Newton-King, Chief Executive Officer of the JSE, Ltd. and member of the Board of Directors at the WFE, commended the Nigerian Stock Exchange, stating: “This membership has been a long road for the Nigerian exchange. The WFE Review Committee tasked with their application commends them for the attention they have paid to putting in place the regulatory and technological infrastructure necessary, both for the NSE to meet global standards, as well as to position the Nigerian Stock Exchange for future growth. It is this very significant, concerted effort by the team over the last three years that earned them the recommendation. We welcome them on board.”

Ms. Yvonne Emordi, Head of Strategy at the NSE and team lead for the Exchange’s WFE membership project also remarked: “This is indeed a wonderful achievement. It sets the tone for the upcoming Asia tour the Nigerian Stock Exchange will kick-off in early December this year, to introduce our market to Asian fund managers with frontier and emerging market investment strategies. The 5-day tour will start in Singapore on December 1, 2014. ”

Nigerian Stock Exchange Market Snapshot

Q3 2014
(Sep-2014)
52-Week Change
(Oct-2013 to Sep-2014)

Total Market Capitalization [1]
$115.68 bn
6.92%

Equities Market Capitalization [2]
$83.10 bn
16.77%

Bonds Market Capitalization
$32.57 bn
-12.06%

NSE 30 Index
1,882.26
9.68%

NSE All Share Index
41,210.10
12.64%

NSE Lotus Islamic Index
2,725.87
5.86%

NSE Banking Index
425.15
9.25%

NSE Consumer Goods Index
1,032.43
-0.02%

NSE Insurance Index
149.19
8.06%

NSE Oil/Gas Index
460.84
152.17%

NSE Industrial Index
2,736.83
23.88%

NSE ASeM Index
951.09
-1.17%

Total Volume (Q3)
26.78 bn
22.67%

Total Value Traded (Q3)
$2.70 bn
124.17%

Avg. Daily Volume (Q3)
418.51 mn
22.67%

Avg. Daily Value Traded (Q3)
$42.11 mn
124.17%

Avg. Daily Transactions (Q3)
4886
-4.03%

Turnover Velocity (Q3) - Equities (%) [3]
12.97

Avg. PE Ratio (Weighted) - Equities
20.3

No. of Listed Companies
192

No. of Preference Shares
3

No. of Listed Investment Funds [4]
5

No. of Listed Equities
200

No. of Listed Bonds
55

No. of Listed ETPs
2

No. of Listed Securities
257

No. of Trading Days
64

Exchange Rate (Naira:USD)
163.80

[1] Figure includes equities, ETFs and bonds.

[2] Figure includes shares listed on ASeM (N4.0 billion market cap).

[3] Total Equity value traded (turnover) divided by Equities market capitalization (WFE).

[4] Investment funds include unit trusts, closed-end funds, investment trusts and all collective investment funds.

About the NSE

The Nigerian Stock Exchange services the largest economy in Africa, and is championing the development of Africa’s financial markets. The Exchange offers listing and trading services, licensing services, market data solutions, ancillary technology services, and more. The Nigerian Stock Exchange continues to evolve to meet the needs of its valued customers, and to achieve the highest level of competitiveness. It is an open, professional and vibrant exchange, connecting Nigeria, Africa and the world.

About the WFE

The World Federation of Exchanges is the trade association for the operators of regulated financial exchanges. With 60 members from around the globe, the WFE develops and promotes standards in markets, supporting reform in the regulation of OTC derivatives markets, international cooperation, and coordination among regulators. WFE exchanges are home to more than 45,000 listed companies. With its headquarters in London, The World Federation of Exchanges (WFE) acts as a central reference point for the securities industry, and for worldwide exchanges. They offer member guidance for member exchanges business strategies, and help in the improvement and harmonization of their management practices.

Contacts

Joseph Kadiri Media Relation Executive

The Nigerian Stock Exchange

2-4 Customs Street | Lagos| Nigeria

Mobile: +234 (0) 703 249 8803

Email: jkadiri@nse.com.ng

Nwando Ajene Head | Corporate Communication

The Nigerian Stock Exchange

2-4 Customs Street | Lagos| Nigeria

Mobile: +234 (0) 813 783 8345

Email: najene@nse.com.ng


IREIS 2014 to Offer Unique Investment Opportunities

Event to Facilitate Real Transactions in Key Global Markets In Middle East, Europe and Asea Pacific

Abu Dhabi-UAE: October, 2014 – The sixth edition of International Real Estate and Investment Show (IREIS 2014), the only dedicated real estate event that targets investors and end-users rather than trade visitors, will focus on high net worth individuals living in the UAE, according to organisers Dome Exhibitions.

Set to run from 20 to 22 November, 2014 at Abu Dhabi National Exhibition Centre (ADNEC), IREIS aims to provide a snapshot of property markets in the Middle East, Europe and the Asia Pacific region and is looking to influence the real estate investment decisions of the 7.5 million-strong expatriate community living in the UAE.

The recently published 2014 Global Investor Sentiment Report by Colliers International, the leading real estate services organization, painted the overall picture of investor confidence worldwide as one of improving with expectations of increasing transactional volumes in 2014. The report particularly mentioned key Asian cities including Singapore, Mumbai, Shanghai, Tokyo and Hong Kong to be the top five cities to focus on the future.

"The key objective of the event is to facilitate and enhance property transactions in Abu Dhabi and major international markets given the UAE’s appeal as a leading destination for large numbers of expatriates from all over the world."

Antoine Georges, Managing Director at Dome Exhibitions, said: “The key objective of the event is to facilitate and enhance property transactions in Abu Dhabi and major international markets given the UAE’s appeal as a leading destination for large numbers of expatriates from all over the world. As the leading investor and end user-centric property event, IREIS will offer a wide selection of properties at different price ranges in key international markets.”

The 2014 Global Investor Sentiment Report found out that despite the increasing globalization of the real estate investment market, investors, particularly Asians, still prefer their home markets.  77 per cent of Asian respondents to Colliers International’s survey considered Asia to be their primary investment focus during next 12 months. Additionally, 62% of Asian investors believed Asia's property market would improve over the next 12 months.

Expatriates from the UAE, one of the top global destination for expatriates, is remitted an estimated over US$20 billion to their home countries according to a report issued by the UAE Ministry of Foreign Affairs in 2012, which has had a significant impact on the economic growth in recipient countries. A major chunk of these remittances are used to invest in houses and lands as a preferred savings mechanism for expatriates amid rising real estate prices worldwide. “IREIS 2014 will benefit those looking to invest in real estate projects in their home countries to find the finest properties that suit their budgets and requirements, while offering them access to mortgage options and answering their queries relating to the investment climate and relevant real estate regulations in the UAE and abroad. Additionally, it serves as an ideal platform for those seeking suitable units for the purpose of leasing, investment or buying in freehold areas in the country, Mr.Georges added”

The real estate market in Abu Dhabi is currently witnessing a resurgence backed by the strong performance of other economic sectors. Experts in the industry attribute the improving conditions in Abu Dhabi market, especially in prime areas, to a number of factors, most notably the new structural changes in Abu Dhabi’s economy that is rapidly shifting its focus to sectors such as tourism, hospitality, media, aviation, manufacturing and renewable energy as articulated by the Abu Dhabi Economic Vision 2030. This has led to a huge influx of well-educated and highly-skilled and financially enabled expatriate professionals to the emirate.

Expatriates are looking for high quality housing units both in the UAE and in their home countries, which has prompted Abu Dhabi’s decision to designate certain areas as freehold properties where foreigners can buy and own real estate such as Reem Island, Saadiyat Island and Al Raha Beach.

Despite the significant number of new stock has entered Abu Dhabi real estate market in recent years, demand is expected to remain strong due to underlying demographic and economic drivers.

Colliers International’s Abu Dhabi Real Estate Overview for the second quarter of 2014 found the residential market in Abu Dhabi currently supplied with 241,000 units whereas the demand is for 292,000 units. The shortage of 51,000 units or 21% of current supply, coupled with the growing housing demand from expatriates has pushed the rental prices up by 12% and sales prices by 9% year on year basis. The report also found an opportunity for non-national Investment in affordable housing sector with Emirate’s population increasing 5.5% year on year.

IREIS 2014 is anticipated to attract nearly 10,000 visitors and more than 70 exhibitors from over 20 countries, including the UAE, Saudi, US, UK, Poland, Cyprus, Turkey, Greece, Lebanon, Egypt, India, Pakistan, Jordan, Thailand, Portugal and Azerbaijan among others.

IREIS 2014 will gather key investors, developers, financiers, property advisors, real estate consultants, architects as well as regional and international investment promotion authorities related to the real estate sector. The definitive property event is set to host a number of associated initiatives including an international conference, country-specific presentations, business networking meetings and investor exchanges. DOME Exhibitions, organisers of IREIS 2014, hosts exhibitions in the emirate of Abu Dhabi and helps businesses in the UAE to extend their reach and enhance their visibility in the global marketplace.


Elif Shafak: Exposing the Moralising Slappers

Born in 1971 to a diplomat mother and philosopher father, Elif Shafak was destined for intellectual greatness. She did not fail to heed the call and today is Turkey’s most widely read and celebrated female author with thirteen books to her name. She is also one of the country’s most outspoken voices on feminism, cosmopolitanism, and politics.

With over 1.6 million followers on the microblogging network Twitter, Mrs Shafak’s word carries considerable weight. Her essays appear regularly in some of the world’s most prestigious newspapers such as The Guardian and The New York Times. Writing in response to repression of the protests following last May’s mining disaster, Mrs Shafak focused on the odd behaviour of Prime-Minister Recep Erdoğan who allegedly warned the discontents that “if you boo me, you get a slap.” Mr Erdoğan then went on to slap one of the protesters who had found refuge from the tumult in a grocery store. An aide to the prime-minister, aiming to oblige, went a step further and was caught on camera kicking a man being held to the ground by two burly police officers. The next day, this aide was sent on sick leave for injuries to his kicking foot.

“Had this happened in another country, the entire government would be shaken to the core. Not in Turkey where the state has all the power and citizens do not. We as a nation are used to being slapped by those in positions of higher authority. In family, in school, in the army, in the street, in the supermarket … the slap is everywhere.”

Mrs Shafak is also mildly critical of the increased polarisation of Turkish society. The female body is all too often the battleground of choice for moralising politicians and administrators. Even in cosmopolitan Istanbul, the city Elif Shafak freely draws her literary inspiration from, advertising billboards displaying moderate amounts of female skin are regularly painted over. Off the record, municipal censors admit to cropping the legs of models in order to meet the unwritten but strict standards of the city’s administration. “Today, men of all political persuasions feel free to lecture women on how to dress and how to live.”

The changing face of political and societal values does not discourage Mrs Shafak in the least: She remains firmly committed to Istanbul as a concept, not just a city straddling the divide between The East and The West. In a recent essay for Time Magazine she concluded: “East and West do mix. In a city like Istanbul they mix intensely, incessantly, amazingly. One should be cautious when using categories to talk about Istanbul. If there is one thing this city doesn’t like, it is clichés.”

In her 2012 novel The Forty Rules of Love, Elif Shafak explores the universal desire for intimacy – with other human beings as well as with the divine. The book is a modern-day fable that toggles between the lives of an American housewife and a 13th century poet and lays bare the struggle for supremacy between the rational mind and the passionate heart. The book sold over a million copies worldwide and was translated into forty languages.

Penning her books in both English and her native Turkish, Mrs Shafak divides her time between the world’s great cities. When not exploring the backstreets of Istanbul, she is likely to be found in Boston, London, or Amsterdam thriving on the multiculturalism that powers the world’s most dynamic societies.


University of Chicago Booth School of Business: Questioning the Economic Effects of a Booming Real Estate Market

Strong house price growth fuels economic activity during expansions, and the ensuing slowdown in housing often precipitates severe crashes. Almost every severe economic downturn in advanced economies over the past 85 years was preceded by a real estate boom: Among them the Great Depression in the United States, the Lost Decades in Japan, and the current economic malaise that plagues Spain. Research, as summarised in our recently published book House of Debt, shows that this relation is causal: Movement in house prices affects real economic activity such as spending and employment.

Policy-makers throughout the world now recognize this fact, and many are paying close attention to housing markets. In Britain, house prices have risen sharply over the past 16 months, sparking worries of an unsustainable housing boom. The Bank of England, recognising the relation between such housing booms and subsequent economic catastrophe, has implemented restrictions on mortgage lending in an attempt to cool the market. Central banks in Israel and South Korea, among others, have also used limits on mortgage lending to cool housing markets in the past.

“While the fact that housing affects economic activity is clear, the underlying economics are not.”

While the fact that housing affects economic activity is clear, the underlying economics are not. An understanding of these economics is crucial as policy-makers increasingly target excessive mortgage lending during real estate booms.

Beyond Construction

Why should house prices drive economic activity? One reason is obvious: A rise in real estate values encourages the construction of new buildings and homes, which in turn contributes directly to economic growth. But in most advanced economies, residential investment is not a major component of economic growth. We need to look beyond construction to understand why housing affects the broader economy.

The other reason is more important, but also harder to explain: Movement in house prices have a strong effect on household spending. In 2005 and 2006, our research shows that house price growth in the United States increased household consumption by 1.3 per cent of GDP. The dramatic decline in spending when house prices crashed was instrumental in both the initiation and severity of the Great Recession [1].
Most call the influence house prices exert on spending the “wealth effect,” and a common estimate is that households spend about 4 to 7 cents out of every dollar of house price appreciation. Symmetrically, households cut spending by a similar amount when home values fall.

But this effect is theoretically puzzling. Why should people feel wealthier when their home values rise? A rise in the price of a home is also a rise in the cost of living. Consider, for example, a young couple that owns a small apartment but wants to buy a bigger home in the same neighbourhood. A rise in real estate prices is a bad thing for this couple – they now need to increase their spending on housing in the future. A higher price of housing makes them feel poorer rather than not richer. This is what makes housing different than stocks or bonds; housing is an asset we directly consume, and so a higher price also means a higher cost of consumption.

Borrowed Cash

So how do we explain the empirically robust relation between home value changes and spending? Rising home values affect spending not because people feel richer, but because a higher home value facilitates borrowing by lower and middle income homeowners, who use the borrowed cash to spend. In our research on US house price growth from 2002 to 2006, we find that the effect of higher home values on spending was completely driven by lower and middle income homeowners [2]. Among the rich, an increase in home values had no effect on spending.

Further, higher spending for lower income Americans was driven by borrowing. They borrowed heavily against their rising home value, as much as $0.25 for every dollar of price appreciation. All of the borrowed money was used for spending, and all of the effect of increased home values on spending was driven by borrowing. The housing wealth effect is really a housing borrowing effect, and it is driven completely by lower and middle income households. The average 4 to 7 cent spending effect cited above is misleading because it masks huge variation across the population.

These findings fit into a broader literature that consistently finds that lower income, lower net worth individuals have a much higher propensity to alter their spending dependent on income shocks. Research has confirmed this result in the context of fiscal stimulus rebate checks, auto loans, and credit card limits. Lower income households see their spending change dramatically when they experience a rise or fall in income or credit availability. Higher income households are far less responsive.

So what are the lessons for policy-makers in Britain today? An overarching theme from our research is that we must move beyond aggregate measures of house price growth, household debt, and spending. It is the distribution that matters, and we therefore must have more microeconomic data to understand the effects of the current boom on economic activity. If low income households in Britain are using higher home values to borrow and spend, then that suggests a warning flag. In contrast, if the gains to home values are primarily accruing to the very rich, then rising house prices may be having a minimal effect on household spending.

Here is a concrete example of how a singular focus on aggregate data can be misleading: Current measures of the aggregate household debt to income ratio in Britain suggest that there is no sharp rise in household leverage. But this fact alone provides only limited information. If the rise in income is driven by those at the top of the income distribution who carry very little debt, then it could still be the case that lower and middle income British households are seeing an unsustainable rise in leverage. Policy-makers need to know whether people in the middle and lower income part of the distribution are borrowing too much relative to their income.

Historical Precedent

We have historical precedent for such an error based on aggregate data. Many in the United States justified the rise in household leverage from 2000 to 2007 by pointing to higher aggregate productivity. But as we have shown in our research, the rise in productivity was not affecting the incomes of the low credit score individuals that were borrowing aggressively. Their income was actually falling. Microeconomic data would have shown this dangerous pattern, while the aggregate data did not.

The disparate effect of shocks to income on spending across the income distribution is also an important consideration when setting monetary policy. As the excellent report by the Resolution Foundation [3] points out, many lower and middle income British households are stretching to meet their mortgage payments; payments that will rise sharply if overall interest rates increase. In surveys, almost half of British households say they will have to cut spending, work longer hours, or renegotiate their mortgage if interest rates increase by just 2%. An increase in interest rates could have a significant effect on spending for lower and middle income homeowners with large mortgages.

Advances in computing power and data availability mean we can now measure the effects of house prices and other economic factors at a more disaggregated level than in the past. Our research suggests that house price growth has a very different effect on spending for low versus high income homeowners –we must measure who is affected to know how aggregate movements in real estate affect the broader economy.

References
[1] ‘Household Balance Sheets, Consumption, and the Economic Slump’ by Atif Mian, Kamalesh Rao, and Amir Sufi, The Quarterly Journal of Economics, Vol. 128, Issue 4, Pages 1687-1726.
[2] ‘House Price Gains and US Household Spending from 2002 to 2006’ by Atif Mian, Amir Sufi, May, 2014.
[3] ‘Hangover Cure: Dealing with the household debt overhang as interest rates rise’ of July 24, 2014.

Originally for “Financial World” and ifs University College.


Set Up for Failure: UK Prime-Minister Approaching Point of No Return

Be careful what you wish for. As UK Prime-Minister David Cameron bravely insists on pushing through far-reaching reforms of the EU labour market – doublespeak for introducing checks on the free movement of people across the union – his yet-to-be defined plans were unceremoniously shot down by a missile fired from Berlin.

German Chancellor Angela Merkel will have none of it and told Mr Cameron his island nation will be cast adrift should he persist in this plan. Mrs Merkel warned the prime-minister that he is perilously close to a “point of no return” which, once reached, will see Germany abandon its efforts to keep to UK in the European Union.

Besieged by Nigel Farage and his jolly band of isolationists, Prime-Minister Cameron is desperately looking for ways to curb immigration. One plan is to introduce an annual cap on the number of national insurance numbers issued to newcomers from EU member states. Another suggestion has the Home Office order the deportation of EU citizens who after three months have failed to secure a job in Britain and are unable to support themselves.

"While pretty much everything under the sun is debatable in Brussels – precisely one of Mr Farage’s many beefs – the four freedoms are not."

Not normally susceptible to reason based on hard facts, Mr Farage’s ongoing rant against the European Union – neatly delivered in, admittedly brilliant, one-liners – thoroughly misses the point. His prediction of December 2012 that millions of Bulgarians and Romanians would flock to Britain was widely off the mark. Last August, the Office for National Statistics tabulated just over 150,000 immigrants from both countries. Also, non-EU immigrants still outnumber union citizens established in Britain by a 2-to-1 ratio.

Prime-Minister Cameron is now hemmed in between the rhetoric of Mr Farage and the iron will of Mrs Merkel. Small wonder he seeks to escape this less-than-enviable predicament. It’s a tall order. Whereas Mr Farage will not likely be swayed by reasoned arguing, Mrs Merkel adheres to a logic that bears no arguing at all.

At its core, the European Union is built around four basic freedoms: The free movement of people, goods, services, and capital. Together, these four freedoms constitute the bedrock on which the EU’s edifice was erected. When the Swiss recently attempted to limit the free movement of people, they were brusquely told by Brussels to either conform or get lost. Switzerland may not be a full member of the EU, the country did sign an association treaty that commits it to following EU legislation.

While pretty much everything under the sun is debatable in Brussels – precisely one of Mr Farage’s many beefs – the four freedoms are not. To question them is akin to expressing doubt on the Pope’s allegiance to the Mother Church. German Chancellor Merkel just reminded Mr Cameron of that plain and simple fact.

The interesting bit is that the quandary is, in fact, not half as bad as it would seem at first glance. Under current EU rules, no country is required to offer social benefits to citizens of other member states who are unable to support themselves and have only recently arrived. The rules clearly state that immigrants are not to burden the host country’s social services in any way. Full entitlement is only gained after a presence of five years, during which time the immigrant will presumably have paid taxes and contributed to whatever social programmes are offered.

While restricting access to the UK labour market remains a no-go area and deporting EU citizens is simply impossible, there is not a single impediment to the UK denying recent arrivals welfare benefits. There is simply no obligation whatsoever to provide newcomers with council housing or any other form of social assistance.

Then again, this brewing storm in the proverbial teacup is not at all about Mr Farage or the EU as much as it is about the phenomenal ineptitude of Prime-Minister Cameron. While he may deserve some credit for keeping Scotland in the UK, Mr Cameron does not seem overly talented in the art of brinkmanship.

By shouting from the rooftops that he will not pay the country’s EU dues, all the while knowing there is no way out, Mr Cameron sets himself up for failure. By stating that he will curb immigration from other EU member states, Mr Cameron places a bomb under the EU. He should not be surprised that others will promptly defuse it and tell him to quit being subversive.

Some battles need not be fought. The UK is perfectly able to limit the fallout from increased numbers of EU immigrants without running afoul of EU legislation. The country should perhaps also pay its EU bills for, curiously enough, the extra €2.1bn the UK is expected to pay is the result of Britain’s own revised statistical procedures. By the way, nobody asked or required the UK to review the way it handles economic data.


Hernando de Soto: Unlocking the Riches of the Poor

 Most of the world’s poor may be slightly less destitute than it appears. However, officialdom often unwittingly conspires to keep the modest wealth of the poor – a shack, a building plot, a sewing machine, or marketable skills – locked up by red tape.

Peruvian economist Hernando de Soto (73), president of the Institute for Liberty and Democracy (ILD) in Lima and a disciple of Milton Friedman of the Chicago School of Economics, convincingly argues that welcoming the poor into the formal economy by doing away with excessive legislation offers a fast track to increased prosperity for all.

In Peru, the ILD helped rewrite legislation aimed at greatly simplifying the registration process of property and businesses thus enabling over 1.2 million families to obtain title deeds to their homes. Close to 400,000 small businesses, previously part of the underground economy, were legalised as well. By drastically reducing the red tape involved in obtaining business licenses, the Peruvian authorities succeeded in shortening the time it takes to register a company from over 40 days to barely 24 hours.

Mr De Soto’s novel approach to combatting poverty is even credited with administrating a fatal blow to the Shining Path guerrilla movement through the legalisation of the smallholdings of coca farmers. This deprived the Maoist revolutionaries of safe havens and recruits.

"Former US president Bill Clinton called him ‘the world’s greatest living economist’, while former United Nations secretary-general Kofi Annan concluded that Hernando de Soto is ‘absolutely right’ in rethinking the path of economic development."

The success of Mr Soto’s policy initiatives has since been noted by the World Bank and other multilateral institutions. It has been calculated that worldwide at least $10 trillion in assets belonging to poor people remain excluded from the formal economy and therefore do not enjoy the full protection of the law. Mr De Soto argues that extending legal protection to the owners of these excluded assets gives them powerful tools with which to build a more prosperous future.

The Institute for Liberty and Democracy has now assisted 23 countries with proposals to open their economies to the excluded. “A modern market economy cannot function properly when a large group of entrepreneurs remains confined to the margins.” Mr De Soto strongly believes that economic inclusiveness also strengthens democracy: “When voters become stakeholders in a nation’s destiny, they will also start paying more attention to the quality of governance.”

Mr De Soto has received lavish praise for his research on the mechanism of upward mobility. Former US president Bill Clinton called him “the world’s greatest living economist”, while former United Nations secretary-general Kofi Annan concluded that Hernando de Soto is “absolutely right” in rethinking the path of economic development.

Critics have drawn attention to De Soto’s heavy reliance on neo-liberal policies that have at times been proven disastrous when applied to emerging markets. RG Rossini and JJ Thomas of the London School of Economics have questioned the validity of De Soto’s statistical data and suspect their Peruvian colleague has grossly overstated the amount of wealth locked away in the informal economy.

Still, in Peru and elsewhere, Mr De Soto’s approach did result in millions of people gaining access to credit and banking, the courts, subsidies, and other business services. Countless others went from being just plain destitute to become home- or landowners. With his common-sense policy recipes, Mr De Soto has delivered rays of hope and official recognition to people formerly outside the scope of economic life.


Executives: Smart Carbon Pricing Policies Can Drive Investment in a Cleaner Future

The IPCC’s Fifth Assessment Synthesis Report warns of the need to reduce greenhouse gas emissions by 40 to 70 percent by 2050, on pace for carbon neutrality by the end of the century.

Businesses know how to cut emissions and can leverage capital to finance a low-carbon shift, but policies often incentivize short-term gains over investments in a sustainable future.

Pricing carbon and requiring companies to disclose climate risk and greenhouse gas emissions can provide the data and economic incentive for businesses to lower emissions and investors to support a cleaner future.

The 195 countries in the Intergovernmental Panel on Climate Change joined thousands of scientists in reminding the world today that climate change is a growing risk that is already affecting lives and livelihoods. They warned in the IPCC Fifth Assessment Synthesis Report that we need to reduce global greenhouse gas emissions quickly – by 40 to 70 percent by 2050 – to stabilize rising global temperatures and avoid the most serious economic damage.

Businesses and governments know this. They know how to cut emissions through energy efficiency, renewable energy, and sustainable land use, and they can leverage the money needed to finance a low-carbon transition.

The question is how to change economic incentives and disincentives so they can turn that knowledge into action that has a measurable impact on climate change.

It’s a challenge that forward-thinking investors, government officials, and business leaders are taking up. We spoke with business leaders during the World Bank Group/IMF Annual Meetings about solutions, particularly about carbon pricing policies that could incentivize low-carbon choices.

We have to start reallocating money from the bad to the good. We see many companies taking this very seriously and putting it into any investment case they have.

- Mats Andersson, CEO of AP4

The executives – including from pension funds AP4 of Sweden and ERAFP of France, the international asset management firm Amundi, and the global technology company Alstom – talked about the need for consistent, meaningful carbon pricing; flexible policy frameworks that allow for innovation in how businesses lower their emissions; links between the diverse carbon pricing systems being developed around the world; and complementary policies, such as binding targets for energy efficiency and renewable energy.

They also discussed the importance of corporate disclosure of climate risks and greenhouse gas emissions to help investors and business leaders direct capital toward low-carbon choices, and the impact that requiring disclosure could have.

Capital is available to finance the low-carbon transition, they said, but it will not flow at the levels needed for the long-term until governments provide consistent and credible policy signals.

 “We have to start reallocating money from the bad to the good,” said AP4 CEO Mats Andersson, whose pension fund asks the companies it invests in to report on their emissions and climate change risks. “We see many companies taking this very seriously and putting it into any investment case they have.”

Transparency

Lowering emissions starts with risk assessment. It’s a concept basic to business practices and economics: calculate today what emissions will cost your business or community tomorrow and act accordingly.

For investors, however, that risk can be obscured when companies don’t report climate risks, such as the vulnerability of their supply chains and assets to natural disasters, resource limitations tied to climate change, and the impact of climate policies or mandates. A growing number of investors are encouraging companies they invest in to disclose their climate risks and carbon footprints to improve the companies’ and the investors’ decision-making.

Requiring climate risk disclosure, starting with public pension funds, would be in governments’ best interest, said Frédéric Samama, deputy global head of institutional and sovereign clients at Amundi. Governments should be asking themselves if public pensions funds are investing in polluting companies that will ultimately costs the country, its citizens, and its budget, and they ask why, he said.

Reporting is also connected with behavioral finance, noted ERAFP CEO Philippe Desfossés: If you have evaluations every six months or every year, and if reporting is present in daily corporate monitoring, it becomes an issue business leaders will act on.

Investing for the Future

For businesses, a consistent price on carbon through cap-and-trade systems or carbon taxes provides the policy direction to shift their focus from immediate returns that could damage the environment and drain resources to a longer-term outlook that supports sustainability. It can drive investment toward a cleaner economy and help them identify both climate risks and opportunities for new investments or business lines.

To encourage low-carbon investment, carbon pricing and climate policies must be feasible, achievable, and not subject to whims or constant political adjustment, said Alstom U.S. President Amy Ericson. The most effective policies are also flexible so each business can respond in the most efficient way for its situation – which leads to innovation and business opportunities.

 “A long-term, meaningful price on carbon is critical for technology developers to sustain the necessary effort to bring innovative technologies to realization, like carbon capture and storage, offshore wind and smart cities,” Ericson said.

When the EU had a strong price on carbon, businesses were quick to invest in technologies that would help them lower emissions and meet the challenges of the future. It was in their economic interest to embrace energy efficiency and cleaner energy sources. With the lower carbon price today, many businesses have less incentive to invest for the future.

Developing a Leadership Coalition

The World Bank and partners, with input from finance ministers, investors and business leaders, are developing a carbon pricing leadership coalition to help governments learn from existing carbon pricing structures and find effective ways to encourage sustainable business decisions. The coalition will be a platform for discussion, knowledge-sharing, and ideas, including on ways to link national and regional carbon pricing systems for greater efficiency.

Investors and businesses are already moving forward. Many work within carbon pricing frameworks in the nearly 40 countries and more than 20 cities, states and provinces with carbon taxes or markets in operation or planned.

Others know they are headed for a carbon-constrained future and can gain an advantage by preparing now. Companies with hundreds of billions of dollars in assets disclose their carbon footprints, and more than 150 large companies have developed internal “shadow” carbon pricing mechanisms to help guide their decisions for a future when they expect to have formal carbon pricing in place.

Internal pricing isn’t enough, though – governments have to follow up. “We need a price on carbon,” Desfossés said. “Once we have that framework, we will allocate the capital.”

Another important source of carbon pricing action and growing knowledge is the Partnership for Market Readiness (PMR). This week, representatives from more than 30 countries in the PMR are meeting in Chile to discuss their progress in designing and building the carbon markets and carbon pricing systems of the future. Source


Working Together to Boost Innovation in Central Europe and the Baltics

Innovation is a critical driver of long-term economic growth and the right public policies are crucial to boost innovation.

Through lending projects and advisory services, the Bank is assisting new European Union member states and candidate countries to unlock their innovation potential.

Experts and policymakers from around the region are working together to identify best practice examples to enhance innovation policy.

[caption id="attachment_8372" align="alignright" width="187"] The Baltics: Tallinn, Estonia[/caption]

Innovation is a critical driver of long-term economic growth in any country. This is particularly true for relatively new entrants into the European Union (EU), including Bulgaria, Croatia, Poland, and Romania.

Stimulating innovation can stimulate growth and competitiveness while simultaneously helping countries advance their potential at the technology frontier. This feat, however, requires both a policy environment and investments that are multi-pronged – allowing for replication of successes from around the globe, as well as adaptation to specific country contexts.

The World Bank has been engaged with Central European countries to help them unlock their potential on the innovation front. One example is Poland, a high income country with substantial innovation potential. Poland has been hampered in reaching its potential due to inefficient use of financial resources to spur innovation, insufficient involvement of the private sector, and weak monitoring and evaluation of impact of investments in the innovation sphere.

"The World Bank has been engaged with Central European countries to help them unlock their potential on the innovation front."

With nearly €10 billion in EU structural funds earmarked specifically for improving Poland’s innovation outcomes over the 2014-2020 financing period, the government is developing new strategies to help ensure the overall efficacy of new and ongoing innovation initiatives by deploying multiple financial instruments, upgrading its research infrastructure, and building strategic international partnerships.

As part of this, Poland’s Ministry of Regional Development also engaged the World Bank through Reimbursable Advisory Services to develop a review of strategic and operational documents that can guide the country’s national and regional innovation policy until 2020, based on the European Commission’s new smart specialization concept. The government of Poland is using insights from the World Bank’s Review of National and Regional Research and Innovation Strategies for Smart Specialization in Poland to strengthen its system of support for innovation.

In Croatia, through a series of Science and Technology Projects, the World Bank has been assisting the government to absorb EU funds for research and innovation more effectively by working with selected public sector organizations to strengthen their capacity and stimulate demand from the business and scientific communities for available funds.

The first Science and Technology Project was designed to strengthen Croatia’s innovation potential and increase its competitiveness by supporting research and development programs managed by the Business Innovation Croatian Agency(BICRO) and the Unity through Knowledge Fund. The Bank also assisted public research organizations to commercialize their research and improve collaboration with the business sector.

The second Science and Technology Project is helping those involved in research and innovation, including public research institutions, scientific communities, high performing scientists, and young researchers, to benefit fully from EU accession by increasing their capacity to apply for and implement EU-funded projects.

The project fosters the collaboration with the scientific diaspora in order to raise the quality of scientific research in Croatia, to contribute to the creation of new values in the Croatian economy, and to raise the scientific infrastructure in Croatia. In addition to promoting research excellence and integration into the European Research Area, the project provides grants and loans to early stage research and development activities.

In addition to supporting Poland and Croatia’s efforts, the World Bank recently joined innovation experts from the region at the Technology Agency of the Czech Republicin Prague to share achievements and best practices, as well as to look into different experiences from specific countries. For example, in Bulgaria the Bank is involved in innovation work through Strategy for Smart Specialization; in Romania, the Bank helped flesh out Competitiveness Enhancement and Smart Specialization Policies in the West Region; and in Serbia, the Bank is supporting the Serbia Innovation Project.

Among the key recommendations identified at the workshop were a need to shift the focus from inputs to outputs, improve the business environment in these countries, and ensure adequate and effective monitoring and evaluation. Suggestions for achieving these goals included reducing the public sector’s aversion to risk, linking public funding with results, switching to demand-driven support, importing skills from abroad when necessary, using independent evaluators to avoid conflict of interest, and increasing feedback from policymakers.

By incorporating best practices from other countries and designing specific recommendations from lessons learned, policymakers can better design specific interventions to boost innovation. Building on broader experience in Europe can help countries create sustainable policies that take a multifaceted approach toward innovation – ensuring that when investment for innovation takes place, it is done as efficiently and effectively as possible. Source


PJ O’Rourke: One of the Last of the Gonzo Journalists

 A gonzo-style journalist par excellence, PJ O’Rourke will seldom fail to tackle serious societal issues with sarcastic humour and some well-placed digs at authority. Formerly managing-editor of National Lampoon, an avant-garde US satire magazine published from 1970 to 1998, Mr O’Rourke derives great pleasure from exposing the often petty considerations of high-minded public officials and others happily wielding power for the common good.

Taking a cue from – and following closely in the footsteps of – HL Mencken (1880-1956), aka the Sage of Baltimore and the inventor of journalistic satire, Mr O’Rourke does not shun controversy and cultivates a natural tendency to rub against the grain. Writing for Rolling Stone magazine (home to “All the News that Fits”), he lashed out equally hard at Bill Clinton as he did at George Bush the Elder.

A self-described libertarian and most definitely a contrarian, Mr O’Rourke possesses a quality not often seen in contemporary journalism: Scepticism coupled to irreverence. The mighty are not to be taken too seriously; their antics deserve exposure; and their lofty ideals merit close scrutiny for signs of hypocrisy.

PJ O’Rourke on Bill Clinton: “Bill Clinton is not a hypocrite. If a man believes that it is just and moral to redistribute wealth, there is nothing hypocritical in his attempts to redistribute some of that wealth to himself.”

“A self-described libertarian and most definitely a contrarian, Mr O’Rourke possesses a quality not often seen in contemporary journalism: Scepticism coupled to irreverence.”

On the Obama Administration: “The good news is that, according to the Obama Administration, the rich will pay for everything. The bad news is that, according to the Obama Administration, you’re rich.”

And finally, for good measure, on Attila the Hun: “Fifth-century Hunnish depredations on the Roman Empire were the work of an over-powerful executive pursuing a policy of economic redistribution in an atmosphere of permissive social mores.”

This is the stuff the Stephen Colberts and Jon Stewards of today grew up on. It is how they honed their skills. Alas, PJ O’Rourke’s pupils have yet to exceed their teacher in acerbic excellence. Mr O’Rourke belongs to the informal triad of Gonzo Greats with Tom Wolfe (The Kandy-Kolored Tangerine-Flake Streamline Baby) and Hunter S Thompson, deceased in 2005 (Fear and Loathing in Las Vegas). These three journalists were the last of a great generation from a now largely bygone era when reporting still required literary skill, wit and powers of observation stretching to well beyond the obvious.

Over the course of his career, Mr O’Rourke also published sixteen books of which two topped The New York Times’ bestseller list for weeks on end. His most famous work is A Parliament of Whores which carries the inimitable subtitle “A Lone Humourist Attempts to Explain the Entire US Government.”

More recently, ever watchful American conservatives have claimed Mr O’Rourke as one of their own for his unrelenting criticism of President Obama. They sorely miss the point of PJ’s writing. Mr O’Rourke and the few true journalists left will always criticise those in power as a matter of professional duty and courtesy. In that sense he is no different from, say, the Argentine rebel Che Guevara: “Is there a government here? If so, I’m against.” Rebellion in stylish writing is now becoming a lost art. It is being kept alive by Mr O’Rourke and a select few others.


WB, Vietnam Sign US$ 500 Million Loan to Improve Energy Efficiency

Hanoi, November, 2014 – The State Bank of Vietnam and the World Bank today signed a US$ 500 million loan for a US$ 731.25 million operation in support of Vietnam’s energy sector. The investment will fund construction of over 1,000 kilometers of transmission lines and implement Smart Grid technologies to improve reliability and quality of electricity supply.

“Improving energy efficiency is critical for Vietnam’s ability to meet energy demand to power growth and maintain improvements in welfare.” said Victoria Kwakwa, Country Director for  the World Bank in Vietnam. “Energy efficiency improvements are also important for reducing Vietnam’s rapidly growing greenhouse gas emissions and contributing to climate change mitigation.”

The loan supports a Transmission Efficiency Project, which is expected to improve the capacity, efficiency and reliability of electricity transmission in areas that are key to the country’s economic development, including the Greater Hanoi Area, the Greater Ho Chi Minh City Area, the Mekong Delta, and the Central Region.

“Energy efficiency improvements are also important for reducing Vietnam’s rapidly growing greenhouse gas emissions and contributing to climate change mitigation.”

It will finance transmission lines and substations, constituting about 15 percent of the expected need for transmission network expansion by 2020. The project targets key investment needs in major economic development areas where transmission overloads are already present or are expected in the very near term.

In addition, the project will support Smart Grid technologies for monitoring, control, and protection equipment to improve reliability and reduce electricity outages, and help build the capacity of the National Power Transmission Company by supporting its operational and financial independence, as part of a plan to pilot a competitive energy wholesale market by 2015.

The total financing requirement of the project is estimated at US$731.25 million, of which US$500 million will be funded by the International Bank for Reconstruction and Development, the World Bank Group’s lending arm for middle-income countries. The remaining US$231.25 million will be financed by the National Power Transmission Company, Electricity of Vietnam. Source

For more information, please visit www.worldbank.org/vn