Ernst & Young, Argentina: Tax Reform Affects Stocks and Dividends

On September 23 of last year a law (nr. 26,893) was introduced which significantly amend the Argentine income tax law. It was published in the Official Bulletin.

As an introduction, the main amendments are aimed at levying income tax over the sale of shares and membership interests by natural resident persons and parties domiciled abroad, as well as the distribution of dividends earned by those parties.

Part of the amendments introduced by the new law were already known to tax advisors and businesspeople, who were well aware that the income tax exemption over the sale of shares by people and companies domiciled abroad would end soon in view of the continuously increasing tax pressure observed in Argentina in the last few years at federal, provincial and municipal levels.

Main Amendments Introduced

Below is a brief analysis of the main amendments introduced by the law and a particular focus on the two most significant changes affecting mainly transactions arising from the sale of shares and membership interests, as well as dividend distributions:

“The issue becomes more complex when both parties, i.e. the stock seller and buyer, are foreign residents.”

Purchase and sale of shares - natural resident persons:

According to Income Tax Law, natural persons shall pay taxes over habitual income, while companies shall pay taxes over habitual and non-habitual income.

In this sense, a significant amendment introduced by the law intends to levy taxes over capital gains in the case of natural persons, stating that they shall pay taxes over income from the sale of shares, membership or equity interests, securities and bonds, among others, and from the sale of depreciable personal property, even when those transactions were not habitual.

Income from the purchase and sale of shares, membership or equity interests, securities and bonds, among others, shall be subject to a 15% rate.

However, apart from the taxability of shares, the law established an income tax exemption over income from the purchase and sale or disposal of shares, securities and bonds, among others, listed on stock exchanges and securities markets and/or authorized for public offering.

Purchase and sale of shares - foreign residents:

Until the law was enacted, natural persons and companies domiciled abroad (foreign residents) were exempted from income tax as to income from the purchase and sale of shares. The law has abrogated that exemption.

The law has taxed such income at 15%. Below we will make reference to the tax base on which that rate may be applied.

Distribution of dividends:

According to the law, the distribution of dividends or earnings in cash or in kind (except for shares and membership interests) obtained by foreign residents and natural persons residing in Argentina shall be subject to a 10% withholding.

New Tax Scenario for Foreign Residents

As previously stated, until the law was enacted, foreign residents were subject to an exemption on capital gains obtained upon the sale of shares. In fact, section 73 of, Presidential Decree No. 2284/1991, exempted from income tax income derived from the purchase, sale, exchange, barter, or divestiture of shares, bonds, or any other securities obtained by foreign beneficiary natural or artificial persons. Finally, the law abrogates one of the few appealing tax planning tools offered by Argentina to foreign investors.

As the law becomes effective, foreign residents intending to dispose of their equity interests in Argentina shall pay income tax at a 15% rate. Note that income tax shall be settled through a withholding at source to be paid on a single and final basis.

Now, which is the applicable tax base?

According to the new legislation, any of the following methods may be chosen:
Applying a 15% rate over the 90% presumed income, as established by section 93(h) income tax law, or
Applying the rate at issue over the base arising from deducting from the price paid the expenses incurred in Argentina (including the cost of the shares acquired) by those foreign residents in order to obtain, maintain and keep equity interests, provided that those expenses have been expressly recognized by Argentine tax authorities (actual income).
In the first case mentioned (presumed income), the withholding to be made shall arise from the following formula: Stock sale price x 15% x 90%.

In other terms, the tax shall arise from applying the actual 13.50% rate (15% x 90%) to the sale price of shares and/or equity interests. If, while negotiating, the parties agreed that the stock seller should receive the price free of withholdings, the rate shall be accordingly grossed up to 15.61%.

One significant aspect consists in documenting the withholding assessment and payment to tax authorities. In fact, the issue would not be controversial if the stock buyer was an Argentine tax resident as the new legal provisions could be reasonably implemented.

The issue becomes more complex when both parties, i.e. the stock seller and buyer, are foreign residents.

In this regard, the law states that the buyer of shares or member interests shall assess and pay the tax to Argentine tax authorities. Currently, as this new provision has not been regulated yet, it would not be possible to pay the tax to these authorities. This situation clearly generates doubts and uncertainties because there are several cases in which the parties involved in the transaction are unable to comply with a legal provision, which gives rise to a potential risk upon tax authorities’ intention to impose penalties due to the failure to pay the tax levied on the transaction.

Another aspect to be considered in this new scenario is whether the sale or disposal of indirect equity interests is taxable. Chart 1 will clarify the situation.

[caption id="attachment_6950" align="aligncenter" width="416"] Chart 1[/caption]

The new legislation does not clarify anything in this regard. Consequently, we interpret that, upon the lack of an express provision, income tax shall only be levied on the direct sale and/or disposal of shares and membership interests of Argentine artificial persons. In the particular case of the chart above, the sale of Opco Argentina’s shares by the Foreign Holdco “B” shall be subject to income tax, while Buyer shall pay the tax withheld from the Foreign Holdco “B”. On the contrary, the indirect sale would not be subject to tax.

Note that the law does not expressly extend to foreign residents the exemption to natural persons residing in Argentina and selling listed shares. Consequently, it is not yet clear enough whether the sale of Argentine companies’ listed shares by foreign residents shall be subject to income tax.

Finally, the potential application of double taxation treaties signed between Argentina and the countries in which the stock seller resides shall be analyzed in each particular case in order to evaluate whether: (i) lower rates set forth by the law are applicable, or (ii) those treaties reserve the tax power in the country where the stock seller resides.

Tax on the Distribution of Dividends and Earnings
The law introduced a significant amendment to income tax law with respect to dividend taxability. Until the law was enacted, the distribution of dividends was subject to an income tax withholding as a single and final payment known as equalization tax. The name was chosen because the withholding is applied over the distribution of book earnings exceeding accumulated tax earnings. In the event of surplus, it shall be subject to a 35% withholding or treaty rate. The intention of lawmakers upon implementing such taxation method was to prevent shareholders from availing themselves from exemptions set forth by income tax law for the benefit of the companies distributing dividends.

The amount of income subject to the equalization tax to be considered at the time of the distribution of dividends will result from the following calculation:
Amount of dividends - Sum of [Income assessed by income tax law - income tax + dividends and earnings received not computed when assessing such income (i.e. dividends from subsidiaries)].

The table below shows an example of a calculation of the equalization tax on dividends:

As previously mentioned, apart from the so-called equalization tax, Argentine companies (corporations, limited liability companies and, in general, all business companies) shall make a 10% withholding when distributing dividends or earnings to natural persons, whether or not residing in Argentina, and artificial persons residing abroad.

It is still pending to analyze whether the 10% withholding shall be applied to the net dividend amount of the potential equalization tax or the gross amount of dividends. We interpret that such percentage must be applied to the earning to be distributed after deducting the equalization tax amount. However, this conclusion must be ratified by the administrative order to be issued by the executive branch.

The law states that if dividends are distributed in kind, the 10% withholding shall be applied, unless the distribution was made in shares or membership interests (e.g. distribution of bonus shares).

Each particular case should be analyzed as to the application of double taxation treaty provisions in order to understand whether the abovementioned withholding percentage limits are applicable.

Final Thoughts

The new tax provisions have been clearly enacted for collection purposes. There are still many unanswered questions as to the application of the new provisions under the tax reform that we have analyzed. We have become aware of a draft administrative order that would solve part of these questions. We expect the administrative order and other regulatory provisions to be published soon in order to solve these multiple situations. i

About the Authors

[caption id="attachment_6740" align="aligncenter" width="289"] Sergio Caveggia and Leonardo Favaretto[/caption]

Sergio Caveggia (Partner) and Leonardo Favaretto (Senior Manager) are members of Ernst & Young’s Transaction Tax Department.


Michael Joseph: Banking for the Masses Fuels Mobile Networks

M-Pesa, mobile money, is the lasting legacy of Michael Joseph’s decade-long term as CEO of Safaricom, the largest mobile network operator in Kenya. M-Pesa allows mobile phone users to send each other small amounts of money, and access a host of other financial services via their handsets. It is, by far, the most developed mobile money system in the world.

M-Pesa is nothing short of a financial revolution and it took a revolutionary to conceive it. A South African by birth, Mr Joseph – a self-described “Bolshevik character” without the finishing school polish of his peers in the business – left his country in the 1980s to flee the restrictions of apartheid. He went on to tramp the world setting up mobile networks wherever he went: Hungary, Spain, South Korea, Greece and Brazil. In Argentina, he engineered that country’s first mobile network in record time – a feat that is still unmatched.

When he arrived at Safaricom in 2000, the fledging company had about 20,000 subscribers. Part-owned (40%) by Vodafone, the expectation of corporate strategists at the time was that Safaricom could grow to about 400,000 subscribers given the best of circumstances. For the new CEO that was just not good enough. After Michael Joseph was done with Safaricom, the network boasted no less than ten million paying customers.

Over the past three years the company added another three million to its subscriber base. In 2012 the company reported revenue of $1.25bn and an operating profit of about $300m. Safaricom is currently the most profitable business in East Africa and keeps growing both its revenue and its profits at double digit rates.

M-Pesa has been the key ingredient of this astonishingly successful business. As a branchless banking service, M-Pesa enables anybody with a dollar or two to spare for the acquisition of a basic mobile phone to move and keep money – no matter how modest the amount. Customers must provide some form of identification in order to sign up for the service but need not have a fixed address, proof of income or any other document. Paperwork is kept at a bare minimum. The expanding gamut of M-Pesa services is offered at the tiniest of fees, promoting financial inclusion and allowing millions their first taste of banking.

Not one for false modesty, Mr Joseph calls M-Pesa “the mobile phone industry’s greatest-ever innovation”: Perhaps an overstatement, but not by much. M-Pesa now moves about $3m daily in Kenya and neighbouring Tanzania. The service has been rolled out in Afghanistan, South Africa and India with Egypt following shortly.

After leaving Safaricom in 2010, Mr Joseph accepted an offer from the World Bank to join its fellowship programme which aims to tap into development expertise. Earlier this year, Kenyan president Uhuru Kenyatta appointed Michael Jospeh as the chancellor of the Maseno University.


IFC: Moving to Green Growth in Emerging Europe, Central Asia and the Greater Middle East

[caption id="attachment_6958" align="alignright" width="320"] IFC financing is helping Turkey’s Zorlu Energy build a wind farm that will help alleviate Pakistan’s severe power shortages.[/caption]

As global temperatures rise, weather patterns shift and natural disasters dominate headlines seemingly every other week, climate change has become a priority for policymakers across the globe. But businesses and investors would be wise to put it front and centre as well, because related economic, regulatory, and technological changes offer serious investment opportunities for the private sector.

A recent report by the World Bank estimated that investment in renewable energy may need to triple by 2030, from an annual $400 billion to $1.2 trillion, in order to achieve universal energy access. Private sector involvement is not merely welcome, but critical to this effort – the UN estimates that four out of every five dollars of climate change investment will need to come from private sources. [1]

The good news is that there is great and growing potential for profitable private sector investment. But where are these investments, and will they deliver healthy returns? The International Finance Corporation (IFC), a member of the World Bank Group focused on private sector development, set out to answer these questions. We commissioned a proprietary analysis of climate-smart investment opportunities in emerging economies in Europe and Central Asia and the Middle East and North Africa (EMENA), the most energy inefficient area of the world.

EMENA’s CO2 emissions and energy use are similar to those of North America, but the region has a 35 percent lower GDP. Indeed, for every dollar of GDP, the region consumes more energy and emits more CO2 than any other area of the world. It holds more than half the world’s oil and three-quarters of its gas and is home to the four biggest oil and gas producers (Saudi Arabia, Russia, Iran, and Qatar). Low domestic energy prices lead to inefficient energy use.

Opportunity in Flaws

These shortcomings represent an opportunity. A forthcoming IFC report developed in collaboration with AT Kearney conservatively estimates a potential $640 billion worth [2] of investment opportunities in EMENA. If regional governments institute many of the regulatory and legislative reforms currently under discussion, this total could top $1 trillion. [3]

“Ranging from large infrastructure projects in hydro and wind power to smaller opportunities such as LED lighting, all have the potential to attract investment and deliver attractive returns.”

Across a region as varied as EMENA (which includes countries in South-eastern, Eastern, and Central Europe), geography plays an important role. But opportunities exist across the region and in many sectors. Ranging from large infrastructure projects in hydro and wind power to smaller opportunities such as LED lighting, all have the potential to attract investment and deliver attractive returns.

Investment opportunities include:

$270 billion worth of potential investments in energy generation. This includes renewable energy ($150 billion), followed by improving transmission and distribution grids ($70 billion) and rehabilitating outdated thermal power infrastructure ($50 billion).

$240 billion worth of potential investments in energy efficiency in the commercial and consumer sectors, through measures such as LED lighting, appliances, and green buildings. [4]

Factor in an additional $70 billion in improving water usage and practices in agriculture and at least $60 billion in industrial sectors and the grass starts looking quite green indeed. Little surprise, then, that support for clean power and greater efficiency is on the rise across the region.

Projects in the Works

In the Middle East and North Africa, renewable energy investments reached $2.9 billion in 2012, up 40 percent from the previous year. Abu Dhabi has committed to sourcing seven percent of its electricity from renewable energy by 2020, and in March launched the region’s largest solar array. Earlier this year, Morocco started construction on a $1.16 billion, 160-megawatt solar project near the desert city of Ouarzazate. It’s only the first phase of a national plan to produce 2,000-megawatts of solar energy by 2020. Tunisia, Saudi Arabia, and Jordan have also launched major wind and solar projects.

Energy efficiency – called the ‘invisible fuel’ by some – has gained greater significance and is now firmly on the radar of policymakers. The Russian Federation is the region’s largest energy consumer, but loses more than 40 percent of the energy it generates, which, over a year, is equivalent of the annual energy consumption of France. Russia is looking to boost its energy efficiency and has committed to decrease its energy intensity level per unit of GDP by 40 percent by 2020.

Several Balkan governments, including Serbia, Albania, and Bosnia and Herzegovina, have, with IFC’s help, instituted regulatory frameworks favourable to the development of renewable energy. Several East European countries have been influenced by the EU’s 2020 target of 20 percent renewable energy, and the government of Turkey is actively encouraging industrial water conservation.

Smart investors are already seizing the opportunities. Supported by international financing (including from IFC), Turkey-based Zorlu Enerji recently completed Pakistan’s first wind farm. The $159 million, 56-MW project launched early this year, producing enough electricity for 350,000 people and cutting C02 emissions by 90,000 tons each year. Zorlu is now scouting sites for its second Pakistan wind project, a 200-MW farm.

After a recent $14 million loan, KKS Group, an independent district heating utility in Russia, is cutting losses and reducing greenhouse gas emissions by nearly 38,000 tons of CO2 per year. Outside Cairo, an Egyptian-Spanish consortium recently completed a $150 million wastewater facility capable of processing 250 million litres of water per day. The consortium, Orasqualia, expects to make 360 million euros over two decades before handing the facility over to the government.

As the most energy inefficient region, EMENA has much to contribute in terms of mitigating the risks of climate change. Dozens of legitimate opportunities across the region can be expected to generate environmental benefits while providing meaningful returns. Given the vast potential and favourable political winds, now is a good time for businesses and investors to seek out the region’s many climate smart investments. i

About the Author

Dimitris Tsitsiragos, a Greek national, is IFC’s Vice President for Europe, Central Asia, Middle East and North Africa and a member of its Management Team. He is based in Istanbul.

Mr. Tsitsiragos has been a Vice President since September 2011. As VP, he has led IFC’s integrated strategy that aims to create jobs, plug infrastructure gaps, increase access to finance, and tackle climate change. Under his leadership, the Europe, Central Asia, Middle East and North Africa region delivered a record $7.03 billion of investments in 170 projects in fiscal year 2012 (which ended June 30, 2012).

Previously, Mr. Tsitsiragos served in various capacities in IFC, including Regional Director for Middle East, North Africa and Southern Europe based in Cairo where he developed a strategy to support the region’s private sector in the wake of the Arab Spring and Director for Global Manufacturing and Services (GMS) department of IFC which was responsible for IFC’s activities in the areas of tourism; retail and property development; construction materials; the forest products chain; life sciences; and energy-efficient machinery. He also served as IFC’s Director of the South Asia department and as Manager of New Investments for IFC’s Eastern/Central Europe region and Manager of IFC’s Oil & Gas division.

Mr. Tsitsiragos holds an MBA from George Washington University.

About IFC

IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries.

Established in 1956, IFC is owned by 184 member countries, a group that collectively determines their policies. IFC’s work in more than a 100 developing countries allows companies and financial institutions in emerging markets to create jobs, generate tax revenues, improve corporate governance and environmental performance, and contribute to their local communities.

IFC’s vision is that people should have the opportunity to escape poverty and improve their lives.

References
[1] UNDP, Catalysing Climate Finance, 2011.
[2] Based on current policies.
[3] The figures are based on market research commissioned by IFC, a member of the World Bank Group, to AT Kearney and Eco Ltd. In gauging the opportunity, ATK and Eco based their analysis on a large body of existing research (including World Bank Group and other leading databases, market reports, and research by various associations and international organizations) and many expert interviews. Consolidating this information, they chose a conservative approach to quantify investment potentials across technologies and regions. As such, only investment potentials expected to materialize as commercially viable by 2020 have been included. Hence this number can be interpreted as a lower bound, with substantially higher potential of around $1 trillion possible with the implementation of several government initiatives under discussion in many EMENA countries. Finally, climate-smart business opportunities are economically viable investments that contribute to climate change mitigation and adaption. The criteria for financial viability of these investments differ across technologies and regions, depending on factors such as asset life times and country risk characteristics.
[4] By their nature, many energy efficiency opportunities are more distributed and less prone to direct project investments. Therefore, the potential business models and investment structures in this market differ substantially, ranging from credit lines by commercial banks to finance small business investments such as solar hot water heaters to a public-private partnership for waste management and street lighting projects.


Solar Power in Brazil: Waking Up to the Power of the Sun

Boosting Brazil’s deficient energy production with large-scale solar power would seem a no-brainer: Both the required vast tracts of land and ample sunshine are available for the taking. Still, with an installed generating capacity of an estimated 17MW, solar power barely satisfies 0.01% of the country’s energy consumption.

However infinitesimal at the moment, solar power is definitely on the rise and leading Chinese photovoltaic module maker Yingli Green has taken note. The company already ships some 30% of all solar panels used in Brazil and now aims to become a household name in that country by co-sponsoring the 2014 World Cup.

Yingling Green is also supplying the 3,650 mono-crystalline silicon panels used in the construction of Brazil’s largest photovoltaic plant to date: The net-metered 1.5MW solar power facility of Neoenergia in the north-eastern state of Pernambuco – one of the few places in Brazil where local authorities actively support alternative energy projects with fiscal incentives.

Brazil has a lot going for it as a host to solar power initiatives. Boasting a well-developed power grid that is easily plugged into, the country also basks in sunshine. Fully half of the Brazil’s 8.5 million square kilometres landmass enjoys a notably high solar incidence (the optimum angle at which the sun’s rays hit photovoltaic panels) during four to six hours a day. This dry fact translates into a most enticing daily electricity generating potential of up to 6kWh / m2.

“Brazil has a lot going for it as a host to solar power initiatives. Boasting a well-developed power grid that is easily plugged into, the country also basks in sunshine.”

At last year’s energy supply contract auction of the federal government, solar power was but a footnote. However, utility-scale projects were still awarded some 122MW in long-term energy purchase agreements, signalling the willingness of the energy regulator to give solar power a chance to prove itself in a country awash in hydroelectric energy potential.

Potential is the key word here. Brazil has plenty of it, but has also lagged behind in the harnessing of its hydropower. The completion, in 1984, of the Itaipu Dam – spanning the Paraná River on the border with Paraguay and still the largest of its kind in the world – was followed by almost two decades of lacklustre, small-scale dam building.

Only recently construction fever has returned with 25GW worth of hydropower projects in either the construction or planning phase. The 11.2GW Belo Monte Dam taming the mighty Xingu River in Pará is scheduled for completion later this year. Still, the Belo Monte Dam stands as a testament to the painfully slow pace at which Brazil edges forward with its electricity-generating plans: The dam has been on the drawing board since as far back as 1975 and was delayed time and again by allegations of corruption and concerns for the environment that resulted in lengthy court battles.

It is precisely because of this molasses-like pace of progress, that solar power may have a fighting chance in Brazil as a quick fix in places that need a dependable supply of relatively cheap energy even as the economy as a whole is suffering from acute power shortages. Just as it happened thirteen years ago, prolonged drought conditions have now again seen the reservoirs of large hydropower plants drop to critically low levels. The country’s national grid operator ONS (Operador Nacional do Sistema Elétrico) recently sounded the alarm as water levels of the main dams supplying Brazil’s industrial heartland in the south-east shrank to below 30% of capacity.

The energy crisis of 2001, still fresh in most people’s memory, saw the introduction of a “volunteer” rationing scheme that recommended users to cut power consumption by at least 20%. People even stopped watching their beloved telenovelas. Those who did not manage to cut power usage by the required amount had their electricity cut off. The crisis eventually abated when the rains returned but not after causing an estimated $26bn of economic damages and impacting GDP growth.

The current energy shortfall is being tackled by importing increasing volumes of liquefied natural gas (LNG) at a premium price. This already derailed President Dilma Rousseff’s plans to cut energy prices by 20% this year in a bid to help ease the burden on poorer Brazilians. In fact, the government now mulls energy price hikes instead.

Solar power generators are also being helped by a new federal law that streamlines the previously cumbersome process by which smaller-scale energy suppliers can plug into the national grid. This law now enables energy suppliers with less than 1MW of installed capacity to transport and sell their power more easily to the end consumer. Moreover, further legislative improvements are in the offing with a proposed fast-track approval process for solar power generators and a revised fiscal regime for alternative energy producers.

Photovoltaic energy is increasingly seen as a valid alternative to the subsidy-slurping thermal energy patches now being applied to stave off power shortages. It offers an exceptional value proposition insofar that solar power projects in Brazil can be quite competitive on the electricity spot market and photovoltaic plants can be erected in a fraction of the time it takes to obtain regulatory approval for more conventional modes of power generation.


Real Estate Industry Looks to Qatar for Opportunities

Cityscape Qatar 2014 set to focus international spotlight on real estate and construction boom in Qatar

[caption id="attachment_6983" align="alignright" width="206"] Doha, Qatar[/caption]

Doha, Qatar, May 15 2014: With Qatar’s World Cup related development coming increasingly under the international spotlight with record projections for 2014, Cityscape Qatar will open its doors from 2- 4  June at the Qatar National Convention Centre to a ground breaking number of international and local investors and developers.

Now in its 3rd edition, the annual three-day exhibition is expected to be twice as large as 2013 and is the annual meeting point for key real estate investors, developers, investment promotion authorities, architects, designers and other real estate professionals to drive growth in real estate investment and development across Qatar and abroad.

Mr. Deep Marwaha, Group Director for Cityscape, commented that Qatar’s development plans leading up to the World Cup in 2022 and the 2030 National Vision have made it one of the most exciting countries on the globe for investors. With one of the world’s fastest growing economies set to double in the next decade, the real estate and construction boom has already picked up considerable pace.

“Qatar’s mega-projects, amounting to more than $150 billion, are a major attraction for investors and progress is under way: the country’s population has increased by 15 percent since our inaugural exhibition in Doha. According to industry reports, within the next 12 months the residential market will be bolstered by the completion of 25 residential towers on the Pearl and nine towers in the Diplomatic District, adding 7200 units, and expectations are high for the retail market with 10 new malls set to be completed, or near completion, in a similar period. The hospitality market will be driven by an expected 20 percent growth in tourist numbers, according to the Qatar Tourism Authority. Set against these impressive growth figures Cityscape Qatar 2014 will be a not-to-miss opportunity for investors looking to enter the market”, he added.

"Qatar’s mega-projects, amounting to more than $150 billion, are a major attraction for investors and progress is under way: the country’s population has increased by 15 percent since our inaugural exhibition in Doha."

- Mr. Deep Marwaha

International participation at Cityscape Qatar is up from 2013, with 55 percent of all exhibitors traveling from abroad in order to learn about the latest project news and showcase their companies. Participants are confirmed from regional countries such as Bahrain, Jordan, Kuwait, Saudi Arabia, UAE and Turkey, as well as major Western markers such as the UK, USA and Russia.

Sharing the spotlight with international exhibitors this year at Cityscape Qatar is the score of local real estate developers announcing their latest projects and providing updates on existing developments, headed by Foundation Sponsors Ezdan Holding Group and United Development Company, while Msheireb Properties and Barwa Real Estate Group will also be out in force.

In their sights are a dazzling array of mega-projects that will transform the state of Qatar to host the 2022 World Cup. According to Ventures Middle East these include: the US$7 billion international airport; the US$5.5 billion deepwater seaport; US$20 billion in roads and highways; the US$5.5 billion Msheireb urban redevelopment; the planned US$1 billion Doha Bay Crossing; US$125 billion in industrial projects; 12 Eco friendly stadia; 45,000 hotel rooms to be built by 2022, and demand for 242,000 residential units by 2017.

As part of Cityscape Qatar,the Cityscape Awards for Real Estate in Qatar will take place on 3 June at the Four Seasons Hotel Doha, which will feature an elaborate ceremony and cocktail evening. The awards programme has attracted a plethora of entries from developers and architects behind real estate developments across Qatar and are seen as one of the industry’s most sought after accolades.

Co-located with the exhibition are two dedicated conference programmes, the Qatar Real Estate Summit and the Cityscape Qatar Retail Forum, bringing together senior real estate professionals who will explore opportunities and find solutions to key challenges affecting the industry today.

Cityscape Qatar 2014 is supported by its Foundation Sponsors, Ezdan Holding Group and United Development Company (UDC), with Qatari Diar Construction Products Company as Silver Sponsor.

About Cityscape

Cityscape first took place in 2002 in Dubai and since then, the brand has grown to be the largest real estate event brand globally.  Since its launch, Cityscape has welcomed over 400,000 real estate professionals and investors from over 160 countries through its doors.  Cityscape Qatar started in Qatar in 2012 and is the only annual meeting point for governmental authorities, key investors and developers, consultants, architects, designers and other real estate professionals to drive growth in Qatar’s real estate market.

For more information, go to: www.cityscapeqatar.com.

For more details please visit: http://www.cityscapeqatar.com

For media enquiries related to Cityscape Qatar, please contact Forbes Associates, Rinilda Raviraj at rinilda@forbes-associates.com


Mehriban Aliyeva - With Azerbaijan at Heart: the First Lady Reaches Out For a Better World

When Azerbaijan first lady Mehriban Aliyeva travels internationally, minds, people and hearts come together – East and West meet – and good deeds spring out.

Mehriban Aliyeva symbolises tireless outreach to women and children. She aims to change the world for the better as she travels her country and further afield as a UNESCO goodwill ambassador and president of the Heydar Aliyev Foundation that is engaged in countless projects aimed at furthering education and healthcare and promoting and protecting the country’s cultural heritage.

According to Mrs Aliyeva, the well-endowed foundation pursues “broad and multi-sided” goals that also include environmental care. In Baku, the foundation seeks to bring nature and culture together with a new museum of modern art at the centre of a sprawling development that also includes white sandy beaches, a walkway over the Caspian Sea and a skyscraper designed by US architect Frank Gehry who masterminded such iconic buildings as the Bilbao Guggenheim and the Cinémathèque Française in Paris.

“She has placed Azerbaijan as a beacon of dialogue between civilizations and a focus for religious tolerance.”

Recently, the Heydar Aliyev Foundation unveiled ambitious plans for the funding of social projects aimed at disadvantaged children in Hungary, Romania and other countries of Eastern Europe. In France, the Azerbaijani first lady was awarded the Légion d’Honneur in 2010 by then president Nicolas Sarkozy in recognition of her “outstanding service and loyalty”. Mrs Aliyeva was instrumental in arranging her foundation’s support for renovation projects at the Louvre, Versailles Palace and Strasbourg Cathedral.

Mrs Aliyeva is particularly active in support of educational programmes. In Azerbaijan, her foundation now builds and maintains more schools than the government. The foundation has also financed the construction of new hospitals, clinics and retirement homes.

Mrs Aliyeva works tirelessly at promoting social inclusion and interfaith dialogue. By focusing on core Azerbaijani values and encouraging the preservation of the country’s rich and colourful heritage, Mrs Aliyeva seeks to strengthen her nation as a regional power for good. Stunning and glamorous yet humble and media-shy, she prefers to let her good deeds do the talking.


PwC Study: High Demand for Quality Infrastructure in Emerging Markets

[caption id="attachment_7004" align="alignright" width="221"] Author: Jonathan Cawood[/caption]

Relentless urbanisation is driving increased demand for higher quality, more affordable and greener urban infrastructure in emerging and developed markets. The world’s cities are already home to more than half the world’s population, and that number is expected to increase to 70% by 2050. The worldwide demand for urban infrastructure will require an investment of $53 trillion over the next three years according to the OECD (Organisation for Economic Cooperation and Development). Governments and political leaders are more focused than ever on cities and their effect on socio-political issues, provision of basic services, economic development, job creation, health, safety and climate change.

It is in this light that PwC, working with the project economists of Oxford Economics, has issued a research paper, Cities of Opportunity: Building the Future, which examines the subtleties and lessons of urban infrastructure across 27 leading centres of business, finance, and culture. In this study, the city of Johannesburg was assessed together with 26 of its global peers. A number of key factors were considered including the gaps in economic and social infrastructure required to make the world’s cities functional, competitive, safe and sustainable.

Cities and towns are much more than a statistical aggregate of population numbers, infrastructure and economic capabilities. The relationship between city infrastructure and urban life is transformative, channelling energy and resources more efficiently into a higher quality of life. Those cities that develop and manage their infrastructure and services through smart long-term and integrated planning will attract the jobs, skills and capital that improve livelihoods.

Directional Forces

Cities of Opportunity examines a number of directional forces which impact how cities evolve, prosper or fail. The total population in both advanced and emerging cities is forecast to grow as the urban renaissance in advanced cities and the rural-urban shift in emerging cities continue. The population of emerging cities is forecast to grow at a pace almost three times that of the advanced ones. More people will mean an increased demand for more infrastructure and more services.

Over the next decade total GDP is forecast to grow twice as fast for emerging cities with shifts in sectorial focus and hence job types and skills. This requires shifts in the type and availability of infrastructure which underpins this changing economic activity. There will still be a substantial wealth gap between advanced and emerging cities forecast to 2025. This gap is forecast to shrink to 43% by 2025 from the current 25% of advanced-city GDP per capita for emerging cities.

A recent World Bank report on urban development states that inadequate infrastructure in emerging cities “can drive up the costs of doing business in urban areas and reduce productivity by as much as 40 per cent. Poor infrastructure is implicated in a host of economic ills and even social pathologies. Writing about Africa, the report states that “for many countries the negative effect of deficient infrastructure is at least as large as that of crime, red tape, corruption, and lack of financing.”

For the UN, the five fundamental factors that constitute a “prosperous city” are productivity, infrastructure, quality of life, equity and social inclusion, and environmental sustainability. But when we look closer at the definition of each element, we find that one significantly outweighs all others—it’s the development of infrastructure.
Some notable observations arise from the PwC study. Johannesburg performed well across many dimensions when compared to its global counterparts in developing countries including Mexico City, São Paulo, Kuala Lumpur, Istanbul, and Mumbai. In terms of ranking current infrastructure provision, Stockholm ranks first, followed by Sydney and Toronto, respectively. Emerging East Asian cities fall somewhere in between, while Latin American and Chinese cities rank toward the bottom third with Johannesburg, São Paulo, Istanbul, and Mumbai propping up the list.

Struggling to Keep Pace

The study shows that some emerging cities are struggling to keep pace with economic growth as the volume of their infrastructure lags in both adequacy and quality. It seems this is due in large part to a combination of limited financing, a lack of prioritisation, weak planning and deficient management.

Housing remains a significant necessity of survival that unites urban centres around the world. A number of developing cities such as Johannesburg and Shanghai rank on the same level as many mature cities.

It is not surprising that the greatest demand, in absolute terms, for housing will be in the rapidly growing cities of Beijing, São Paulo and Mumbai. What might be surprising is that New York and London have greater future demand than Johannesburg.

Demographic changes that have already taken place will continue throughout the next decade. For example, many emerging cities will need to expand classroom capacity while developed cities will need to expand hospital (and elderly care) capacity as the global population ages.

The demands for infrastructure will vary from city to city based on stage of development, priorities and affordability. The basic needs for power, water and sanitation, transport and logistics, housing and ICT top the list for most developing cities. The wisdom of the choices cities make in balancing political, social and capital agendas will become even more critical in managing finite financial and environmental resources.

Prudent and responsible urban development always assumes a general public benefit. It is up to municipal authorities to take advantage of the many opportunities that exist to provide it, wisely and with foresight for the benefit of current and future generations.

Infrastructure is expensive and lasts a long time. If people in a city want buses or subways instead of roads or bridges, or basic services instead of opulent landmarks, frustrating their wishes will also frustrate, and perhaps even undermine, responsible and effective governance. Citizens’ wishes can be evaded for a while—perhaps even a long while—but they will reassert themselves in the end.

About the Author

Jonathan Cawood is head of Capital Projects and Infrastructure for Africa at PricewaterhouseCoopers (PwC).

About PwC

PwC firms help organisations and individuals create the value they’re looking for. PwC is a network of firms in 157 countries employing more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services.


Grant Thornton UAE: A Defining Period for UAE Capital Markets

[caption id="attachment_7013" align="alignright" width="146"] Abu Dhabi[/caption]

The economy of the United Arab Emirates (UAE) is set to grow at a significant pace in 2014 due to an overall positive outlook. With investor confidence building momentum, sustainable growth seems assured. The UAE is particularly noted for possessing the dynamism of the West whilst maintaining the culture of the East.

For 2014, the IMF has predicted a GDP growth rate of 4.5%. This is supported by Abu Dhabi’s buoyant oil and gas industry and its significant infrastructure and industrial investment. It is also spurred on by Dubai’s rebounding economy fuelled, in part, by the country’s recent Expo 2020 win.

Equity Capital Markets

In June 2013, the UAE’s classification was upgraded from frontier market to emerging market. As a result, in May 2014, the three UAE indices – the Abu Dhabi Securities Exchange (ADX), the Dubai Financial Market (DFM) and Nasdaq Dubai – are now expected to be incorporated into the MSCI’s (Morgan Stanley Capital International) emerging markets index. Commentators widely expect this development to attract over $270 million to those exchanges.

The performance of the UAE stock exchanges in the past year is notable. The ADX ended 2013 with a total of almost $23 billion in share value and a year-on-year growth in volume of 282%. The socio-political turmoil affecting the wider region is seen to be driving trading volumes with investors seeking a safe haven. This is positively affecting real estate and stock values in the UAE. Moreover, the index opened at 2,631 in 2013, and closed 63% higher at 4,290.

In 2013, the DFM was the second-best performing exchange globally. In January 2014, it achieved a new five-year high at 3,819 points, equalling its January 2008 peak.

Initial Public Offerings (IPOs)

A strong pipeline of issuers looking to launch IPOs regionally is expected to materialise over the next 18 months. Grant Thornton (GT) provides IPO readiness assessments and acts as a sponsor to companies seeking to list. GT expects to see several UAE local family groups evaluating listing opportunities in an effort to obtain capital injections and to raise their regional profile.

A well-known Abu Dhabi bank expects six companies to go public in 2014. This is estimated to raise $2 billion. In 2013, the only sizable local IPO was that of Damac Properties. However, its management opted to list on the London Stock Exchange. The company was valued at $2.65 billion post offering.

The last significant IPO valued at over $1 billion was 15 times oversubscribed and concerned port operator DP World Ltd which raised $4.96 billion in November 2007. After a seven year retreat, it is now widely anticipated that there will be a return to this kind of more robust IPO activity.

Bourse Consolidation and Regulation

The UAE’s stock market regulator, the Securities and Commodities Authority, continues to improve and implement higher standards of regulation since its inception in 2002. The regulator thus aims to ensure investor confidence without hindering local capital market activity.

According to Bloomberg, Abu Dhabi and Dubai have already completed due diligence on a possible merger of the ADX and DFM exchanges. This will ensure a more efficient and coordinated approach to the global investor community.

Also, there is motivation from UAE listed companies to lift foreign ownership limits on their shares. Under current UAE rules, investors from outside the UAE or GCC (Gulf Cooperation Council) are permitted to buy up to 49% of the shares of any listed company. In order to attract further equity from the international investment community, including large financial institutions, an end to these limits on foreign ownership is being suggested. The trend to increase limits is noticeable. In the last quarter of 2013, two major banks and a real estate developer listed on the UAE exchanges approved an increase of foreign ownership limits to between 20-25% of their share capital.

Debt Capital Markets

New bond rules are expected to give further stimulus to UAE debt securities in 2014. According to the International Financing Review, a Thomson Reuters unit, bond issuance from the region is expected to flourish because of significant infrastructure investment and refinancing.

The UAE, which has the largest portfolio of outstanding debt securities in the GCC, has issued new rules for the issuance and trading of covered bonds (bonds which have a preferential claim on the assets in the event of a default). This is a welcomed initiative for the development of the UAE’s debt market, and will allow for a new source of funding for commercial banks.

Islamic Financial Markets (Sukuks)

In line with the initiative of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Dubai is leading the way to become a global hub for Islamic finance with the aim to drive Islamic banking and capital market activity in both the UAE and the wider region.

So far in 2014, Emaar Properties has dual listed a $500 million sukuk, issued in 2011 on Nasdaq Dubai, providing further momentum to the country’s resolve to become a global sukuk centre. Furthermore, UAE based GEMS Education celebrated the listing of a $200 million sukuk on Nasdaq Dubai.

Defining Period for UAE Capital Markets

The next two years are set to be a defining period for UAE capital markets, with expectations of increased regional and international investment into the region; growth in both debt and equity security valuations; increased trading volumes, and a return to a more frequent and successful IPO listings period. Undoubtedly investors are now becoming more confident to deploy the cash sitting on the side lines into the UAE markets with expectations of robust medium and long term returns.

About the Author

[caption id="attachment_7018" align="alignleft" width="171"] Author: Simi Nehra[/caption]

Simi Nehra is the Corporate Finance Partner at Grant Thornton UAE. Mr Nehra has over 15 years’ experience in financial advisory services, including expertise in corporate finance, due diligence, business valuations, mergers and acquisitions and debt advisory. Mr Nehra has led several advisory mandates in the Middle East and North Africa region spanning a variety of industries. He has also provided transaction support to high profile IPOs on the UAE financial markets and advisory services to UAE government entities.

Mr Nehra is a chartered accountant and a corporate finance designate from the Institute of Chartered Accountants England and Wales. He also holds a BA from the Manchester School of Accounting and Finance. Mr Nehra practiced alongside leading professionals in London before relocating to the UAE.

About Grant Thornton

Grant Thornton is one of the world’s leading organisations of independent assurance, tax and advisory firms. These firms help dynamic organisations unlock their potential for growth by providing meaningful, forward looking advice. Proactive teams led by approachable partners in these firms use insights, experience and instinct to understand complex issues for privately owned, publicly listed and public sector clients and help them find solutions. More than 35,000 Grant Thornton people, in over 100 countries, are focused on making a difference to clients, colleagues and the communities in which they live and work.

“Grant Thornton” refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires.

Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm forms a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions.


Cristiano Ronaldo: Football Virtuoso Equipped with Class and Modesty

 The embodiment of the superlative, striker Cristiano Ronaldo gathers titles by the dozen: Most Expensive Football Player in History; Most Goals in a Single Season; Fastest Player to Reach 50, 100, 150 and 200 Goals, etc. He’s also a most likeable guy with an ego largely unaffected by his remarkable success on the pitch. That alone is surely enough to make Cristiano Ronaldo a hero in anyone’s book.

Currently on the squad of Real Madrid and captain of Portugal’s national team, Cristiano Ronaldo in January 2014 scored the 400th goal of his professional career. Of course, racking up goals is what he does best: Ronaldo is the first player to move the scoreboard forty times in two consecutive seasons. In Spain, he became the first player of La Liga to score against every single opponent in a single season.

Cristiano Ronaldo doesn’t merely play well when in possession of the ball; he is a gifted tactician with a sharp mind, excellent vision and, most of all, an expert sense of game development. His anticipatory powers get him at the right spot at the right time. These gifts make the difference between a good player and an excellent one.

“Last year, Cristiano Ronaldo became an ambassador for both Save the Children and the Mangrove Care Forum in Indonesia which aims to preserve that country’s biodiversity.”

Contrary to most football players of note, Cristiano Ronaldo keeps a rather off-pitch low profile. His is not a life of wild excess or glitter and glamour. He keeps well clear of controversy and minds his manners. Cristiano Ronaldo is no stranger to philanthropy. He regularly, and quietly, contributes to good causes ranging from a £100,000 (EUR120,000) donation to a hospital on his native Madeira to £830,000 (EUR1m) for schools in Gaza. The latter sum was raised when Cristiano Ronaldo sold the Golden Bot he had won in 2009.

Last year, Cristiano Ronaldo became an ambassador for both Save the Children and the Mangrove Care Forum in Indonesia which aims to preserve that country’s biodiversity.

SportsPro, a publication dedicated to reporting on the financial side of professional sports, named Cristiano Ronaldo one of the world’s most marketable athletes alongside star striker Leonel Messi of Argentina. Product endorsements earn the Portuguese striker an estimated £12m (EUR14.5m) annually.

A professional athlete doing well for himself, his fans and for the wider world may not appear to be that exceptional but when delivered with a smile and in an unpretentious manner, such an athlete becomes a hero.


Norwegian-African Business Association (NABA): Private Business as Educator - Bridging Africa’s Job-Skills Gap

In the wake of the global financial crisis, Africa’s sustained economic growth over the last decade has compelled the global investment community to take note. Foreign direct investment has skyrocketed and top international law firms are opening up offices from Luanda to Maputo, eyeing the continent’s vast untapped economic potential. Yet, the long-term sustainability of growth is challenged by the demographic explosion of restless unemployed youths – the continent’s largest financial asset and simultaneously most pressing political risk.

The key challenge and responsibility for business and governments alike lies in connecting Africa’s vast labour supply with the skills necessary to meet industry and employment demands.

The burgeoning growth rate and influx of foreign investment is placing an increased strain on the knowledge capacity of local labour markets. Capital absorption hinges on the availability of qualified labour resources. In many countries the saturation point has already been reached. It is particularly prevalent in specific industry sectors such as mining, energy and transport infrastructure where a lack of engineers hampers investment opportunities.

“Where the public sector falls short, the private sector should embrace the possibilities of filling the gaps between skills and labour supply.”

The presence of high vacancy rates alongside high levels of unemployment underlines the issue and confirms the presence of a skills mismatch. The problem spans the entire continent from Egypt, where 1.5 million young people are unemployed while private sector firms struggle to fill over 600,000 vacancies, to South Africa, where 600,000 unemployed university graduates live alongside 800,000 vacancies. The problem is compounded in many countries due to stringent local content requirements on labour supply. This forces the hand of private businesses unable to recruit adequately trained personnel.

Demographic Explosion

Africa has more people under the age of twenty than anywhere else in the world. The continent’s population is set to double to two billion by 2050. Researchers and economists alike argue that, if properly managed, this massive potential work force can be forged into one of the main catalysts of economic development. With youth making up 40% of the working age population, inclusive and capacity-building steps are needed to harness this demographic dividend. Although the private sector is screaming for qualified workers, local universities often do not adequately equip graduates with the skillsets needed by employers.

[caption id="attachment_7045" align="aligncenter" width="482"] In Pictures: Norwegian-African Business Association (NABA) flagship event the “Norwegian-African Business Summit” will take place on October 30th 2014 at the Radisson BLU Scandinavia Hotel, Oslo, Norway. The conference will also draw attention to the “skills-gap” in the African market and how to address the challenge.[/caption]

Mr Eddo, a former BBC journalist covering the Africa Business Reports, places part of the blame on national education systems where critical and independent problem solving skills are often trumped by the old fashioned prerogative of memorisation and submission to pre-packaged ideas. Many students therefore end up lacking key transferable skills [1].

Where the public sector falls short, the private sector should embrace the possibilities of filling the gaps between skills and labour supply. There are many ways this may be achieved from setting up partnership programs with local universities and schools to well-structured job training programmes with adequate follow up. Businesses as educators are in the privileged position of knowing exactly what skills are required at any given moment.

Shifting Paradigm

The paradigm of global development is also steadily shifting away from the traditional top-down approach of money dispensed as generic foreign aid toward a more earmarked cooperation with a wider range of actors and intended to strengthen local capacity building and knowledge transfer. Within this framework, much attention has recently been given to the development of private-public partnerships.
This was recognized as a key outcome at the World Economic Forum in Davos as surmised by Julian Robert, the CEO of Old Mutual, in the panel discussion “Africa cannot succeed without a real handshake between private enterprise and the public sector”. [2]

The United Nations has included this as a priority for the post-2015 development agenda. Companies that take the lead on training strategies will thus find themselves on the right side of public policy momentum. For example, the Norwegian Agency for Development Cooperation (NORAD) has a funding scheme intended to increase FDI (Foreign Direct Investment) in developing countries. This scheme is based on giving Norwegian companies the means to fund pilot projects in order to determine the feasibility of investment opportunities.

Many companies have already taken advantage of the momentum, recognizing the long-term benefits of raising the educational level of local staff with the aim of supplying them with sector specific skills and knowledge. Statoil, one of the world’s leading companies in oil and gas production, provides attractive training opportunities for local employees.

Collaborative Initiatives

In Angola, where Statoil has operated for nearly two decades, the company has established collaborative higher education initiatives between two Norwegian and Angolan universities. Since 2008, 36 students have carried out master degree studies in petroleum sciences. This initiative has further helped the company comply with local content regulations. Of the total workforce, 89% have been locally recruited. Similar programs have been introduced in Tanzania and Mozambique.

Yara International, a Norwegian firm specializing in agricultural products, initiated in 2008 the Ghana Grains Partnership (GGP) – a public-private partnership aimed at improving the efficiency of the maize value chain in Northern Ghana. The project features an educational component that gives farmers access to knowledge and advice on agricultural best practices with a view to increase crop yields.

Now that it is widely acknowledged that entrepreneurship can transform economies, drive innovation and change communities, Ernst & Young (EY) has linked its global presence with supporting local entrepreneurs. In 2012, the company launched Next Gen, a programme directed at empowering the next generation of women in Africa.

With Africa holding 25 percent of the global workforce by 2050, EY supports the notion that active participation of women is needed to sustain economic growth across the continent. The NextGen programme includes leadership camps and access to bursaries that will help disadvantaged young women complete tertiary education. Piloted at ten schools in South Africa, it is now set to be extended to other African countries.

Critical Factors

There are some critical factors underpinning successful capacity enhancement which should form the backbone of any training strategy, whether on the job or in the classroom. This strategy should not just focus on technical skills but should leave room for the development of key behavioural skills such as listening, empathy, curiosity, flexibility and trust-building that bind together a good working and learning environment.

Programmes should also make sure to adapt to local knowledge and contexts, seeking to find solutions in terms of ‘best local fit’ rather than ‘best global practice’. Foreign businesses should use training programmes as unique opportunities to gain in-depth knowledge about the place that hosts their operations. They may also benefit from harnessing the vast stores of local knowledge of their employees. This will in time facilitate and strengthen the exchange of ideas which in turn is key to building mutual trust. By nurturing critical mind-sets and lowering cultural barriers to giving and receiving feedback, a better – and ultimately more profitable – relationship may be forged between subordinates and executives.

The expectations of companies have changed over time. Whereas a certain amount of philanthropy in a company’s hometown was once thought sufficient, recent notions of corporate citizenship and corporate social responsibility are changing the relationship between businesses and consumers.

A company’s reputation is not only confined to its financial expertise but to its moral leadership as well. The private sector has a lot to gain by taking its role as an educator seriously on the African continent, both in terms of increasing its revenue and its moral capital. In order to realize the economic potential of African countries, businesses should ally themselves with development objectives aimed at curtailing youth unemployment. These comprise mutually reinforcing solutions that meet the challenge of Africa’s demographic explosion.

By Hedda Wingerei and Halfdan Broch-Due

About NABA

NABA is the only Norwegian-African chamber of commerce, and provides strategic advice, joint-venture facilitation, business exploration journeys, information products (country analysis, political risk, sector studies, market reports, legal aspects), seminars and conferences.

References
[1] Mr. Mark Eddo, speaker at NABA business saminar on Business Culture in West Africa, February 2014.
[2] Julian Roberts, Panel discussion speaker at World Economic Forum in DAVOS, January 2014.


United Nations Office for Project Services (UNOPS): Infrastructure to Empower Women

On the face of it, building a road is simply about connecting two points. In reality, a road is so much more. A well-placed road can improve access to schools, health facilities and justice services. It can mean a mother making it to a hospital in time to deliver her child. It can also give a woman a quicker, safer route to sell her goods at the local market, or a job as a construction worker.

From rehabilitating roads in Afghanistan to building health clinics in Sierra Leone, UNOPS (United Nations Office for Project Services) supports infrastructure projects that achieve real progress for people in need, by engaging local communities and empowering the most vulnerable. These infrastructure projects, implemented on behalf of a range of UN, government and other partners, have the ability not just to grow economies but to make a tangible improvement in people’s lives - women and girls in particular.

“In particular, UNOPS project managers work to improve gender equality and empower women at all stages of their projects.”

This improvement starts by constructing facilities for women and girls to access education, justice, and healthcare. But UNOPS realises that a successful road or school is more than just tarmac or bricks. Infrastructure can create livelihoods and empower communities. Working closely with governments and communities, the organization strives to create infrastructure that is truly ‘owned’ by the people it serves.

[gallery columns="2" ids="7062,7063,7064,7065,7067,7068"]

In particular, UNOPS project managers work to improve gender equality and empower women at all stages of their projects. The results of this work are more girls in school, more job opportunities for women, more control over their health and more power over their own lives. This is the true power of infrastructure.

Helping Girls Go to School

Getting more girls into schools is about more than just building school facilities. That is why high quality projects to build schools consider ‘soft’ inputs such as free school lunches and community engagement. Alongside such inputs, ‘hard’ outputs like the physical design of the building can also make a huge difference.

In many cultures, girls are less likely to be allowed to go school if they have to share a toilet with boys, or if boys can see them entering a toilet. These barriers are easily overcome by speaking with the community and devising a solution, such as erecting permanent toilet screens at schools in South Sudan, which were built by UNOPS with funding from a range of donors.

Providing Work and Business Opportunities

Infrastructure projects can also provide considerable amounts of work for local communities. Labour-based road projects in particular can inject much-needed cash into post-conflict or post-disaster communities while increasing skills and developing capacity.

With the right planning and community outreach, these projects can also attract women into the labour force and provide skills for future jobs. For example, when building roads and shelters in post-earthquake Haiti on behalf of multiple donors, UNOPS emphasised a labour-based approach in order to be able to employ as many Haitians as possible, with a particular focus on female heads of households. This approach empowered women while at the same time ensuring a minimum family income to help improve lives and promote economic recovery.

Breaking Traditional Boundaries

In some cases infrastructure projects can help break traditional boundaries for women. For example, a Swedish-funded road project in Afghanistan wanted to give the community’s women the chance to work on the roads like the men. As this is an area where women traditionally do not work outside the home, outreach officers were employed to persuade local community leaders to agree to let women work.

This approach was a success and 105 women were trained to screen gravel and weave wire baskets for wall building. This enabled them to both learn a useful new skill and earn a valuable income for their families. The women reported that working as a group also led to the creation of an informal social forum where they could exchange ideas on ways to improve their lives.

As well as training women labourers, infrastructure projects can help women create their own businesses. In that same road-building project, construction workers complained of a lack of places to buy food on site. In response, the project helped a group of local women to set up a bakery, which began supplying bread to local workers and bus passengers. This was such a success that five women’s groups were then trained to start similar ventures. One group was engaged to produce protective clothing for the project’s snow clearing crew. The quality of the products led other UN agencies to enquire about buying winter wear from the same group. The wages brought home from these businesses brought a new financial freedom for many of the women.

Reducing Dangerous Travel

In developing countries, women are often the ones responsible for fetching water for their families, sometimes travelling a long way through insecure areas. In Lakes State in South Sudan, for instance, many women risk their safety by travelling up to four hours a day to fetch water during the dry season.

Talking to women to find out their water needs allows project managers to build dams and water reservoirs in the right locations to increase women’s safety, such as in the case of the Lakes State Stabilization Programme in South Sudan. This was coordinated by the United Nations Development Programme in partnership with UNOPS and the World Food Programme, under the state government.

Similarly, women in many communities are responsible for getting goods to market. In remote areas this can take many days. Well-planned and maintained roads can cut that time down immensely and give women more time for other uses. For example in the Democratic Republic of Congo, UNOPS rebuilt a road between Masisi and Goma, on behalf of the government of Belgium, reducing travel time from three days to half a day.

Supporting Life-Saving Relief Operations in South Sudan

More than 110,000 stranded refugees in South Sudan were able to receive emergency relief after transport infrastructure in the area was greatly improved, with UNOPS support.

The Sudanese refugees fled to Maban County in Upper Nile State during 2012, but poor roads made delivering humanitarian aid difficult, especially during the rainy season when roads became impassable.

UNOPS was tasked by the United Nations logistics cluster to undertake emergency infrastructure works to create vital access to the refugees.

As well as building better roads, UNOPS completely rehabilitated the surface at Maban airfield, creating a new all-weather 1,400 metre runway. The resurfacing was carried out in six weeks and used a labour-based approach that provided much needed income for the local community.

These activities were funded by contributions from the European Commission, the United States government and the Common Humanitarian Fund for South Sudan.

With both roads and air routes open, organizations such as the World Food Programme were able to deliver crucial provisions and provide life-saving support in one of the world’s biggest humanitarian operations of 2012.

Throughout the project, UNOPS consulted the local community and the government of South Sudan regularly and held weekly meetings with representatives from the relief organizations on the ground, to ensure their needs were met.

In one example of the value of such consultation, when preparing to rehabilitate the airfield, UNOPS altered the specifications after talking with pilots from humanitarian organizations operating locally, making the airstrip more fit for purpose while saving the donors money. In another example, UNOPS installed road signs and speed bumps in villages and set up driver training after the new roads led to an increased incidence of unsafe driving.

Improving Maternal Health

Women’s health is a major issue in development, with many women dying in childbirth or being denied access to contraception that could help them plan their families and better control their own lives.

As one of the UN Millennium Development Goals, maternal health has received considerable attention and the indicators are improving fast. This is partly thanks to an improvement in dedicated maternal health spaces, such as the integrated pregnancy and childhood centres built in Indonesia by UNOPS on behalf of UNICEF.

Empowering Expression

All members of the community have to be engaged in order for development projects to successfully identify needs and provide the required jobs, training and access to services. This includes making a special effort to consult those whose voices are not always heard, such as women in traditional societies.

In the Maldives, for example, UNOPS implemented a project to pipe drinking water into people’s houses, on behalf of the government through UNDP, with funding from the Adaptation Fund. To ensure that the outputs met the needs of all family members, the project board consulted members from the islands’ Women’s Development Committees. In countries where there is no such formal representation, female community liaison officers are often hired to seek out local women and meet them at home, to find out their needs and hear their opinions. Ensuring that women’s voices are heard is critical to making a project successful, sustainable and truly inclusive.

About UNOPS

UNOPS mission is to serve people in need by expanding the ability of the United Nations, governments and other partners to manage projects, infrastructure and procurement in a sustainable and efficient manner.

As central resource of the United Nations, UNOPS helps its partners deliver their aid and development programmes in over eighty countries. With over 6,000 personnel, UNOPS offers its partners the logistical, technical and management knowledge they need, where they need it.

UNOPS partners are currently relying on its proven expertise to increase the speed, cost effectiveness and sustainability of over 1,000 projects.
In 2012, 65 percent of UNOPS delivery was on behalf of the United Nations system. UNOPS charges a different rate for different types of projects, depending on a variety of factors including length, location, complexity and expected risk. In 2012, UNOPS delivered $977 million in project services and earned $58.8 million in project-related revenue, meaning that administration costs were on average around six percent.

Jan Mattsson – Executive Director, UNOPS
Mr Jan Mattsson joined UNOPS as Executive Director in 2006 and has led the organization through a major transformation. During this period, UNOPS mandate and role in the UN system were clarified by the General Assembly, its core competencies firmly established in line with international best practice standards of performance and the organization was returned to financial sustainability.

Mr Mattsson has enjoyed a distinguished career with the United Nations, spanning more than thirty years. Just prior to UNOPS, he served as Assistant Secretary-General and Director of the Bureau of Management of the United Nations Development Programme (UNDP), where he was a leader of change management and organizational reform.


Robert Shiller: Making Sense of the Irrationality of Markets

The question of what motivates a trader to buy or sell shares at any particular moment is probably as old as the stock market itself. Given that trading securities often is a pursuit largely devoid of rational behaviour – though many would have you believe otherwise – the answer remains elusive as ever, and that’s not for a lack of trying to devise ways and methods with which to foretell the conduct of the market and the players therein.

Nobel laureate Robert J Shiller has made a distinguished career analysing the world of finance in general and more particularly the way it responds to events. Professor Shiller takes as his starting point the premise that in a fully rational market, investors would base stock prices on the expected receipts of future dividends.

That, of course, is not the way it happens in real life. By analysing vast amounts of data, Prof Shiller concluded that investors are mostly guided by emotions, hunches and other, often rather primeval, feelings. Now that the crunching of big data is in vogue, these conclusions are yet again put to the test. They still hold true.

In the course of his academic work, Prof Shiller warned in 2006 of an impending housing crisis. He had identified a bubble that just had to burst. With the benefit of hindsight, this may not seem like rocket science but at the time pundits were almost unanimous in their verdict that housing prices would not just be sustained but increase further fuelled by an ever buoyant stock market. We now know what happened and who was right all along.

So, the smart money would want to heed Prof Shiller’s latest warnings about the digital currency Bitcoin that has a growing number of investors enthralled. He calls it “an amazing example of a bubble.” Prof Shiller is at a loss to explain the excitement of his students at Yale University over Bitcoin. “I tell them ’no, it’s not such a great idea at all’”. In 2013, the value of a Bitcoin increased by over 6,200%. “It may be an inspiration because of the computer-powered crypto science Bitcoin relies on, but in fact represents a return to the dark ages for the lack of clarity surrounding the digital currency.”

Still, Bitcoin fits the mould when it comes to behavioural finance and as such constitutes a most interesting phenomenon to watch. The prestigious Foreign Policy journal has named Prof Shiller as one of the top global thinkers. His contributions to creating a deeper understanding of market volatility, asset pricing and the lifespan of bubbles have been nothing less than formidable.


Ai Weiwei: Free Expression in Art and Politics

Curiosity may have killed the cat, but that doesn’t deter Ai Weiwei from asking questions, ruffling feathers and expressing opinions through his peerless art. Apparently, this makes Mr Weiwei a most dangerous man.

Chinese authorities seem to consider Mr Weiwei an enemy of the state. They leave no stone unturned in their pursuit of a peccadillo with which to silence the artist. In 2011, a charge of tax evasion failed to stick but did land Mr Weiwei in jail for close to three months. He may still not leave the country because of vague official suspicions. Beijing police obligingly informed that Mr Weiwei may be involved with pornography, bigamy and unlawful foreign exchange dealings. However, no charges have been filed.

The curtailment of his mobility has forced the artist to find other ways of keeping in touch with the wider world. Technology came to the rescue. The Internet has enabled Mr Weiwei to link up with museums, art galleries and patrons who clamour for his work. From his Beijing studio, employees are regularly dispatched to the four corners of the globe to install the works Mr Weiwei has designed.

Back home, the artist is being kept under constant watch. His studio, also his home, is surrounded by a small forest of surveillance cameras. Irreverent and not devoid of courage, Mr Weiwei has installed his own impressive network of cameras to snoop on the snoopers.

Inside the building, a group of computer-savvy youngsters help the artist transform analogue thought into digits merging art and politics.

Hope for a future free of constraints remains high. “Today’s technology and its ease of access offer people new ideas that bring light to the darkness. We cannot stay dark forever. It’s not possible.”

Mr Weiwei doesn’t necessarily blame the Chinese authorities for their reluctance to embrace change. Power is conservative by its very nature and perceives change as threatening.

That’s also how the Internet came to play such an important role in Mr Weiwei’s life: “I wish to help people connect through free expression. No matter how unknown or fragile you are, you still need expression. It’s a sign of life and a very powerful one too.”


Bassem Youssef: Confronting Power with Laughter and Ridicule

“You can’t laugh and be afraid at the same time – of anything. If you’re laughing, I defy you to be afraid.” An elegant an explanation as any of the power of satire, coined by US comedian and television host Stephen Colbert.

In March 2011, Bassem Youssef, an Egyptian cardiac surgeon who had assisted wounded protesters at Tahrir Square, started posting a show on YouTube in order to vent both frustration and anger. In The B+ Show, Mr Youssef exposed the hypocrisy and misinformation prevalent in mainstream Egyptian media and poked fun at politicians and other public figures. Episodes were filmed with a handheld camera; a table in his laundry room served as the set. A mural with Tahrir Square battle pictures served as the backdrop. In the first three months alone, Mr Youssef’s YouTube channel attracted over five million views.

Three years on, Bassem Youssef hosts the political talk show El Bernameg (The Programme) on regular television. The show handles news stories, political figures, media organizations, and all it touches with the same irreverence and humour as The B+ Show did.

Mr Youssef is busy schooling post-Mubarak Egypt in the fine art of irreverence and ridicule toward those in power. He has at his disposal a most impressive arsenal: A viewership regularly numbered in the tens of millions, various newspaper collumns, a twitter feed followed by over two million and a Facebook account boasting some 4.5 million friends.

Stylistically the progamme is very similar to its US counterpart The Daily Show. Even some of Mr Youssef’s mannerisms seem based on Jon Stewart.

Last October, El Bernameg returned to air its third season. In the meantime, an elected president had been deposed. The country was now controlled by the military. The crackdown they orchestrated against the MuslimBrotherhood saw hundreds of people killed.

During the first two seasons of his show, Mr Youssef had been an outspoken critic of the Morsi Administration, and he wasn’t particularlykeen on holding back against the new powers that be. The first episode of season three had Mr Youssef mocking the widespread idolization of Egyptian defense minister Abdul Fatah al-Sisi.

The very next day, CBC, the network that aired El Bernameg, hurriedly released an exculpatory statement. A bit later, CBC cancelled the show alleging a break of contract. However, in February El Bernameg did return for a second crack at its third season, this time on the MBC MASR network.

Satire is the celebration of irreverence. It is irreverence that ultimately keeps democratic leaders in check and topples despots. Comedians like Jon Stewart, and his Comedy Central colleague Stephen Colbert, may be proud of their country’s satirical tradition which they personify and helped export to the troubled Middle East.

Bassem Youssef and Jon Stewart are now close friends and have appeared several times on each other’s shows. Mr Youssef is at the very frontier of funny – an at times dangerous place to be. Since his show first aired, he has been taken to court countless times, mainly for “insult and defamation”. In January 2013 it was widely reported that a public prosecutor was investigating Mr Youssef
on charges of maligning then-president Morsi, whose office claimed that the show was “circulating false news likely to undermine public peace and security.” Later that same year, Mr Youssef was arrested on charges of insulting both Islam and President Morsi. After questioning, he was released on bail.

In 2013, Time Magazine named Bassem Youssef as one of its “100 most influential people in the world”. He had been nominated by
Jon Stewart.


Booz & Company’s Ideation Center: Empowering Women Entrepreneurs in the Middle East

One of the greatest challenges in the Middle East and North Africa (MENA) is to bring more women into the workforce. The region has a large number of aspiring, young, and well-educated women who lack exposure to work. Over the next decade many of these women will start to participate in the economy, driving growth and prosperity as part of a global trend. In the Middle East there are around ninety million economically excluded women – women poised to become employees, producers, and entrepreneurs.

One of the most powerful drivers of economic inclusion is entrepreneurship. This is the driver that Middle East governments should focus on. The Middle East lacks women in business. Insufficient encouragement for young women is reinforcing this trend. Women own just 20% of Middle East companies. This compares to nearly 40% in Latin America and the Caribbean.

No Exposure

Underlying this fact is the lack of students’ exposure to entrepreneurship and their consequent failure to demonstrate much interest. According to a recent W & Company survey conducted to better understand students’ voices across the countries of the Gulf Cooperation Council, Qatari youth showed the least interest in entrepreneurship. Just 3% of Qatar’s high school and university students expressed any interest in going into business – compared to the regional average of 11%. There is also a striking imbalance between female and male students, in part because young women lack female role models to look up to. In Qatar, 62% of interest in entrepreneurship comes from male students, and just 38% from females.

“Businesswomen do not enjoy easy access to credit since they often lack the required collateral against which to secure loans.”

A lack of finance opportunities and the challenging overall business environment tend to make matters even more difficult for women entrepreneurs. Businesswomen do not enjoy easy access to credit since they often lack the required collateral against which to secure loans. This is in part due to unequal access to land and property. As a result, barely 10% of the funding for women entrepreneurs is provided by commercial banks and other formal sources.

Household Savings and Red Tape

Women are forced to seek funds from family and friends or use household monies or savings to cover new investments and to raise working capital. The few women who do try to run their own business are confronted with excessive red tape and must face steep fees to register their activities. Infrastructure costs are significant as well. Rents for business premises and offices are high, as are the costs for communication systems and other utilities.

[caption id="attachment_7114" align="alignleft" width="169"] Author: Leila Hoteit[/caption]

Another disadvantage that businesswomen face is the lack of entrepreneurial training and support. There are few networks dedicated to supporting women entrepreneurs and almost no chances to obtain an advanced degree in business administration. Men take such support – colloquially known as the “old boys’ network” – often for granted.

For Qatar, bringing women into the workforce and ensuring they have access to the tools needed to become entrepreneurs, will advance the country toward sustainable economic growth - one of the core goals of the Qatar National Development Strategy 2011–2016.

Encouraging more women to become entrepreneurs has the positive effect of helping more women to participate in the workforce and of putting more women in higher level positions. Currently, women constitute about 25% of the total workforce in female-owned firms in the MENA region, with many at professional and managerial levels. This compares to a 22% female participation in male-owned firms where women mostly occupy low skills positions according to research conducted by the International Finance Corporation (IFC), the World Bank, and Booz & Company.

Five Steps

Qatar, which has taken steps to advance women in the workforce, can boost these efforts by focusing on five key areas:

Introducing early entrepreneurship education into the school curriculum

Developing an enabling regulatory environment

Facilitating the availability of finance

Providing access to business support services and mentoring

Ensuring openings for collaboration and networking

Early entrepreneurship education is important because it instils an entrepreneurial culture among women. This starts in the middle or secondary school classroom and should encompass the fundamentals of entrepreneurship, business, and financial management. One system used by schools worldwide to teach entrepreneurship as a practical skill, rather than just theory, is supplied by the BizWorld Foundation. Students participate in workshops in which they run mock enterprises, allowing them to experience something akin to the business cycle.

[caption id="attachment_7117" align="alignleft" width="175"] Author: Mounira Jamjoom[/caption]

An enabling regulatory environment is critical because it sends the message that entrepreneurs are welcome. This framework will require the government and stakeholders to establish an institutional body focused on women to collect data, formulate policy, and advocate it. Government should also define public procurement guidelines integrating women-run small and medium-size business into the supply chain.

Facilitating the availability of finance involves the government ensuring that female entrepreneurs have access to information about the types of financing being offered. The government should also support their eligibility which may require changes to family and labour laws in order to enable women access to credit. Governments should furthermore ensure that women become aware of other credit options such as those offered by equity investors, microfinance loan schemes, and state-sponsored programmes.

In terms of providing women with access to business support services and mentoring, governments can establish business incubators focused on supporting female entrepreneurs. Developed countries use this technique frequently. Incubators offer women the support they need to successfully run their businesses. This includes basics such as assistance with marketing initiatives, accounting, training, and regulatory compliance. Incubators can also provide female mentors and role models so that potential women entrepreneurs can acquire the necessary knowledge, expertise, and confidence to start their own businesses.

Structures and Networks

Finally, governments and other stakeholders need to come forward with structures for collaboration and networking opportunities for women. Local businesses and associations should be encouraged to offer entrepreneurship and management training. Business development centres and businesswomen’s associations can provide venues for networking opportunities. International women’s associations should also be encouraged to support and partner local initiatives, thereby creating regional networks of women entrepreneurs.

By providing support and services that aim to redress the current bias against women in business, Qatar can help more of its women to become entrepreneurs and thus take advantage of the multiple opportunities arising from the country’s robust economic growth and ambitious development goals.

About the Authors

Leila Hoteit - Principal at Booz & Company.
Mounira Jamjoom - Senior Research Specialist at the Ideation Center.

About the Ideation Center

The Ideation Center is Booz & Company’s leading think tank in the Middle East. Established in 2007, the Ideation Center provides thought leadership through insightful research, analysis, and dialogue that is true to the Middle East’s dynamics. The Ideation Center brings these ideas to the forefront through their publications, website, and forums.