www.businessannual.net
July 2013
The Evolution of Business
Urban Renewal • Corporate Universities • Special Focus on the Premier IFCs 1
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The Evolution of Business The ongoing evolution of business is relentless. The global economic crisis has seen ordinary folk, rather than corporate bodies seemingly become the driving force behind such developments as governments putting tax transparency at the top of the popular agenda, with traditional commercial interests appearing to react to, rather than dictate events. This is true up to a point, yet it is important to recognise that, in the main, these same interests recognise a sea change is well under way in the way business is undertaken and are making great strides in fundamentally changing the way they approach things. Tempting as it sounds, at this time of momentous change businesses cannot and should not be broken down into the good guys and the bad guys. There are many shades of grey and credit should be given where credit’s due. In a new world of über-connectivity, organisations are increasingly advocating and practicing listening to and engaging with both their marketplace and their employees. The most pioneering, meanwhile, are actively giving employees the autonomy to engage directly with the marketplace, bravely recognising that ceding control in this fashion actually breeds a culture of loyalty to the company, whilst working wonders on the public relations front. Unfortunately, fashionable thinking, fuelled by social media can change the popular atmosphere at the drop of a hat, such that scrupulous operators can suddenly find themselves caught up in a whirlwind of negative publicity applied to the sector they are attached to. This, no matter how proactive they may have been in embracing a fresh culture of compliance, nor how great the extent to which they may have placed innovation at the heart of a new approach to operational and strategic thinking. For many organisations, convincing people they’re one of the good guys can be a hard task at the present juncture – when what they’re doing is being careful not to throw out the baby with the bath water.
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Contents Comment
Special Focus on the Premier International Financial Centres
6 Urban Renewal and Development Clyde Waterfront, Scotland; Swansea Bay, Wales; Birmingham, England; Derry-Londonderry, Northern Ireland.
Comment 50 A Review of Business-University Collaboration in the UK By Professor Sir Tim Wilson DL. 51 Stand Out UK Business Schools
9 The Öresund Regional Development Strategy (ÖRUS)
52 IMD Insights By IMD Faculty Professor, Stewart Black. 24 The World’s Premier IFCs are a Force for Good 26 The BVI: The Highest Standards of Business Excellence By Elise Donovan, Executive Director, BVI International Finance Centre. 29 BVI: Part of the Solution
14 JESSICA: Joint European Support for Sustainable Investment in City Areas
54 University Sponsorship Taken to Task By Richard Fuchs.
15 Youth Unemployment and Geographic Mobility in the EU By the European Urban Knowledge Network (EUKN).
56 What Climate Change Means for Africa, Asia and the Coastal Poor From the World Bank.
16 HISTCAPE (HISTorical towns and related landscape) 30 Mauritius 32 Samoa 33 Cayman = Captive Insurance 34 New Cayman Islands Insurance Law Comes into Force
Captive Benefits By The Insurance Managers Association of Cayman (IMAC).
18 Corporate Universities The best corporate universities place innovation at the heart of a new approach to operational and strategic thinking. 20 A Case Study in the Strategic Application of the Corporate University Management Concept By Richard Dealtry, Chairman, The Global Association of Corporate Universities & Academies (G-ACUA).
36 Reinsurer Southport Re Domiciles in Cayman By Michael Klein, Caymanian Compass. 37 Cayman Islands Gets OECD Thumbs Up 39 International Financial Centres and Trends in Tax Information Exchange By Martyn Gowar, Rasha Albazaz and Clare Morison, McDermott Will & Emery.
21 The Seven Pillars of the Corporate University By Kenneth Fee, Director, Learnforever Ltd.
42 Global Forum Update on Effectiveness and Ongoing Monitoring OECD Secretary-General’s Progress Report to the G20 Finance Ministers and Central Bank Governors. 48 G8 Action Plan Principles to Prevent the Misuse of Companies and Legal Arrangements G8 Lough Erne, Northern Ireland, 2013.
60 The International Cybercrime Assistance Programme Provided by the International Cyber Security Protection Alliance (ICSPA). 63 Building on the BRICs: Redraw the Global Map of Opportunity and Competition By Kishore Rao, Principal, Strategy and Operations, Deloitte Consulting LLP, Ira Kalish, Director, Global Economics, Deloitte Services LP and Simon Mclain, Senior Manager, Strategy and Operations, Deloitte Consulting LLP.
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Clyde Waterfront
Swansea Bay
Photo CC by TruTourism
Photo CC by Kilan Seifried
Urban Renewal and Development
Marina, Swansea Bay, Wales.
River Clyde, Glasgow, Scotland.
The best examples of urban regeneration initiatives are marked by mixeduse, sustainability and job and wealth creation that can point to a long pedigree of attracting sustained investment and delivering on commitments over a number of years. Here, we look at four stand-out locations in the United Kingdom where momentous things are happening right now.
Clyde Waterfront Developments along the River Clyde in Glasgow, Scotland certainly meet the above criteria. This Clyde Waterfront initiative has also seen an increase in already industrious activity in advance of the Glasgow 2014 Commonwealth Games. This has acted as something of a catalyst and revitalising force, given the concerted pooling of resources to complete various projects, such as the landmark HydroArena Entertainment venue, in time for the start of the event in July 2014. The event is showing its capacity to consolidate and support the work of the Clyde Waterfront - and sister initiative the Clyde Gateway - by delivering an economic
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and social legacy of note, including the National Indoor Sports Arena and Sir Chris Hoy Velodrome, as well as the Athletes Village marked by its environmental and energy credentials. Other development has seen the green light recently given to commencement of works on DeVere Group’s ‘Urban Resort’ and Premier Inn’s 180 room hotel at Pacific Quay. In addition, the regeneration of the Calton and Barras areas will see the revamping of shops and market stalls to create a revitalised zone at the heart of the Games venues, with the Barras market place at its heart. Further developments of note include the recently approved planning permission for the £228m development of two new campuses for the City of Glasgow College, thereby reinforcing further the high esteem in which the city is held in respect of its further education provision. In addition, a recent announcement confirms that the South Glasgow hospital campus, due to open in 2015, is on time and on
budget. Meanwhile, a £70m flagship office development opposite Glasgow’s Gallery of Modern Art, being developed by BAM Construction, speaks to a renewal of faith from investors in the city’s continued commercial growth.
Swansea Bay Proposals for a £650m tidal lagoon in Swansea Bay, Wales is a renewable project to parallel anything across the globe and comes with the ability to supply 107,000 homes with clean renewable energy. Other noteworthy developments include the recent approval for plans for a new domed roof for Swansea’s indoor market with capacity to incorporate energy efficiency measures, the ongoing Swansea Boulevard Project, enhanced transport links in the Fabian Way corridor, as well as the Felindre Business Park development. Moreover, there are great efforts being made to maximise benefits to the local economy e.g. Swansea Bay based businesses being encouraged to be suppliers to the £150 million first phase of Swansea University’s new Science and ...continued on page 8
CLYDE WATERFRONT OPPORTUNITIES KEEP ON FLOWING!
The scale, pace and diversity of its regeneration has revitalised the River Clyde, making it one of Britain’s biggest and most advanced regeneration areas. With a further £500 million of new private sector projects proposed in the last 18 months, opportunities to invest, locate and live here keep on flowing! Clyde Waterfront Strategic Partnership (www.clydewaterfront.com) comprising the Scottish Government, Scottish Enterprise and Glasgow City, Renfrewshire and West Dunbartonshire councils, continues to facilitate and promote the +250 developments along 13 miles of the Clyde from Glasgow, via Renfrew to Dumbarton. £3.5 billion has been spent or committed since 2003 by the public & private sectors, creating 22,000 new jobs, 10,000 new homes and 350,000 metres2 of new commercial space and many new centres of business excellence, namely: Financial Services: Glasgow’s award winning International Financial Services District (IFSD) (www.ifsdglasgow.co.uk) has attracted +£1billion of investment to date via global companies like Aon, Aviva, Barclays, BNP Paribas, esure, HSBC, JP Morgan, Morgan Stanley, National Australia Group, Santander and Tesco, creating 15,500 new jobs since 2001. New occupiers, new Grade A office space, the Tradeston “Squiggly” bridge and hospitality plans for Broomielaw Quay, all add fresh impetus. Creative Industries: the Pacific Quay and SECC area is marketed to Creative Industries as Creative Clyde (www.creativeclyde.com).
BBC Scotland and STV are firmly established here and another 50 creative SMEs are based in Medius, The Hub and Film City Glasgow respectively. A “Floating Village” is planned for the Canting Basin and opposite the 12,000 seat Hydro arena opens September 2013, reinforcing Glasgow’s credentials as a world class entertainment and conferencing venue. Shipbuilding: having completed six Type 45 Destroyers recently, now the thousands of highly skilled workers at BAE’s two shipyards in Govan and Scotstoun are building massive hull sections of two 65,000 tonne Queen Elizabeth Class Aircraft Carriers. Medical Science: the £842m redevelopment of the NHS Southern General, has expanded its maternity hospital, built a new £90m super laboratory and is constructing two new hospitals, creating a health campus able to treat 725,000 patients annually. Leisure: the £74m Riverside Museum, designed by Dame Zaha Hadid, has attracted 2 million visitors since opening in June 2011, complimenting other major Clyde attractions such as Glasgow Science Centre, the Glenlee Tall Ship, Xscape and the Titan Crane. Retail: Braehead near Renfrew, already Scotland’s busiest shopping centre, will embark upon a £200m expansion. Glasgow’s Style Mile (Buchanan Galleries / Street and Argyle Street / St Enoch’s Centre) is one of the UK’s most popular retail destinations. Housing: over 10,000 new homes have been built since 2003 along the Clyde, such
as the award winning £1.2billion Glasgow Harbour development which has further shops, restaurants and hotels planned. At Ferry Village near Braehead, six developers are building a range of 2,000 apartments and detached homes, by Clyde View Park. Education: - our FREE on line resource (www.clydewaterfronteducation.com) offers teachers 200 lesson plans that link 12 Clyde themes with 8 subjects, as per Scotland’s Curriculum for Excellence. These lesson plans are reinforced for schools when they go on Clyde Marine Services Ltd “Classroom on the Clyde” river trips. Tourism: we have produced 350,000 Heritage Guides to attract the public to the river (www.clydewaterfrontheritage. com). Clyde Clippers and Clyde Link ferries link the city centre with Govan, Renfrew and Yoker, complimenting other services like Seaforce RIBs, Loch Lomond Seaplanes and the Waverley Paddle Steamer. The Future: Its skilled workforce, cost competitiveness, excellent communications and new infrastructure give Clyde Waterfront a real momentum. However, this attractive and thriving waterfront location has another £2 billion of commercial, retail and residential opportunities for developers, investors and companies to realise.
Contact Details Clyde Waterfront, 4th Floor, Atrium Court, 50 Waterloo Street, Glasgow, G2 6HQ. 0141 242 8253 or www.clydewaterfront.com
Innovation Campus at Fabian Way, being delivered by St. Modwen, and Swansea University, through VINCI Construction UK and the Leadbitter Group.
Birmingham
In addition, as a further example of how developments in the sports and cultural sectors can act to catalyse urban renewal on the ground, Swansea City Football Club, which is looking forward to hosting European football in the 2013/14 season, has plans to extend its Liberty Stadium’s capacity by 11,000 to 33,000.
Birmingham
Meanwhile, Business and investors across the city are already benefiting to the tune of a commitment to £1bn of public sector investment in transport and digital infrastructure.
Photo CC by Bob Hall
Birmingham, at the heart of the UK’s Midlands region, sits at the centre of a £90bn regional economy and has access to a working population of 4.3 million people. The Birmingham Development Plan 2031 is a radical 20 year programme set to deliver sustainable growth, improved connectivity, global competitiveness and a diversified economic base to six distinct Economic Zones across the city, the first and biggest of which is Birmingham City Centre. With the potential for 700,000 sq.m of new office space and 600,000 sq.m of new leisure, recreation and commercial space, sectors including financial services, digital media and ICT are being principally focused upon, since they offer a competitive advantage and therefore the greatest scope for growth.
Birmingham Canals, Birmingham, England.
Derry-Londonderry Derry-Londonderry is Northern Ireland’s second city and occupies a strategic location on a river estuary in the North West of Ireland. Testament to the city’s vibrant quality is the fact that 40% of its 110,000-strong population are under 25, while it currently enjoys the status as the UK City of Culture 2013.
Derry-Londonderry
With an enviable pedigree of FDI and re-investment, the city is already home to world-class research in the nanotechnology, intelligent systems, clinical life sciences and legal sectors, while other growth areas include software/digital media, technology production and financial services. The city’s transformative ‘One Plan’ to 2020 aims to leverage these existing credentials and so generate further investment and employment, create co-operative change, ensure economic and social fairness and make the city a more attractive place to live.
It is accepted that the key to successful delivery of One Plan objectives is the attraction of sufficient and ongoing funding. As predominantly public sector funding starts to deliver results and investor confidence grows, it is expected that further public funding complemented by private sector investment will enter the arena. In addition, accessing relevant EU funds to realise the One Plan has not been ruled out.
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Peace Bridge over the River Foyle, Derry-Londonderry, Northern Ireland.
Photo CC by David Jones
The development focus is very much determined by the Guiding Principles of ‘Mainstreaming Equality’ and ‘Embedding Sustainability’ and all regeneration activity is informed by these. To this end, key ‘catalyst’ programmes are in place related to: support for young people; expansion of the University; and improvements in access or the development of new methods of linking communities to economic opportunity.
Photo CC by Martin Nikolaj Christensen
The Öresund Regional Development Strategy (ÖRUS) With its 3.7 million inhabitants the Öresund Region, centred on the cities of Copenhagen in Denmark and Malmo in Sweden, is one of the most significant and dynamic regions in northern Europe. However, to defend the Öresund Region against increasing international competition, it is essential for stakeholders to work together to create growth and build dynamism: only through close cooperation can the Öresund Region attain sufficient critical mass to be able to compete internationally. For this reason, the Öresund Committee has formulated an Öresund Regional Development Strategy, known as ÖRUS. The strategy has a time horizon that extends to 2020 and is a dynamic tool that is reviewed annually to reflect developmental changes and follow up on implementation.
A need for political dialogue All of the stakeholders in the Öresund Region should work together with national partners in order to realise the vision and the development strategies. This also applies to representatives of the two nations (Denmark and Sweden), who need to enter into a political dialogue about ÖRUS with the Öresund Committee, the regions and the municipalities. On 1 July 2010 it was ten years since traffic first started to cross the Öresund Bridge. Although integration across the Sound has increased during this time, the process remains far from complete. There is still a need to promote the emergence of a common labour market, a common housing market, a greater exchange of innovations and greater
reciprocity in trade, education, culture, sport and leisure activities. The Öresund Region currently accounts for approximately 26 percent of the aggregate of the gross domestic products of Denmark and Sweden. Establishing a fixed link across the Fehmarn Belt in 2018 will improve ties between Scandinavia and the rest of Europe, and so further strengthen the Öresund Region.
The strategy has a time horizon that extends to 2020. A region characterised by green growth In 1993 the Öresund Committee was the only cross-border organisation in the region. The committee became the region’s prime mover – a mediator, catalyst and driving force for cooperation and integration. Since 1996 structural funds have become available via Interreg II, III and now IVA, and the use of Interreg funds continues to be given high priority. The Medicon Valley Alliance is one of the best examples of Öresund regional cooperation between business, academia and the university hospitals in the field of life science. The most far-reaching example of regional collaboration to date is the merger of the Port of Malmö and the Port of Copenhagen into Copenhagen Malmö Port. Other associations and interest groups have established links with sister organisations across the Sound. But the region also needs more knowledge-intensive business clusters.
The ambition is for the Öresund Region to be characterised by green growth, a region where sustainable urban development and clean technology provide a favourable climate for growth enterprises on both sides of the Sound.
Vision and strategy ÖRUS is a vision and a strategy for how, together, we can unlock the numerous potentials of the Öresund Region as a border region. But if the vision laid out in ÖRUS is to be realised, everyone will have to play their part. The ÖRUS vision is that “by maximising the benefits of integration and cross-border dynamics, the Öresund Region will stand out as the most attractive and climate-smart region in Europe”. Therefore the region in 2020 should be: • A front-runner in environmentally friendly transport and a laboratory for green technology. • A centre for cleantech solutions and sustainable urban development, so that we can host an Öresund Region EXPO in 2022. • A single, attractive, obstacle-free labour market where people with different educational backgrounds, professional skills and practical experience have unrestricted access to all of the region’s workplaces, regardless of whether they
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Photo CC by News Oresund
have acquired their proficiency in Sweden, Denmark or elsewhere. • A model for how to make the best possible use of the resources that workers with a foreign background can bring to the labour market. • A region that provides individuals and companies with an overview of opportunities, regulations and frameworks through ØresundDirekt. • A model region in terms of digital integration through the use of highquality broadband. • A region with a diverse cultural offering that meets high criteria in terms of quality. • A region that invests in cultural activities produced for, with and by children and young people. • A host for international events and a popular tourist destination. • A cohesive, competitive educational market that produces the best-trained graduates and attracts students and researchers from other countries.
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• A hub of innovation, with entrepreneurs and synergies between educational institutions and trade and industry. • A region whose residents are able to make use of all that the region offers and to explore its potential.
The Öresund Committee is working to remove the border obstacles that today complicate life for people in the region. Labour Market Working to develop the labour market The Öresund Region needs a properly functioning common labour and housing market to help ensure that the region continues to develop in a positive direction. Forecasts suggest that the Öresund Region may experience major labour shortages in the future, which would cause bottlenecks
in development and lead to increased competition between Zealand and Skåne. The Öresund Committee is working to remove the border obstacles that today complicate life for people in the region. To solve these problems, the Öresund Committee is engaged together with various regional and municipal players in a close dialogue with Sweden and Denmark and with the Nordic Council of Ministers’ Freedom of Movement Forum. The following three issues have been accorded top priority in the Committee’s efforts to create a cohesive yet diverse labour market throughout the entire region: 1. The ØresundDirekt cross-border information service needs to be expanded and developed even further. 2. There must be some degree of harmonisation between the Swedish and Danish tax, social insurance and unemployment benefit systems to simplify life for those who live in one country and work in the other. 3. It must be possible for professionals with the equivalent training/skills/qualifications from Sweden and Denmark respectively to work freely throughout the region.
© News Øresund. Øresund Bridge
Climate A climate-smart region The Öresund Region has great potential to show the rest of the world the way in terms of sustainable development. But this means that climate work on both sides of the Sound must be closely coordinated, while also pursuing every opportunity to share experiences and good examples with the different regions and municipalities. The Öresund Committee has formulated its vision for the Öresund Region in 2020: “By maximising the benefits of integration and cross-border dynamics, the Öresund Region will stand out as the most attractive and climatesmart region in Europe.”
A recurrent theme The climate issue is of crucial importance. It is a constant theme throughout the entire development strategy for the Öresund Region, recurring in conjunction with everything from waste management and transport to energy-efficient construction. The Öresund Committee makes every effort
to convince those concerned of the need to introduce a regional perspective into the climate work that is currently taking place in Skåne and Zealand. A working group comprising representatives of the members of the Öresund Committee and also of trade and industry in the Öresund Region is currently building a platform on which to base the work of coordinating existing strategies, developing collaboration and creating a common regional perspective.
Climate work on both sides of the Sound must be closely coordinated. Accessibility and Mobility Greater mobility means more opportunities It must be simple and straightforward to move around within the Öresund Region, both on your own and with the help of public transport that makes it easier to work, study and experience everything the region has to offer.
The region faces some major challenges in terms of traffic and infrastructure. These require joint action that focuses on three clear goals: 1. Travel to and from the region – international accessibility 2. Travel within the region – intra-regional accessibility and mobility 3. Travel through the region – the Öresund Region as a transit area Today the Öresund Region is a transport hub, a crossroads for national and international traffic. Accessibility is good in international comparisons, but the region is also subjected to intense pressure of various kinds in various areas. In collaboration with regional and municipal players, the Öresund Committee is engaged in a dialogue with both Sweden and Denmark on the following key issues: • Making preparations for a fixed link between Helsingborg (Sweden) and Helsingør (Denmark) • Safeguarding the status of Copenhagen Airport (Kastrup) as a major hub and a highly competitive airport
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Photo CC by Tristan Ferne
Copenhagen, Denmark
• Developing and integrating public transport on both sides of the Sound in order to maximise the potential benefits of the planned Fehmarn Belt Link • Creating a rail network with higher speeds and more frequent services to Kastrup via the Öresund Bridge • Developing the Öresund Region as a model region for green transport, including freight shipments The Öresund Committee is also working to expand and improve the region’s digital infrastructure by harmonising technology, standards and prices.
Culture and Events Culture and events – flagship cross-border collaboration The cultural sector, the events industry and tourism are rapidly growing in significance. The cultural sector employs 78,000 people in Denmark and 107,000 people in Sweden, and households in the Öresund Region spend a total of DKK 27 billion on culture every year.
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Culture and events is one of four main themes in the Öresund Committee’s regional development strategy (ÖRUS).
The Öresund Committee is focusing on the following strategic initiatives:
The culture and experience industry extends across a broad spectrum of commercial, cultural and artistic activities carried out by numerous categories of workers from cultural producers to service staff, from the artists and performers themselves to impresarios and event makers.
There is a need to make potential audiences more aware of cultural activities and to make the events and activities themselves globally competitive. These aims can be achieved by coordinating efforts, improving collaboration and setting clear priorities to compete effectively for international events such as the World Expo 2020 or the European Football Championship.
The Öresund Region is a crossroads for national and international traffic. Residents in the Öresund Region need to be made aware of the cultural resources available to them, and the process of cultural integration needs to be boosted by closer cooperation around existing events and the development of new, shared cultural projects. The forms this can take are many and varied: a focus on a shared culturalhistorical heritage, a “Round the Sound” cycle race, a regional sailing challenge, the “Broloppet” bridge run, a week when the focus on both sides of the Sound is on art, new media and culinary experiences, and events that draw attention to the region’s multi-cultural resources.
• Opportunities must be provided for greater diversity in the region’s cultural offering by improving the coordination of cultural activities in order to make better, shared use of the region’s cultural facilities and arenas. • Mentoring programmes between culture workers and businesses will help to support initiatives to establish new players in the cultural sector. We will also support culture workers in their ambitions to cooperate more closely with trade and industry. • As part of this process, we will pave the way towards bringing together creative activities, artists and knowledge-based enterprises under one and the same roof in an “innovative business centre” – an
Knowledge and Innovation Firm focus on knowledge and innovation The development of knowledge and progress in the field of innovation are acquiring ever greater importance as factors behind the region’s competitive strength. Here in the Öresund Region we are determined to make the best possible use of our skills and resources in the fields of knowledge and innovation on both sides of the Sound. It is only by virtue of such coordinated efforts that the Öresund Region can attain the critical mass that is essential to be able to compete successfully in the international arena. Knowledge and innovation is one of the four focus areas in the Öresund Committee’s regional development strategy, ÖRUS. Together with its member organisations, other stakeholders in the fields of climate technology and cleantech solutions, and innovation-intensive companies, the Öresund Committee has set up a working group to coordinate all the good work that is already being done in these areas.
In close liaison with other regional players, such as the Copenhagen Cleantech Cluster, the Medicon Valley Alliance, the Öresund Institute and the European Spallation Source, the Öresund Committee is working hard to create an even better climate of regional cooperation in which knowledge and innovation can flourish.
The cultural sector employs 78,000 people in Denmark and 107,000 people in Sweden. The Öresund Committee focuses on the importance of promoting: • Collaboration between the region’s institutes of education in providing educational activities and opportunities: the Öresund Region is to be a single market in terms of education • Student mobility throughout the Öresund Region, both in relation to academic education and in-service training • The appeal of the Öresund Region for international researchers and students
• Cooperation, collaboration and knowledge transfer between business, academia and research institutes; for example in relation to the ESS and MAX IV projects • Cross-border exchanges of positive experience about how to support innovation, entrepreneurship and “movers and shakers” on both sides of the Öresund Strait • Coordinated efforts to attract international research projects and funding; for example, EU funding.
International competitiveness through regional integration In international comparisons, the individual Danish and Swedish constituents of the Öresund Region are relatively small in economic and demographic terms. In its analysis of the competitive capacity of the Capital Region of Denmark, the OECD has shown that, with regard to a number of key growth indicators, the region lags behind other regions with which it is normally compared. To strengthen the region’s competitive position, the OECD recommends the adoption of a broader, panÖresund mind-set to promote integration and develop cross-border collaboration.
Malmo, Sweden.
Photo CC by La Citta Vita
“Ideon”, where culture is just one business activity among others.
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Photo by nexus 7
JESSICA: Joint European Support for Sustainable Investment in City Areas
What is JESSICA? JESSICA - Joint European Support for Sustainable Investment in City Areas, is an initiative of the European Commission developed in co-operation with the European Investment Bank (EIB) and the Council of Europe Development Bank (CEB). It supports sustainable urban development and regeneration through financial engineering mechanisms. EU countries can choose to invest some of their EU structural fund allocations in revolving funds to help recycle financial resources to accelerate investment in Europe’s urban areas.
What assistance does JESSICA provide? JESSICA promotes sustainable urban development by supporting projects in the following areas:
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urban infrastructure – including transport, water/waste water, energy
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heritage or cultural sites – for tourism or other sustainable uses
•
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redevelopment of brownfield sites – including site clearance and decontamination
•
creation of new commercial floor space for SMEs, IT and/or R&D sectors
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university buildings – medical, biotech and other specialised facilities
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energy efficiency improvements
How does JESSICA work? Contributions from the European Regional Development Fund (ERDF) are allocated to Urban Development Funds (UDFs) which invest them in public-private partnerships or other projects included in an integrated plan for sustainable urban development. These investments can take the form of equity, loans and/or guarantees.
Owing to the revolving nature of the instruments, returns from investments are reinvested in new urban development projects. Alternatively, managing authorities can decide to channel funds to UDFs using Holding Funds (HFs) which are set up to invest in several UDFs. This is not compulsory, but does offer the advantage of enabling managing authorities to delegate some of the tasks required to implement JESSICA to expert professionals. Owing to the revolving nature of the instruments, returns from investments are reinvested in new urban development projects, thereby recycling public funds and promoting the sustainability and impact of EU and national public money.
What are the advantages of using JESSICA? Sustainability – Financial engineering instruments such as JESSICA are based on the provision of repayable assistance from the structural funds to investments which should generate returns and in this way pay back investors. This offers a more sustainable alternative to the assistance traditionally provided through grants. Leverage – by combining structural funds with other sources of funding that may already exist, JESSICA will boost resources making it easier to provide support to a larger number of projects. Flexibility – JESSICA offers flexibility, both in terms of structure, and in the use of funds by way of either equity, debt or guarantee investment, which can be tailored to the specific needs of particular countries and regions. Expertise – JESSICA enables structural fund managing authorities, cities and towns to engage with the private and banking sectors. This helps to leverage further investment, as well as technical and financial capacity in project implementation and management. Partnerships – JESSICA is the result of the partnership established between the Commission, EIB and CEB. It can also act as a powerful catalyst for the establishment of partnerships between countries, regions, cities, EIB, CEB, other banks, investors, etc to address the problems faced by urban areas.
By the European Urban Knowledge Network (EUKN). Conclusions and Recommendations European countries increasingly face youth unemployment, even countries where it went pretty well so far. The problem requires an approach that is not exclusively based on economic principles (job creation). An integrated approach is needed that also pays attention to further education and investments in human capital, and to social effects - for instance the exclusion of the unemployed, the risk of long-term effects of youth unemployment (“lost generation”) health, security, polarisation, and radicalisation.
Urban prosperity is closely linked to the quality of human capital. Understanding trends and patterns with regard to youth unemployment is very important: are we dealing with a temporary disruption of trends or long-term effects? The answer to this question is crucial for urban development: even in times of crisis coherent planning is necessary.
Urban prosperity is closely linked to the quality of human capital (“a skilled city is a prosperous city”, Glaeser). Cities compete for talent. Cities and regions have to deal with “brain drain” effects when they are not capable of finding the right “skilled people”. Labour migration can have many advantages for migrants, sending and host society. However, we should not disregard the negative socio-economic impact at local level. A triple-win situation is possible only if due attention is given to both positive and negative aspects of free movement. Labour migration is a two-sided issue, relevant for both sending and receiving countries. There is a need for developing free movement supporting policy both at Community and at intergovernmental level (i.e. multigovernmental). This means that Europe should not only focus on the removal of barriers to free movement. Attention is needed as well for negative socio-economic impacts at a local and national level in both receiving and sending countries. This is important to optimise the benefits and to ensure public support. Intra-EU mobility requires coordination and bilateral agreements between sending
Photo by jokerpro
Youth Unemployment and Geographic Mobility in the EU
and receiving countries, to prevent braindrain effects (for example in the health sector) and to aim at a more balanced recruitment of specific professionals. Cooperation between sending and receiving regions may be required as well with regard to: facilitation of return migration of homeless and unemployed migrants, recognition of foreign credentials, etc.
Cities have the capacity to help new immigrants adapt quickly to new demands and circumstances. Cities have the capacity to help new immigrants adapt quickly to new demands and circumstances. Migrant workers are a very diverse group for which no general policies can be developed. New migration patterns demand new approaches and measures. For instance, new patterns of temporary migration require flexible facilities, such as temporary housing and voluntary integration and language courses.
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Photo CC by Francois Phillip
HISTCAPE (HISTorical towns and related landsCAPE) Background
The project will;
Historic towns and their landscapes are a unique part of Europe’s identity. While Europe’s population is largely concentrated in larger settlements, 80% of its territory is rural in character. These rural landscapes are home to a scattered pattern of smaller historic towns and villages. Once focal points for economic and community activity, these smaller historic places have come under serious threat over recent decades. Changing patterns of economic activity have led to de-population, a lack of investment with a subsequent loss of facilities and services.
• identify and disseminate good practice
The HISTCAPE project addresses this challenge by focusing on the sustainable management of historical assets in small rural towns. Through interregional workshops, study visits and a special online practitioners’ forum the project will identify and establish effective policies and plans for the sustainable management of cultural heritage assets and related landscapes.
Planned project duration: 01.01.2012 – 31.12.2014
Objectives and Results HISTCAPE aims to arrest the decline of historical assets in rural areas. It plans to do this by developing sustainable management solutions to help responsible bodies develop a more dynamic view of cultural heritage assets in rural areas.
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• contribute to increased skills and capacities within regional authorities • identify, implement and transfer improved models of heritage protection • improve the networking of regions and heritage management authorities • develop policy recommendations at the European level
Project partners Rural Development Styria (Austria) Castilla y León Regional Authority (Spain) Northern Cultural Regional Direction (Portugal) Region of Marche (Italy) Region of Western Macedonia (Greece) General-Directorate for the Cultural Heritage Rhineland-Palatinate (Germany)
Alytus District Municipality Administration (Lithuania) Saaremaa Local Governments Association (Estonia) Vidzeme Planning Region (Latvia) University of Ljubljana (Slovenia) Tecnalia Research & Innovation (Spain) European Association of Historic Towns and Regions (United Kingdom) 1. The project activities follow a carefully defined methodology. First, partners identify good practice and jointly define a methodology for developing policies. Examples of good practice will be collected, analysed and highlighted by partners. Stakeholders in rural development will be invited to participate in these discussions. Study visits, peer reviews and state of the art good practice will be important instruments in this first phase. 2. In the second stage, the viability of implementing those policies will be tested through six pilot actions in the partner regions. In parallel, the project partners will pool resources and knowledge to jointly develop new policy instruments building on identified good practice.
Kuressaare Castle, Saaremaa, Estonia
Photo CC by Wolfgang Wildner
3. The final stage is dedicated to the development of an implementation plan for each participating region and to the training of partners to ensure these plans are successfully carried out after the end of the project. The plans serve as readyto-implement strategies for improving the efficiency and sustainability of rural cultural heritage management across Europe. 4. Lastly, to create added value at the European level, HISTCAPE partners will present the results of their cooperation in a sustainable management guide on the preservation of rural heritage values. This will include policy recommendations, examples of best practice and general guidelines for successful implementation. Through regional cooperation the HISTCAPE project will fill a strategic policy gap improving the effectiveness of regional policies relating to cultural heritage in Europe’s smaller settlements whose viability is now seriously under threat. It will identify good practice in sustainable management and ensure they transfer into regional action plans that are capable of accessing the structural funds – providing a catalyst for further public and private sector investment alongside the empowerment of local communities. For more information, please visit www.histcape.eu
Styria, Austria
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Photo by PaulPaladin
Corporate Universities
The best corporate universities place innovation at the heart of a new approach to operational and strategic thinking, resulting in an immediate transformative effect on the ground thereafter. In addition, they breed a culture of loyalty to the parent company, as well as assisting in staff retention. Increasingly, they represent a meaningful alternative and, some would argue, something of a threat to graduate business schools, given that they are much more directly linked to the workplace with learning in the classroom needing to show a clear link to results on the ground. With spiralling costs for institutions and students alike, alternative distance learning opportunities and an increasing lack of public sector support, combined with a reduction in its perceived value from some quarters, the number of business schools searching for a sustainable business model is increasing. Capgemini University is a prime example of all that’s best about Corporate Universities. With a global curriculum that reached 82,000 participants worldwide in 2011, it constitutes an outstanding leader in the field with its university benefiting clients, staff and the wider group worldwide. It maximises the full spectrum of staff potential through the development of specific skills and the enhancement of capabilities in a
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customised fashion, both in the classroom at central delivery locations in France, India and the US, locally across 17 countries and also via e-learning modules and in virtual classrooms. Moreover, its Business Priority Weeks held four times a year in various locations across the globe are focused on Group priorities with a view to enhancing a commonality of purpose. In addition, the group has received many independent accolades in recent years, not least being awarded Silver and Bronze in the 2012 Brendon Hall Excellence in Learning Awards.
Capgemini University is a prime example of all that’s best about Corporate Universities. Two of the best known corporate universities are those attached to GE and McDonalds, established in 1956 and 1961 respectively. GE’s learning facility, in Crotonville, N.Y. is the oldest of its kind in the US and has courses covering three areas: leadership, skills and business - an umbrella approach known as ‘GE Global Learning’. In addition, learning takes place at its global research centres in Munich, Germany, Shanghai, China and Bangalore, India – no less than one would expect for a company with some 290,000
employees spread across the world. In addition, GE is adapting its approach built up over 60 years to account for a new generation of leaders who have grown up with the internet and social media. This sees technology and the likes of podcasts complementing, rather than replacing the face-to-face physical approach. Meanwhile, McDonald’s ‘Hamburger University’, as it is affectionately known, was the first restaurant company to develop a global training centre and receives college credit recommendations from the American Council on Education (ACE). It has 19 full-time professors and is backed up by seven total Hamburger University campuses around the world, all of which apply the ‘Global Learning Approach’, which sees training materials and tools integrated into a variety of different languages and cultures. Corporate Universities are specialist by nature and focused exclusively on the needs of their own organisations and sectors. In short, they develop the global managers and leaders they need, while at the same time ensuring such future leaders’ creative, adaptable and innovative credentials are not just retained but celebrated and developed. In many ways it’s hard to see how traditional graduate business schools can compete.
Photo by RAStudio
Photo by discpicture
A Case Study in the Strategic Application of the Corporate University Management Concept By Richard Dealtry, Chairman, The Global Association of Corporate Universities & Academies (G-ACUA). In 2009 we received a request from an international IT Systems and Consulting Group to assist them in setting up a Corporate University. The company had three main strands of business at national level: Financial and Banking Systems, Enterprise Support Systems and IT Services. From a phase of high growth on an exponential trend, it had quite suddenly plateaued and they had experienced a sudden decline in performance delivery. They knew that something had to change. They had to learn some new management tricks; but what were they? Our corporate university action learninginspired process proposal was accepted and delivered in three formal 1 week briefing sessions with 5 week intervals. During these intervals the managers used the iPCo Corporate University Blueprint, the main toolkit for the process, in the design and development stage. They also used this interval time to carry out a diagnostic appreciation of their organisation’s new learning needs using dedicated literature resources and management models provided by G-ACUA. A large number of barriers to development and opportunities for growth were identified. They stated “We cannot do all these things at once. We have such a lot of new things to learn and do!”
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The company’s 132 directors and managers then worked in a number of combined functional and divisionally-based teams, thrashing out the main issues around these developmental possibilities and refining and proposing priorities which were presented to the whole company in a plenary session. These priorities become the core projects for development, with skills and competency training and development being the main thrust, closely followed by changes to the structure and processes in the organisation. The acquisition and application of new technology was seen as important but did not merit the same level of prioritisation.
The Corporate University Blueprint can be applied in many important organisational capability and capacity building situations. In no time at all the company was reinventing itself in many different ways and at different levels. It became a hive of activity, bursting out with new ideas. This informal process for the development of these activities became formalised and a corporate university governance structure was established to maintain the overall direction, continuing intelligence gathering and the projects’ timing and resourcing.
This flexible work-based process has laid the dynamic framework for the G-ACUA Corporate University Management Programme which is now available as an online programme at www.g-acua.org. Every company is different and faces new challenges and opportunities every day, but with the right corporate university management process inspiring a new level of intellectual space, mixed with a dash of trust and confidence in freedom to manage, the new era of management can be the most exciting and profitable yet. The Corporate University Blueprint can be applied in many important organisational capability and capacity building situations; some examples are: • Division and subsidiary re-generation projects • Business turnaround & recovery situations • Innovation process management • Customer development management • Empirical research frameworks for policy formulation • Best practice green management and many other important projects where intensive new learning and knowledge is required. For more information, please visit www.g-acua.org.
The Seven Pillars of the Corporate University
By Kenneth Fee, Director, Learnforever Ltd. Cynics sometimes say that a corporate university is just a renaming of the old, centralised training function – old wine in new bottles. There may be enough poor implementations to lend some credence to this theory, but it really doesn’t do justice to the many successful corporate universities that have been operating since as far back as the 1950s, and now number over 2,000 worldwide. The cynics might be better asking why their organisation doesn’t have one. Corporate universities come in many shapes and sizes, but in this article I want to consider the critical success factors for any corporate university that aims to develop learning and knowledge for the organisation, its individual employees, and perhaps a broader community (suppliers, partners, customers, shareholders, employees’ families, etc). And to do so with the same levels of professionalism you would find in a respected academic university. Collectively, I refer to these success factors as the seven pillars of the corporate university.
The Seven Pillars of the Corporate University 1. Strategy setting 2. Project planning 3. Branding 4. Infrastructure 5. Curriculum
Photo by Konstantin L
6. Learning programmes & support 7. Assessment and accreditation The imagery of pillars is deliberate – these are the uprights that support the overall structure. Let’s look at each of these pillars in turn.
Strategy Setting The first thing you need to ask yourself, when considering a corporate university for your organisation, is why? What do you need it for, what will it do, what will be its aims and how should they be expressed? These questions should lead you to the formulation of a strategy. Without that strategy as your first pillar, the corporate university is bound to collapse. You need to be clear about your values and how this initiative projects them and sustains them; you need to be clear where you’re going with it, articulating this through a mission statement; and you need to align your strategy with your existing business strategies.
You need to be clear about your values and how this initiative projects them and sustains them. The process of setting a strategy is an opportunity to involve as many people as possible, in order that they can better understand the need, and begin to feel a part of it. It is a way of making public what this is all about, and by doing so, ensuring from the outset that you remain true to your values and on-track to achieve your aims and objectives. And it focuses you on showing how your corporate university adds value.
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Project Planning Setting up and establishing a corporate university is a project; running it, once it is established, may also be a project, or a series of projects, but our initial concern is about the setting up. Putting a project plan in place, and managing that plan, is our second pillar. Your project plan should take account of your available personnel and resources, and how you are going to deploy them. It should follow a series of carefully determined milestones that mark the way along the setup timetable. There should be an evaluation of the risk attached to any of the milestones slipping, and contingency plans for how to get back on track should anything go awry. A project plan is a means of sharing information about progress with your stakeholders, and helps to maintain everyone’s confidence in the project.
Branding The issue of branding can easily be underestimated. It’s about a lot more than just assigning a name and designing a logo.
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There is an opportunity here to build on your corporate brand and its values, and to position learning in such a way that it is understood as part of the strategic purpose of the organisation. An important part of the concept of creating a corporate university is its symbolism, and the inspirational effect it has on its learners and contributors – the brand is critical to this.
stationery, print-based publicity materials, online and in all other media you use. The brand should feature in everything associated with it, from application forms to certificates. It should elevate the profile of the corporate university, and of learning in general.
Putting in place a university infrastructure is no small task.
Putting in place a university infrastructure is no small task. You are going to need a lot of systems and procedures, and the trick will be to keep them simple and intuitive, and to avoid becoming unnecessarily bureaucratic. Your infrastructure will have to serve the needs of your total potential learner population, and the demands of all the activities you plan to include, from courses, to other learning opportunities, to research and development.
The corporate university can become a vehicle for engendering a learning culture and growing a learning organisation; it can articulate an educational purpose for the business; and it can help make the organisation an attractive place to work, draw in the best talent, and foster their ongoing development. It is the brand that pulls all this together. Your brand should link naturally with your corporate brand, following the same visual style. You should have appropriate colours, livery, a logotype, and all the merchandise that identifies the corporate university in
Infrastructure
You need to have a budget, and a resourcing plan, and all the management planning you would need for any comparable initiative. You will need to be clear about the learning modes you plan to offer and how they will integrate. You will need to set up learner support systems, both for traditional, faceto-face learning and for online learning. And
Photo by FreshPaint
you will need to have documentation, such as an application process. There will be much more, too: you may not need to replicate the colossal infrastructure of an academic university, but you will need a lot of the same things that they have.
Curriculum Developing a curriculum is the fifth pillar. You need to define the scope of what your university will teach (and research); you need to define a range of courses (and other learning initiatives), their learner objectives, and how they will be provided. This doesn’t mean you need to dot every i and cross every t at the outset, but you need to put a number of initial courses, perhaps flagship courses, in place: exemplars of what is to follow. And it helps to have a clear idea of the limits of your curriculum, although it may be comforting to bear in mind that you can always adjust these parameters later. A classification of the subject range that will be offered can help clarify people’s understanding of the scope of the university, even if the detailed content is not yet in place.
Learning Programmes & Support What sort of learning will your corporate university provide? You need to consider not just the content you wish to offer, but the form it will take. As a minimum, I believe a corporate university should include: facilities for face-to-face courses, which gives it a physical presence; a digital presence, including online courses and online learning resources; links to other learning approaches, especially coaching and work-based learning; and potential for more, such as innovative learning methods.
A lot of thought needs to go into how learners will be supported. A lot of thought needs to go into how learners will be supported. You can commission content and put in place many digital resources, but you also need to have arrangements for learner support, a pool of tutors, coaches and other support roles; and managers need to understand their support role too. Without a strong network
of people who can support learners, their learning will be compromised, and the success of the university will be jeopardised.
Assessment and Accreditation Lastly, you need to put arrangements in place for assessment and accreditation. This is important to build partnerships to underscore your university’s sustainability, to provide clear success measures, and to help motivate learners. You need links with professional bodies and their continuous professional development programmes, and links with an academic institution to confer degrees and other awards. This is the seventh pillar. Taken together, these seven pillars provide a support structure to underpin whatever corporate university you wish to build, and, if properly implemented, will not only guarantee stability but also provide a platform for future growth and development, and the flourishing of learning. And therein lie the beginnings of wisdom. For more information please visit www. learnforever.co.uk
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The World’s Premier IFCs are a Force for Good A raft of recent negative and subjective media reports invites an equally robust defence of IFCs and their merit-worthy credentials. Such jurisdictions represent a perfectly legal home for legitimately acquired money and far from operating in a shady fashion, a select band of premium IFCs worldwide have, in fact, embraced the prevailing international culture of compliance. Despite being under renewed and unprecedented assault recently in respect of their integrity, when you look at how and why the leading IFCs are actually used in practice, one would be hard pushed to view them as anything other than a force for good. For example, they exercise a pivotal role in joint venture structuring, afford easy access to regulators and key financial markets, while they are synonymous with low cost and ease of administration.
When you look at how and why the leading IFCs are actually used in practice... one would be hard pushed to view them as anything other than a force for good. There is no doubt that the more stringent regulatory landscape governing the international financial sector has begun to effect change. Yet, what may be coming as something of a surprise to the collective of big hitting onshore communities looking to get their hands on what they perceive to be uncollected revenue, is that this call to arms has found many IFCs tarnished with the ‘tax haven’ tag, exceeding expectations and stepping up to the plate in no uncertain terms. Successive studies have shown that despite onshore regimes’ assertions to the contrary, most offshore financial centres are far from lax on the regulatory front. In fact, the most high profile fraud cases have tended to be concentrated onshore. Moreover, against conventional wisdom, supposed tax havens have been found to be more diligent in complying with ‘Know Your Customer’ guidelines than their onshore counterparts.
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The Marshall Islands Corporate Registry
International Registries (U.K.) Limited
in affiliation with the Marshall Islands Maritime & Corporate Administrators
tel: +44 20 7638 4748 | london@register-iri.com
The new requirements are, however, an opportunity to demonstrate to the world that such IFCs offer much more than tax mitigation opportunities, being at the same time; integral cogs in the process of channelling FDI to where it’s most needed; global hubs of specialised expertise and; jurisdictions keen to embrace an enhanced culture of compliance to ensure that reputations unfairly sullied, are rightfully restored.
Such jurisdictions represent a perfectly legal home for legitimately acquired money. Those jurisdictions unable or unwilling to meet the new criteria, or diversify as necessary, will naturally fall by the wayside. Yet, those IFCs profiled here most certainly do not fall into this category and, if allowed to do so, can play an invaluable role in the ongoing drive to restore healthy global financial markets marked by fairness responsibility and effectively regulation. As part of this, they are ready to embrace the G8 Lough Erne Declaration and assist in furthering its aims of advancing trade, ensuring tax compliance and promoting greater transparency.
www.register-iri.com
The BVI: The Highest Standards of Business Excellence BVI Financial Services Commission
Elise Donovan, Executive Director, BVI International Finance Centre. In the increasingly competitive global market for financial services, the British Virgin Islands (BVI) continues to attract significant international and cross-border business. This is due to the range of professional services the centre offers, the internationally recognised standards of legislation, and the breadth and depth of firms operating in the jurisdiction. The territory has strengthened relationships and business flows with key markets in Asia, such as Hong Kong and mainland China, fast-developing economies in South America, and markets across the Middle East, among others. The BVI has pro-actively sought to reach out to investors and the wider business community in these markets and others around the world, emphasising the significant benefits the BVI offers them and how it can help them meet their investment and trading aspirations. The BVI is committed to offering the very best service proposition, and constantly looks to differentiate itself in the market. The Premier and Minister for Finance of the
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BVI, Dr. Orlando Smith, has made it clear the Government will aim to set the territory apart from its competitors through the development of innovative new offerings and by adhering to international standards of regulation.
What separates the BVI apart? The BVI offers tax neutrality, political stability and a legal system that is at once familiar to much of the developed world but also uniquely pragmatic and practical, and all backed by an efficient and respected court structure.
Service firms on the islands have been involved in significant deals in 2013. These qualities have led to the BVI becoming one of the world’s leading jurisdictions for company incorporation, with close to 500,000 active companies registered. Such structures, which have found significant use for those investing in emerging markets in particular, act as highly efficient conduits for global trade and cross-border capital flows,
thanks largely to the jurisdictional neutrality of the BVI. The BVI Business Companies Act 2004 has received highly positive reviews from global legal practitioners for its flexibility. Five different types of companies can be incorporated under the Act. In particular, investors have welcomed the introduction of segregated portfolio companies, as these allow umbrella funds to be set up with limited liability between share classes, thus avoiding potential cross-class liability issues. The Act also includes statutory merger and consolidation provisions, which make it possible for two entities (only one of which need be a BVI entity, provided certain conditions exist), to merge, with all the assets of both entities consolidated into the surviving entity. The inherent flexibility of the BVI’s businesses mean not only are they attractive to investors, many also remain at the centre of global trade. Indeed, the BVI’s role in highprofile, high-value transactions continues to be strong. Service firms on the islands have been involved in significant deals in 2013 and the BVI is confident that the jurisdiction will have a very positive year ahead.
One of the world’s largest transactions in 2012 At the end of 2012, for instance, local law firm Conyers Dill & Pearman was involved in one of the world’s largest transactions - advising the consortium of Alfa Group, Access Industries and Renova (AAR) on the sale to Russia’s Rosneft of its 50% stake in TNK-BP, its joint venture with the UK oil giant BP. The total value of the deal was $55bn. TNK-BP, Russia’s third-largest oil producer, is owned by a holding structure established in the BVI, reflecting the jurisdiction’s popularity as a domicile for international joint ventures. The acquisition of the 50% stake of TNK-BP by Rosneft will result in the latter becoming one of the world’s largest oil producers, matching the output of US giant Exxon.
Many industry leaders have noted that no other corporate vehicle has had quite the impact in Asia as the BVI Business Company (BC). Another leading local law firm, Harneys, also had a successful start to the year. The firm advised Kaisa Property Group (Hong Kong) in relation to its issue of $500m senior notes; it advised Shimao Property Group (Hong Kong) in a similar issue valued at $800m. Harneys also advised on a major transaction for Russia’s largest mobile communications retailer, Euroset. The firm acted as BVI and Cyprus law counsel on the sale and purchase of 50.1% of the shares in Euroset in a $1.2bn sale transaction which closed in December last year. Euroset operates over 5,000 stores, one of the largest such networks in the world. These deals are evidence of a strong, vibrant and world class business environment in the BVI, and a strong endorsement for the island’s business services and its role in the global economy.
Emerging Economies The deals also illustrate just how popular the BVI is as a jurisdiction for investors from markets such as China and other BRIC countries. Many industry leaders have noted that no other corporate vehicle has had quite the impact in Asia as the BVI Business Company (BC), which in China is simply referred to as ‘a BVI’. It is standard practice for the expanding class of high net worth individuals, businesses and even governments of the BRIC countries to acquire BVI BCs for a multiplicity of investing and other cross-border transactions. The BVI Commercial Court
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BVI BCs are an integral part of business in these jurisdictions to such an extent that, for example, the BVI has the second largest foreign direct investment in China after Hong Kong. China is experiencing economic growth that outpaces global averages and it is investing in mineral rich countries to feed its need for more resources. It uses the BVI BC to make many of these investments. BVI trusts and fiduciary services and funds and investment business are also popular in the BRIC countries for wealth management, investing, structuring ownership and control, and for planning for the succession of assets. By using BVI structures globally that are easy-to-use, flexible, widely-accepted and cost-competitive, the BRIC countries are able to stimulate their economic growth and increase wealth creation. Conversely, the BVI has also benefited from their growth; it shares a symbiotic relationship with the BRIC countries.
Looking to the future The BVI has a world-class brand and it offers a very attractive business model. Its services are provided in a secure, safe, well-regulated and business friendly environment. It has a proven track record of providing excellence in delivery, exemplary regulatory standards, innovative legislation, state-of-the-art technology, and its firms and agencies are run and staffed by experienced and highly qualified professionals.
The BVI plays a significant role in the global economy.
provides advantages and value to businesses, individuals and countries to successfully navigate the global landscape and maximise their economic growth and increase their wealth potential. The BVI plays a significant role in the global economy. It recognises that regulatory standards must be adhered to across the globe. It is in that spirit that the BVI will continue to cooperate with international partners and enhance the quality of its regulatory regime. The BVI is proud of its part in the global economy and believes that good regulation is good business.
These are the strengths and advantages that the BVI provide and is why top-tier firms are based in - and do business with - the BVI. Evidence points to a strong correlation between successful economic growth and doing business with the BVI. The jurisdiction Elise Donovan, Executive Director, BVI IFC
Best-practice regulation Offshore centres have been in the media and political spotlight over the past few months, brought to the public’s attention by a political agenda focused on global taxation and cross-border finance. The BVI has welcomed this high-level discussion. The jurisdiction has seen it as an opportunity to put the record straight on a number of key issues and to show the world that the BVI is a progressive, professional financial centre offering a broad range of services and products underpinned by some of the toughest regulation in the world. For well over a decade, the BVI has implemented the highest standards of transparency, accountability and information exchange, as set out by the OECD, the IMF and other supranational and regulatory bodies. The BVI subscribes to the OGBS Statement of Best Practice on Trust and Corporate Service Providers and has, since 1990, been regulating its corporate service providers. In 2002, the BVI signed on to the Organisation for Economic Co-operation and Development (OECD) principles of transparency, accountability and information exchange as they relate to tax matters. As a member of the OECD Global Forum, the jurisdiction has signed 24 tax information exchange agreements (TIEAs) and continues to negotiate with more than ten other countries. The first TIEA BVI signed was in 2002 with the USA. The BVI shares information when legitimate requests are made by the relevant treaty partners. Perhaps most significantly, the BVI is currently engaged in progressive discussions around the Foreign Account Tax Compliance Act (FATCA) – the jurisdiction has announced a commitment to concluding FATCA negotiations with the US Treasury and entering into a similar arrangement with the UK Government.
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Photo by Michael Byrne
BVI: Part of the Solution The BVI, led by the Premier and Minister of Finance of the British Virgin Islands, Dr. Orlando Smith has lent its support to the UK government’s global agenda on tax, transparency and trade, and agreed to play an active part in the new pilot initiative of multilateral automatic tax information exchange launched, to prepare national action plans on Beneficial Ownership to meet the FATF standards; and to commit to joining the Multilateral Convention on Mutual Administrative Assistance on Tax Matters. In addition, the BVI has committed to the FATCA Model I Inter-Governmental agreement in respect of its relations with the US authorities, is an active participant in the OECD Global Forum and has enjoyed OECD white list status for many years, as well as having 24 TIEAs and counting. It’s fair to say that the BVI is resoundingly “not guilty” when it comes to adhering to both the spirit and the letter of the international law. It steadfastly operates in accordance with the principles of confidentiality, rather than secrecy, such that it’s hard to see how the recent unparalleled criticisms levelled at the jurisdiction have any foundation, especially
given that much of the negative press is on the back of illicitly obtained information. In fact, the BVI has gone significantly over and above the call of duty on the compliance front to ensure the maintenance of its international credibility and reputation for professionalism.
The BVI...justifiably expects to be given a fair hearing. Such an approach testifies to the jurisdiction’s willingness to be part of any solution, rather than the problem and although this has always been the case, it has all too often gone unrecognised. With over 2400 investment funds – public, private and professional – and almost 500,000 companies registered, the BVI understands it will be subject to close scrutiny, yet it justifiably expects to be given a fair hearing. Moreover, given that the BVI already has stronger financial regulation and rules in place regarding beneficial ownership than many G8 countries, it could be forgiven for feeling rather hard done by.
The BVI has for some time now factored strongly in the minds and plans of the Chinese market and backs this up with regular on the ground promotional activity and relationship building in the region. The BVI Business Company (BC) is a very popular instrument that predominates in China and beyond and which is used for a range of investing and cross border transactions. Meanwhile, BVI trusts have for some time dominated in the wider Asia region. Factors such as BVI’s political and economic stability, its British Overseas Territory status, its legal system based on English law, the absence of exchange controls, the well respected regulatory framework and court system, extensive skilled labour pool of qualified professionals, forward thinking and business-enabling legislation and strong pedigree of the public and private sectors working closely and efficiently together towards a common goal all serve to make it a highly attractive proposition for the new wave of HNWIs coming out of locations such as China.
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photo CC by eutrophication&hypoxia
Mauritius This dynamic and innovative IFC is well respected on the international scene and continues to go from strength to strength as it consolidates its strategic location between Asia and Africa. Mauritius enjoys a growing reputation as a stable and trustworthy investment gateway to Africa and is capitalising on its prime strategic location to become, in particular, a bridge between Asian and African markets. This state of affairs is supported by its network of Investment Promotion and Protection Agreements with African states. These complement the existing Double Taxation Avoidance Agreements (DTAAs) by creating favourable conditions for investors. While no two agreements are entirely the same, each essentially provides protection in respect of profits, interest, dividends, fees, capital gains and royalties. By protecting foreign investments into certain key nations, this acts to increase the flow of capital, whilst providing spinoff skilled job opportunities from the new international firms that are looking to utilise Mauritius as a centre for regional treasury and headquarter administration. Perhaps the key development at present, however, is the great interest being shown by Chinese financial institutions to use the jurisdiction as the Renminbi Centre for Africa. Its status as a regional treasury
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centre and credentials of trading with other African countries make Mauritius an ideal candidate as an RMB centre, whilst added to this is its dual English/French language set up and absence of currency controls. Yuan-denominated settlement with Mauritius currently stands at 2.3 billion yuan as part of an increasing trend for both Chinese and non-Chinese businesses to trade in RMB. With Africa offering fertile market opportunities for RMB, the internationalisation of it is likely to be only a matter of time.
Perhaps the key development at present is the great interest being shown by Chinese financial institutions to use the jurisdiction as the Renminbi Centre for Africa. The benefits of RMB are many. For example, direct settlement in RMB results in a reduction in transactions and associated risk. Meanwhile, borrowing costs are reduced due to RMB’s low interest regime, while currency appreciation benefits investors. In addition, risk management strategies are supported
by way of RMB transactions leading to a diversification of the currency base. A high volume of product innovations and legislative developments are a testament to Mauritius’ drive to distinguish itself via high end and value added services in banking, global business, insurance and capital markets. Moreover, Mauritius’ advanced state of compliance and its continued status as a pivotal investment springboard into the Indian sub-continent further recommend it to investors. Meanwhile, following a recent visit the IMF complimented Mauritius on its prudent macro-economic policies which have resulted in good fiscal and inflation outcomes. New improvements to legislation and regulation surrounding GBC Category 1 companies, foundations, limited partnerships, LLPs and private pension funds are set to provide clarification to investors and cement Mauritius’ international reputation further. The LLP legislation in particular should act to see many more international service providers such as tax advisors and law firms setting up shop. In addition, Mauritius is looking to build upon its position as a domicile for some 800 registered global funds by setting up a regime for non-treaty based funds. This will increase its competitiveness as a fund destination able to attract funds which can
photo CC by austinevan
effectively target any country and afford it the opportunity to sit alongside other IFCs which already have such exempt fund structures in operation. Mauritius also enjoys a high standing in respect of compliance. For example, on the Peer Review front it is at a much more advanced stage than many other jurisdictions. In respect of its high profile investment relationship with India, which has been pivotal in directing FDI towards India and thereby contributed significantly to that country’s development, this has matured to a stage whereby a TIEA will in the near future come into force, while a new DTAA between the two countries is being worked on. This is set to enhance cooperation between the two jurisdictions and assuage any fears from the international community about suspicious activity in the form of round-tripping, in the process attracting more business from previously hesitant clients.
Mauritius is progressing things on a number of other international fronts as part of its commitment to follow international standards on information exchange. In addition, Mauritius is progressing things on a number of other international fronts, to encompass discussions with the US re FATCA, as part of its commitment to follow
Ebene Cyber City, Mauritius.
international standards on information exchange. A commitment to transparency is also evidenced in Mauritius having established institutions such as the Financial Intelligence Unit (FIU), Financial Services Commission (FSC) and the Independent Commission against Corruption, as well as being a signatory to the IOSCO Multilateral Memorandum of Understanding (MoU).
than a 15% corporate tax rate, and as little as 3% on overseas profits. Moreover there are no withholding taxes on dividends or other payments issued to non-resident shareholders. GBC 1s are also now entitled to carry on business within Mauritius itself. It is worth noting that new tax residency requirements are set to come into force soon as part of a new ‘commercial substance’ test.
There are two clear categories of Global Business Company (GBC) for international investors: GBC1s and GBC2s.
GBC 2s, meanwhile, can be 100% foreign owned, have no minimum capital requirements and are not subject to tax on income derived from outside Mauritius, although this means they cannot make use of the DTA network. In addition, they must state their business objective to the Mauritius FSC and provide details of the beneficial owner, as well as an annual financial summary.
GBC 1s are considered resident for tax purposes and so enjoy exemption from stamp duty, land transfer tax and capital gains taxes. They also benefit from foreign tax credits and the network of DTAs meaning they pay no more
photo CC by ashok prabhakaran
Port Louis, Mauritius
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Samoa’s trailblazing Special Purpose International Company (SPIC) legislation has addressed the quandary of how to introduce the benefits of the civil law concept of the Foundation into common law arenas by essentially being a hybrid between a company, complete with directors; and a foundation with no shareholders and the concept of Founder’s rights. It provides an alternative to trusts, which being based on the principles of equity where assets are held for beneficiaries, are not always understood by the civil law Chinese market. The potential uses of a SPIC are many. For example, it can be used to take temporary positions in longer term corporate structures and transactions as a vehicle without beneficial ownership, thereby avoiding all of the tax and audit consequences which come with that. It is also an ideal means of dedicating money for charitable purposes in corporate form. Furthermore, Samoa can point to strength in depth in terms of its portfolio of international financial services, as illustrated by its thriving banking and trust management sectors and comprehensive range of corporate vehicles: companies; insurance products; segregated funds; and a public, private or professional mutual fund offering
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Photo by Valery Shanin
Samoa
Samoa enjoys close ties with the Chinese market, which increasingly recognises the cross-border structuring, wealth planning and asset protection solutions the jurisdiction provides. This relationship received a boost at the end of 2011 when Samoa moved west across the international dateline to align itself with the working week of its principal trading partners in the
The potential uses of a Special Purpose International Company (SPIC) are many. region. In addition, a Samoan embassy in Beijing opened its doors in 2010, allowing Chinese investors access to straightforward registration and notarisation of documents, as well as the permitting of incorporation in Chinese. Meanwhile, the relationship between the two countries has been further cemented via the ongoing success of Samoa’s rugby sevens side at the world-renowned Hong Kong Sevens tournament. This has raised Samoa’s international profile and enabled it to further develop relations with the international financial community and investors based in the all important Chinese market.
Samoa’s international reputation is backed up by solid regulatory credentials and a proactive stance regarding compliance. It was in fact the first Pacific island jurisdiction to be included on the OECD’s white list as far back as 2009. In addition, it is a key player in a number of international regulatory initiatives and firmly sits in the ‘competent’ camp in the eyes of the OECD. The wellrespected Samoa International Finance Centre (SIFA) acts as the one stop shop for prospective investors, performing both a regulatory and promotional role. It is acknowledged within the jurisdiction that constant innovation in legislation, service provision and its portfolio of products is essential to maintain Samoa’s status as a distinguished player in the global IFC sector, particularly in light of the unprecedented criticisms currently being levelled at any jurisdiction which plays host to any level of financial impropriety on the part of service providers operating there. To this end, on top of the groundbreaking new SPIC legislation which serves a real need, Samoa can also point to other developments such as the Electronic Transactions Bill, which allows for the electronic registration of companies, as well as the recent introduction of a 4G network to meet an anticipated upturn in demand for mobile broadband services.
Photo by Holger Wulschlaeger
Cayman = Captive Insurance A booming Cayman captive market saw assets under management rise by 51 per cent in 2012 from a year earlier to stand at a record breaking $88.1 billion, while total premiums written by captives were reported at US$11.8 billion. Meanwhile, the Cayman Islands Monetary Authority (CIMA) reported that it received 67 applications for new licenses in 2012. New formations came from various sectors including life reinsurance, P&C reinsurance, manufacturing and technology, as well as the healthcare sector in the form of the medical malpractice product line most commonly associated with the jurisdiction, which along with workers’ compensation is likely to continue to constitute the bedrock of business going forwards, alongside other new innovative lines. A number of group captives were also formed as segregated portfolio companies. In total Cayman can lay claim to some 1500 entities, including 780 segregated portfolios. Rob Leadbetter, Chairman of the Insurance Managers Association of Cayman (IMAC) is not surprised at what at first glance appear to be a remarkable set of statistics. He puts Cayman’s success down to the building up of core competencies over decades in respect of the captive insurance business, as well as the fact that the industry and the regulator work in concert towards a common goal on the back of a harmonised regulatory environment and sensible legislation.
In short, when it comes to Captive Insurance, for good reason is the Cayman Islands widely considered to be the leading jurisdiction worldwide. It is able to point to an unparalleled skilled elite of independent insurance management companies, at the forefront of which can be found Kensington Management Ltd under the stewardship of the highly experienced Mike Gibbs. Moreover, an extensive support industry, access to reinsurance markets in major insurance centres, its status as a member of IOSCO and full ‘regulator-to-regulator’ disclosure with all IOSCO regulators, not to mention representation on the IAIS board, add further weight to Cayman’s status as the global hub for captives.
When it comes to Captive Insurance, for good reason is the Cayman Islands widely considered to be the leading jurisdiction worldwide. In addition, ground breaking new legislation in the form of the ‘New Insurance Law’ has succeeded in retaining Cayman’s approach
of regulating based on the nature, scale and scope of the risk, rather than high cost umbrella regulation with its unwelcome side effect of stifling growth. It has also led to the abolition of the distinction between unrestricted and restricted Class B licences, the provision of two new classes of insurance licence, the requirement for more comprehensive annual return reporting requirements, as well as clarifying and reinforcing penalties for non-compliance. Captives’ core value proposition is the provision of stability to their parents, allowing for simplification of insurance budgeting, as well as protection from rate shocks by not having to be reliant on the vagaries of the commercial market. In addition, they offer underwriting advantages and scope for strengthening and monitoring the enterprise risk management (ERM) strategies of their parents. Assisted by its prime location betwixt North and Latin America, the Cayman captive sector has been very successful in communicating all of these advantages to a growing and diversified client base. With the new insurance law now in place, which embraces the concept of ‘proportionality’ and addresses entities based on the nature, scale and scope of risk, the future looks bright indeed.
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New Cayman Islands Insurance Law Comes Into Force The Cayman Islands Insurance Law 2010 came into force 1 November 2012 after an order made in Cabinet earlier in the week. The latest amendments to the law were based on recommendations from a public/private sector Insurance Working Group and the International Monetary Fund. The aims of the law were to clearly differentiate between the domestic and international insurance markets in the Cayman Islands and to regulate each in accordance with its requirements, to strengthen legislation to protect Cayman residents, to bring the law, formally, into line with international standards, and to open new markets for new business sectors. The new Law achieves these objectives by positioning the Cayman Islands to take advantage of new opportunities in the insurance industry, in particular the growing insurance-linked securities (ILS) and the reinsurance sectors. This has been accomplished through addressing both the regulatory function and streamlining immigration policy, so as to increase physical presence in the Cayman Islands. By taking into consideration the International Monetary Fund recommendations, this new law brings Cayman to the fore in terms of international regulatory requirements for insurance by clarifying and in some cases expanding the Cayman Islands Monetary Authority’s scope of supervision and its powers of enforcement, while still maintaining the riskbased philosophy that has made Cayman a successful domicile for insurance. The Cayman Islands Insurance Law 2010 clearly delineates four separate classes of insurance and has specific regulations for each class.
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The Class A licence, for retail insurers in the Cayman Islands domestic market, will see provisions for increased protection for domestic policy holders by requiring these insurers to have Cayman Islands Monetary Authority approval in order to transfer or amalgamate all or part of the insurers’ longterm business. It empowers CIMA to approve or deny requests by the insurer for portfolio transfers and amalgamation, between companies.
The (New) Insurance Law clearly delineates four separate classes of insurance and has specific regulations for each class. The current Class B licence, which is now dedicated to captives, has been split into three further sub-categories, each distinguished by the proportion of netpremiums written which originate from the insurer’s related business (Class B(i) 95%+ related business, Class B(ii) 50%+ related business and Class B(iii)50%related business). Capital requirements will vary depending on the sub-class of the Class B licensee. This sub-division brings more clarity to this category and provides flexibility to the type of business a Class B licensee can underwrite. The Class C licence is a new Class and is dedicated to reinsurance arrangements financed through the issuance of cat bonds and similar instruments. The law recognises the structured nature of these arrangements, how they function in practice and what all participants, including sponsors and
investors, expect from such transactions. For example, the description of the Class C insurer specifically references such essential concepts as “limited recourse” and funding through the issuance of bonds or other instruments. Class D is specifically for traditional commercial re/insurers and has been created to support the jurisdiction’s objective of attracting reinsurers to the islands. As the Cayman Islands is acknowledged as the leading offshore domicile for hedge funds, there is a natural market for this business and the Government has committed to facilitating reinsurance set-ups in many respects and is actively engaging with industry in this regard. These amendments include the availability of ten-year work permits for executives and managers in the reinsurance industry and free work permits for various categories of administrative staff for their first five years of residence in the Islands. In addition, Permanent Residence with the Right to Work is now available to approved persons who make a substantial investment in a home or other developed real estate. Among other amendments contained in the law is a strengthening of protection for whistle-blowing insurance managers and auditors. The introduction of this law is welcomed by the Cayman insurance industry as it underscores the pro-business nature of the jurisdiction for its historic captive insurance base and enhances its attractiveness for ILS vehicles and the reinsurance sector
photo CC by James Willamor George Town, Grand Cayman.
Captive Benefits coverage; there is also the opportunity to reduce costs by combining two or more lines of risk.
Cost reductions - reducing expenses such as administration and settlement of claims, loss control expenses, various state and federal taxes, brokerage commissions, and other acquisition costs and consulting fees.
Diversification into a profit centre diversifying into open market insurance operations and operating as a separate commercial profit centre, including any profits generated from third party unrelated business.
Risk retention, risk management and loss control - achieving lower premium by retaining its own risk when a company has a better loss history than its industry average. Cash flow benefits - earning investment income and using more flexible premium payment plans. Access to the reinsurance market - accessing directly the reinsurance market which can be less expensive than conventional direct excess and umbrella
“Unbundling” of services unbundling technical services provided by its conventional insurer, such as separating risk control and claim handling services from the actual purchase of insurance cover. Reduction of government regulations and restrictions - domiciling in a professional, yet flexible regulatory environment, widening investment opportunities and the facilitation of legitimate international movement of funds.
Tax minimisation or deferral - creating the potential to minimise or defer tax payments through properly structured and adequately capitalised captive insurance arrangements. The Insurance Managers Association of Cayman (IMAC) is a non-profit organisation run by the insurance managers of the Cayman Islands. IMAC’s membership includes Associate and Overseas members, comprising not only the Captive Insurance Companies in the Cayman Islands but also the service providers that support the industry both here and in other jurisdictions. The aim of IMAC is to act both as regulatory liaison with the Cayman Islands Government and to promote the Cayman Islands as the domicile of choice for Captive Insurance Companies. For more information please visit www.imac.ky
photo CC by Katie Thebeau
Insuring the uninsurable - provising of coverage either not readily available in the commercial market or priced prohibitively.
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Reinsurer Southport Re Domiciles in Cayman By Michael Klein, Caymanian Compass. Southport Re (Cayman) Ltd, the reinsurance subsidiary of New York City-based private equity firm Southport Lane, has become the first insurer in the Cayman Islands to take advantage of the jurisdiction’s recently amended Insurance Law by changing its company classification. Southport Re migrated from Cayman’s Class B captive license to its new Class D openmarket reinsurer license. Both classes of insurer are fully regulated by the Cayman Islands Monetary Authority, but, as a Class D reinsurer, Southport Re is now required to operate an office in Cayman.
The move confirms Southport Re’s intention of expanding its insurance and reinsurance platform.
business. The common-sense approach to regulation, and the knowledge and experience of CIMA staff combined with a great service sector, makes the Cayman Islands an ideal location for us.” The move confirms Southport Re’s intention of expanding its insurance and reinsurance platform. Last year, Southport Re parent Southport Lane acquired Redwood Reinsurance SPC, Ltd, a Cayman Islandsbased reinsurer that provides treaty reinsurance for workers compensation and general liability insurance in the US. And in March of this year the private equity and asset manager completed the acquisition of Dallas National Insurance Company, a Texas-based property and casualty insurer specialising in general liability and workers’ compensation.
“Southport Re is a significant addition to our financial services community,” said Dax Basdeo, chief officer in the Ministry for Financial Services. “Southport Re’s decision to migrate from a Class B to a Class D insurer underscores our strength and competitiveness in our reinsurance sector”. Other reinsurers domiciled in the Cayman Islands as Class D reinsurers include Greenlight Re, the reinsurance firm backed by hedge fund Greenlight Capital. CIMA Director Cindy Scotland said the amended Insurance Law enhances Cayman’s capability to effectively regulate the risks inherent to different licensees in the insurance market. “This is a key reason for differentiating between captives and reinsurers,” she explained.
Under the previous classification as a captive insurance vehicle, Southport Re could be managed by an administrator without a physical presence on island. Moving to a Class D reinsurer shows that Southport Re’s owner, the Southport Lane private equity and asset management firm, is serious about growing the contribution reinsurance makes to its balance sheet and delivering larger returns from reinsurance to its investors. Glenn Weber, CEO of Southport Re, said, “Southport Re continues to view Cayman as an attractive location for our reinsurance Southport Re (Cayman) Ltd is the reinsurance subsidiary of New York City-based private equity firm Southport Lane.
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Cayman’s financial sector has a clear and efficient system for releasing information, according to a report published by the OECD last week. In the second phase of the OECD’s Global Forum Review of the jurisdiction’s legal and regulatory systems, they were described as “transparent and robust”. With 30 tax exchange deals signed, 25 of which are in place, and recommendations from the phase one review largely implemented, the report was welcomed by local officials at a time when criticism of this jurisdiction and other offshore centres as places that are still offering shelter to tax dodgers continues. The OECD review has, however, recommended that local authorities monitor information exchange to ensure the parties concerned are complying with the laws that are now in place. The Global Forum phase two assessment was undertaken between July 2012 and January 2013 and the findings have now been published on the OECD website. The review said Cayman has a clear and coherent communication system, and noted the quality of its cooperation and speed in response to exchange of information requests. The report also found Cayman’s
Photo by Sergey Nivens
Cayman Islands Gets OECD Thumbs Up exchange process was well organised for handling requests and that the jurisdiction is well resourced with knowledgeable personnel.
The jurisdiction’s legal and regulatory systems were described as “transparent and robust”. The review said Cayman has a clear and coherent communication system, and noted the quality of its cooperation and speed in response to exchange of information requests. In the wake of the report, the minister now responsible for financial services said Cayman has had similar outcomes following
other multi-national, independent reviews of its structure. Rolston Anglin said the Global Forum results should indicate to politicians, advocacy groups and the general public that Cayman’s financial services industry operates within a sound legal and regulatory framework in regard to the exchange of information for tax purposes. “We’ve developed, and we remain committed to enhancing, this framework not just because we know there’s a misperception about Cayman that stubbornly persists and is promulgated, perhaps innocently, by certain groups, but because we know that Cayman will have a stable economy only if we continue to attract good and responsible business,” he said. “And every country – no matter how small and regardless of its topography – should be allowed to build a strong economy, as long as it fulfils its responsibilities to the global economy.” Conducted by the Global Forum’s Peer Review Group (PRG), the second of Cayman’s assessments of its practical application of the legal and regulatory systems for the exchange of information for tax purposes is built on the PRG’s Phase 1 assessment. That report was published in 2010 followed by a
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supplementary report in 2011. The Phase 2 report published Thursday found that Cayman had addressed the recommendations made following the first review. Nevertheless, with much of the relevant legislation only very recently passed, the review noted that in some cases there was as yet no practical application of the law and warned the authorities to pay close attention that entities here are following the rules, retaining information as required under the law and ensuring the availability of ownership and identity information at all times.
The review said Cayman has a clear and coherent communication system, and noted the quality of its cooperation and speed in response to exchange of information requests.
The Cayman Islands is a member of the Global Forum’s Steering Group, which prepares and guides the forum’s work. It also is a member of the forum’s PRG, which is responsible for the peer review process. In addition to the Phase 2 report, the Cayman Islands’ financial services regime has been assessed favourably by, among other transnational bodies, the Global Financial Centres Index in 2013 and the Financial Stability Board in 2011. In addition, in 2012, research conducted by Professor Jason Sharman of Griffith University in Australia found that Cayman had a ‘perfect compliance record’ in terms of collecting all of the identify information required by the Financial Action Task Force’s anti money-laundering regulations. The next step in the peer review process will be the preparation of Phase 2 jurisdictional ratings, which are expected to be discussed and assigned at the September 2013 PRG meeting in Paris. © CNS Business Service
photo CC by Ray Bodden
The review pointed to a need to ensure information on bearer shares is also available at all times and emphasised the need for enforcement of what is now a compliant regulatory regime. It also recommended that Cayman continue widening its exchange of information treaties, despite a global trend towards automatic exchange.
The ministry noted that a number of government agencies provided assistance and information to the PRG during the Phase 2 assessment, including the Attorney General’s Chambers, the Cayman Islands Monetary Authority, the Tax Information Authority and the Financial Services Secretariat. During the review’s on-island component, the assessment team also met with representatives of the Cayman Islands Compliance Association.
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Photo by IM_photo
International Financial Centres and Trends in Tax Information Exchange
It is almost impossible for businesses to avoid some financial connection with the United States
By Martyn Gowar, Rasha Albazaz and Clare Morison, McDermott Will & Emery June 12, 2013 The old adage that “money makes the world go round” might soon be replaced with another concept: information. More specifically, tax and financial information. Details regarding the financial affairs of individuals are now readily transferable across countries and institutions. This has inevitably captured the attention of taxation authorities. Over the course of a decade, what began as a gentle discursive foray into transparency and voluntary information exchange has steadily spiralled into an onslaught of automatic information exchange agreements between various taxation authorities. Across Europe, the United States and an increasing number of developing countries, governments are putting in place new initiatives to try to combat non-compliance with tax laws and the non-disclosure of assets by their citizens. There are a number of ways in which these developments are affecting international financial centres (IFCs), one of which is the US Foreign Account Tax Compliance Act (FATCA), possibly the most ambitious tax compliance programme attempted to date.
International Financial Centres IFCs are jurisdictions with low tax rates and features that make them attractive investment locations. They improve the international movement of capital and provide an efficient base for some of the world’s largest investors and banking institutions.
In recent years, IFCs have increasingly been put under the microscope and pressured to change their laws. In recent years, IFCs have increasingly been put under the microscope and pressured to change their laws, disclose greater quantities of information or work with international taxation authorities. For instance, in the United States, the Stop Tax Haven Abuse Act (HR 1554) was introduced in April 2013 to implement various measures intended to reduce tax evasion through offshore tax havens. The UK Government has already entered into agreements for information exchange with various countries including Aruba,
the Bahamas, the British Virgin Islands, Grenada and Liberia, and this list is growing by the day. A number of initiatives have been introduced to bring in resistant UK taxpayers, thereby reducing the country’s budget deficit. For instance, the Liechtenstein Disclosure Facility, which allows UK taxpayers with unpaid tax linked to investments or assets in Liechtenstein to settle their tax liability, is expected to yield £3 billion. In addition, through the EU Savings Directive, the EU Member States have agreed to automatically exchange information with each other about customers who earn savings income in one Member State but reside in another. There is speculation that the Savings Directive could be extended to catch wider classes of income and ownership structures, including trusts and offshore companies. An EU initiative to broaden the automatic exchange of tax information (modelled on FATCA) was signed on 9 April 2013 by France, Germany, Italy, Spain and the United Kingdom. Within days of signing, Belgium, the Czech Republic, the Netherlands, Poland and Romania also announced their intention to take part in the programme. One innovation in this latest push is a proposal to include information on assets held in trusts and foundations, as well as in savings
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Photo by Oliver Hoffmann
accounts. This multilateral European system will bring further credence to one global standard of information exchange. FATCA Nowhere is the advancement of systematic information exchange more evident than FATCA. The objective of FATCA is to combat the non-reporting of information and consequent tax evasion by US persons by enabling the Internal Revenue Service (IRS) to extend its authority overseas. FATCA imposes an obligation on non-US financial institutions to report certain information on US account holders to the IRS. To ensure compliance, FATCA comes armed with a big stick: if a non-US financial institution does not comply with the reporting requirements, a 30 per cent US withholding tax will be imposed on all US payments to that institution. Non-compliance with FATCA is not really a viable option as it is almost impossible for businesses to avoid some financial connection with the United States. This is
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particularly true for financial institutions that are based in small IFCs for whom international regulatory compliance can be a good way to counteract negative views of institutions that operate out of such jurisdictions.
that would satisfy the objectives of FATCA without breaching national law on issues such as data protection.
Through the EU Savings Directive, the EU Member States have agreed to automatically exchange information with each other about customers who earn savings income in one Member State but reside in another.
Following discussions between the United States and a group of European countries (France, Germany, Italy, Spain and the United Kingdom), two forms of intergovernmental agreements have now been prepared: Model I and Model II. Under Model I, financial institutions situated in the relevant jurisdiction will report certain information to their local taxing authority, which will in turn report that information to the IRS. This ensures compliance with any relevant local law and, in theory, makes it easier for the financial institution to comply with FATCA as reporting to a local body is generally easier than reporting to the IRS. Under Model II, financial institutions report directly to the IRS; the foreign government only becomes involved if there is an exchange of information request from the IRS.
Governments from all over the world have entered into negotiations with the US Government to try to find an approach
The intergovernmental agreements also provide for automatic reciprocal information exchange, which means that both the United States and the country with which it is
By working together jurisdictions can benefit financially.
contracting could potentially benefit from entering into the agreement. There are now more than 50 different countries in negotiations with the United States to put these agreements in place before the reporting requirements of FATCA come into force. Interestingly, Guernsey, the Isle of Man and Jersey chose to act together during their negotiations with the United States, which is likely to give them more negotiating strength. By taking the same approach as each other, they also guaranteed their continued competitiveness. As these IFCs are closely connected geographically, it can often be easy for clients to switch jurisdictions if any one jurisdiction becomes uncompetitive. By working together to ensure relative similarity, each of the jurisdictions can benefit financially. FATCA is still evolving and the introduction of new intergovernmental agreements ensures that, from an international perspective, it will continue to evolve. Small IFCs would be well advised to act together when approaching the United States to try to enter into intergovernmental agreements.
This level of cooperation will show their commitment to the international goal of tackling tax evasion and aid any financial institutions situated within their borders in complying with FATCA.
Small IFCs would be well advised to act together when approaching the United States to try to enter into intergovernmental agreements. Unless a financial institution has no connection whatsoever to the United States, a certain amount of diligence will need to be done if only to ensure that FATCA itself, or one of the intergovernmental agreements, does not apply. The provisions of the regime are broadly drafted to catch entities and individuals who would not think they were necessarily a financial institution or
a US person. For this reason, until FATCA compliance has been considered and dismissed, it should not be ignored. The Future Although tax laws will always differ across jurisdictions, the means by which taxation authorities can enforce their laws will increasingly conflate and become dependent on international cooperation between taxation authorities. The use of intergovernmental agreements for the enforcement of FATCA shows that governments can, and will, find a way to overcome any domestic legal obstacles to tax information exchange. The practical financial incentive for global information exchange cannot be overstated, particularly during a time of financial austerity and crippling national debts. This article was originally published in McDermott’s International News, Issue 2, 2013. http://viewer.zmags.com/publication/68 b822a6#/68b822a6/1
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Global Forum Update on Effectiveness and Ongoing Monitoring
OECD Secretary-General’s Progress Report to the G20 Finance Ministers and Central Bank Governors. Introduction 1. The Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) was profoundly restructured in 2009 following a call from the G20 to ensure a rapid implementation of the standards through the establishment of a rigorous and comprehensive peer review process. The Global Forum reported the findings of its first 79 Peer Reviews to the G20 Leaders at their June 2012 Los Cabos Summit. That report conveyed to the G20 Leaders the progress made since their November 2011 Cannes Summit, showing a high level of co-operation among members and the actions taken by jurisdictions to tackle the deficiencies identified, resulting in a good level of compliance with the internationally agreed standard. The report also identified room for further improvements and the need to assess that effective exchange of information is implemented. In their CommuniquÊ, the
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G20 leaders commended the progress made and urged all jurisdictions, particularly those which did not qualify for a Phase 2 review, to take the necessary actions to tackle the deficiencies identified.
and describes the next steps for the Global Forum, notably the completion of the Phase 2 reviews and the assignment of ratings.
Since 2009, the capacity for cooperation in international tax matters has improved significantly.
3. Since 2009, the capacity for cooperation in international tax matters has improved significantly. More jurisdictions are committed to the standard, the number of exchange of information agreements has grown substantially, and many changes in domestic legislation have been introduced to comply with the standard. The Global Forum also conducts a number of technical assistance activities aimed to ensure that jurisdictions that are new to cooperation in international tax matters equally participate and implement the standard and has worked with the competent authorities responsible for exchange of information to facilitate assistance amongst the tax administration.
2. In November 2012, the G20 Finance Ministers and Central Bank Governors asked the Global Forum to report on the effectiveness of information exchange practices by April 2013 and in February 2013 reiterated this call and encouraged the Global Forum to continue to make rapid progress in assessing and monitoring on a continuous basis the implementation of the international standard on information exchange. This report provides an assessment of the Global Forum’s work so far on assessing information exchange practices
A. State of Play
Membership 4. One of the great achievements of the Global Forum has been the establishment of a level playing field with 119 member
Photo by Tom Wang
jurisdictions now committed to implementing the standards of transparency and exchange of information. Only Lebanon has so far refused to commit to the standard and become a member of the Global Forum despite being identified as a jurisdiction relevant to the Global Forum’s work. 5. The Global Forum has welcomed 11 new members since its last report to the G20 in June 2012. Kazakhstan, Pakistan, Cameroon, Burkina Faso, Albania, Uganda, Gabon, and Senegal joined late in 2012. Azerbaijan, Romania and the Kingdom of Lesotho have joined early in 2013. Observership to the Global Forum has also increased to 12 organisations with the inclusion of the Centre de rencontres et d’études des dirigeants des administrations fiscales (CREDAF) and the World Customs Organisation.
Network of Agreements 6. The connectivity between Global Forum members continues to grow. In 2008, most exchange of information on request was based on the existing network of tax
treaties between jurisdictions with a long track record of exchange of information. Only a handful of dedicated tax information exchange agreements (TIEAs) were in place. Today, there are almost 800 bilateral TIEAs worldwide, ensuring the existence of mechanisms to exchange information with those jurisdictions that do not have large tax treaty networks. A separate related development has been the updating and expansion of the Convention on Mutual Administrative Assistance in Tax Matters in 2011, a multilateral convention that, with the support of the G20, has more than doubled its number of signatories in the past two years. This has led to a further increase in the number of EOI relationships, consisting of 675 additional EOI relationships (where a bilateral agreement already existed) and 228 new EOI relationships (where no bilateral agreement previously existed). With the support of the G20, further progress is expected in the next few months. Overall, the number of new EOI relationships (bilateral and multilateral) has increased by around 1100 since the Global Forum began its work in 2009.
Peer Review Process 7. The mandate of the Global Forum is to promote exchange of information through a robust and comprehensive monitoring and peer review process. This process is divided between Phase 1 reviews, which examine a jurisdiction’s legal framework for the exchange of information, and Phase 2 reviews, which examine information exchange in practice. To date, the Global Forum has adopted and published 100 peer review reports. 8. Since the Global Forum’s last report to the G20 in June 2012, 21 peer reviews have been published, containing 112 new recommendations. These are: 11 Phase 1 reports (Belize, Dominica, Marshall Islands, Nauru, Niue, Poland, Portugal, Russia, Samoa, Sint Maarten, and Slovenia), 6 Combined Phase 1 and Phase 2 reports (Argentina, Finland, Iceland, South Africa, Sweden, and Turkey),
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4 stand-alone Phase 2 reports (Belgium, Cayman Islands, Guernsey, and Singapore). In addition, 5 more supplementary reports have been adopted (Costa Rica, Liechtenstein, Monaco, United Kingdom, and Uruguay).
The connectivity between Global Forum members continues to grow. 9. At the time of the last report to the G20, 11 jurisdictions (Botswana, Brunei, Costa Rica, Guatemala, Lebanon, Liberia, Panama, Trinidad and Tobago, United Arab Emirates, Uruguay and Vanuatu) could not move to Phase 2 because it was determined at the time of their Phase 1 reviews that critical elements necessary to achieving an effective exchange of information were not in place in their legal framework. In another two cases (Liechtenstein and Switzerland), progress to Phase 2 was subject to conditions.
11. Of the jurisdictions not moving to Phase 2, follow up reports have been submitted by Botswana, Brunei, Guatemala, Lebanon, Liberia, Panama, Trinidad and Tobago, and United Arab Emirates on the progress they have made in implementing changes to address the recommendations made in their reports. The follow up reports of Dominica, Marshall Islands, Nauru, and Niue are not yet due. Switzerland has also recently provided a follow up report providing details of actions taken by its Government to implement the recommendations made in its report.
Results 12. The Global Forum’s peer review reports include determinations in respect of the elements which comprise the international standard as to whether a jurisdiction’s legal framework is in place and recommendations are made for improvement where
appropriate. Of the total number of 862 determinations made: 618 elements were found to be “in place”; 171 elements were “in place, but needing improvement”; and 73 elements were “not in place”. 13. A fundamental aspect of the Global Forum’s peer reviews are the recommendations for improvement that go along with the determinations in cases where there is some deficiency in the implementation of the standards. In the 100 reports adopted so far, a total of 652 Phase 1 recommendations have been made. 14. Where the Global Forum has made recommendations, jurisdictions have responded in many cases by making changes to improve their systems for the exchange of information. A supplementary review procedure has been established so that these changes can be evaluated and given public recognition. To date, 19 supplementary reports have been launched, of which 18 have been completed, with the following results: 78 recommendations addressed 49 determinations upgraded 8 jurisdictions have been able to qualify for the Phase 2 where initially they could not move to Phase 2 (Antigua and Barbuda,
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10. Costa Rica, Liechtenstein and Uruguay have since responded by making the changes needed to improve their legal frameworks and, on the basis of their supplementary reports, have now qualified for Phase 2. With respect to the new Phase 1 reviews completed since June 2012, four
additional jurisdictions cannot move to the Phase 2 review (Dominica, Marshall Islands, Nauru, and Niue). Hence as of the day of the production of this report a total of 13 jurisdictions cannot move to Phase 2 review until they act on the recommendations to improve their legal and regulatory framework: Botswana, Brunei, Dominica, Guatemala, Lebanon, Liberia, Marshall Islands, Nauru, Niue, Panama, Trinidad and Tobago, United Arab Emirates and Vanuatu. Additionally, the Phase 2 review of Switzerland is still subject to conditions.
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Barbados, British Virgin Islands, Costa Rica, San Marino, Seychelles, Turks and Caicos Islands, and Uruguay)
17 of these jurisdictions improved their access to bank information for EOI purposes;
2 jurisdictions (Belgium and Liechtenstein) for which the Phase 2 review was subject to conditions are now able to proceed to their Phase 2 reviews, and the Phase 2 review of Belgium has now been completed.
13 jurisdictions reported improvements in EOI procedures or strengthening EOI units for timely EOI.
All jurisdictions are required to provide follow-up reports describing the action taken to address recommendations made in their reports. 15. In addition, all jurisdictions are required to provide follow-up reports describing the action taken to address recommendations made in their reports. So far, 68 jurisdictions have provided follow-up reports describing actions they have taken to implement more than 300 recommendations: 53 jurisdictions have improved their legislation to ensure the availability of accounting and ownership information, 17 of which have abolished or immobilised bearer shares; 38 jurisdictions improved access power to the information under domestic laws,
16. These results show that the Global Forum’s work is leading to greatly improved transparency, wider exchange of information networks, and upgraded legal frameworks. As noted below under “Phase 2 and the Ratings Exercise”, the real test of whether the Global Forum has achieved its goal is whether it has improved transparency and made exchange of information more effective in practice. This can only be determined at the end of the Phase 2 reviews, which are currently ongoing and any definitive conclusion on the results would be premature.
Technical Assistance and Training 17. Since June 2012, the Global Forum has organised four training seminars in Paris, Dubai, Manila and Barbados, and proposes to hold seminars in Brasilia, Prague as well as Dakar in the first half of 2013. In collaboration with other international organisations and development agencies, assistance has been provided to a number of jurisdictions. In recognition of the fact that many new countries that are joining the Global Forum are developing countries and are new to international cooperation in exchange of
information, assistance is being provided to create awareness of the international standard, help jurisdictions prepare for their peer reviews and implement the recommendations made. The Global Forum is also developing important tools to assist jurisdictions in implementing the standard, including a toolkit, work manual and a tracking system for requests for information.
Competent Authority Database 18. Following the first meeting of Competent Authorities – the officials responsible for exchange of information on a day-to-day basis – in Madrid in May 2012, the Global Forum has launched a database which includes contacts for more than 70 jurisdictions. This tool will facilitate the flow of exchange of information amongst tax administrations and help develop the EOI network. A second meeting of Competent Authorities will be held in the Netherlands in May 2013. Competent Authorities will share challenges regarding the growing volume and complexity of information exchange and practices implemented to respond to these challenges, as well as the importance and challenges of developing the use of EOI within their tax administration.
B. Measuring effectiveness 19. The preliminary indications from the Combined reviews and stand alone Phase 2 reviews conducted to date show that the timeliness of responses is improving and there has been an increase in the volume of requests in recent years. For these
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jurisdictions, figures indicate that there has been a 22% increase in the volume of the requests they receive over the threeyear review period. This figure is even more pronounced for those jurisdictions that have smaller volumes of requests. Those jurisdictions with fewer than 100 requests in the first year of review saw an average increase of more than 100% over the three years. In addition, a large number of EOI relationships have just recently come into force and are only now starting to be used. As a result there remains a considerable scope for increase in the volume of requests and jurisdictions should expect the number of requests to go up in the near term. However, there is a wide variation in the extent to which EOI agreements are being used by different jurisdictions – some rely on the agreements more for their deterrent effect (for example by preventing taxpayers from evading tax in the first place or inciting them to provide information voluntarily), while others consciously seek to test them in practice right away. Where agreements are used, they are effective in countering tax evasion.
It is clear that a number of issues still need to be addressed. 22. These results show the very practical impact the work of the Global Forum is having. As a result of these improvements, exchange of information on request will become a much more effective tool in the future as changes in member jurisdictions’ EOI systems and organisations are reflected in an improved service to treaty partners. The great benefit to member jurisdictions is the potential to prevent tax evasion through increased use of EOI agreements and effective cooperation in practice.
C. Phase 2 and the Ratings Exercise 23. Ultimately the real test of whether the Global Forum has achieved its goal is whether it has improved transparency and made exchange of information more effective in practice. Where the Phase 1 reviews
examine a jurisdiction’s legal framework for exchange of information, Phase 2 reviews examine how well that framework does in practice. The Global Forum’s second mandate began in January 2013, and this coincides with the beginning of the stand alone Phase 2 reviews and evaluating compliance in practice. A key output of Phase 2 reviews is the assignment of a rating both for a jurisdiction’s compliance with each element of the Global Forum’s Terms of Reference as well as an overall rating. 24. The issuance of an overall rating will best achieve both the recognition of progress by jurisdictions toward a level playing field and the identification of jurisdictions that are not in step with the international consensus. 25. The Global Forum is proceeding carefully with the ratings exercise in order to ensure a fair, consistent and transparent result. Consideration has been given to the timing of the ratings exercise as it will be important to complete Phase 2 reviews for a representative subset of jurisdictions before finalising ratings to ensure that the application of the ratings system is consistent across jurisdictions. As a representative subset of Phase 2 reviews will be completed later in 2013, work within the Global Forum is underway to establish a fair and transparent process through which ratings will be assigned to all jurisdictions having already undergone an analysis of the exchange of information practices. Ratings will then be an integral part of Phase 2 reviews going forward.
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20. While the timeliness of responses to exchange of information requests is improving, it is also clear that a number of issues still need to be addressed. Out of the 30 published peer reviews assessing phase 2 aspects, 50 recommendations have been made to improve the jurisdictions’ ability to effectively exchange information in practice, and most of these recommendations relate to timeliness.
21. Thirteen jurisdictions have already reported taking action to address these issues by improving their case management systems and devoting additional resources to exchange of information. Moreover, improvements in processes are also being made in jurisdictions which have not yet undergone a Combined or Phase 2 review in anticipation of their reviews.
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©OECD
OECD Conference Centre, Paris, France.
Compliant: The essential element is, in practice, fully implemented. Largely compliant: There are only minor shortcomings in the implementation of the essential element. Partially compliant: The essential element is only partly implemented. Non-compliant: There are substantial shortcomings in the implementation of the essential element. 27. It is expected that the first ratings (for as many as 50 jurisdictions) will be finalised by the Global Forum at its plenary meeting in November 2013. The Global Forum looks forward to reporting back to the G20 after completion of the initial ratings exercise.
D. Beyond Phase 2 28. The delivery of overall ratings will be a watershed moment in the Global Forum’s evolution, as it represents the completion of its original mandate while at the same time setting the bar for its future work. Indeed, as the reviews are being completed and the ratings exercise undertaken, the Global
Forum has started reflecting on its future beyond its current mandate, which extends to the end of 2015. This discussion includes the question of how to refine and improve the Terms of Reference which embodies the international standard, and what form of assessment and monitoring on a continuous basis should take place once the Phase
The real test of whether the Global Forum has achieved its goal is whether it has improved transparency and made exchange of information more effective in practice.
29. Global Forum members are united in seeing the Global Forum play an important role beyond the Phase 2 reviews and the current mandate. Thus, the ratings exercise should be seen as one component of an ongoing process for which the support of the G20 is key. Progress Report to the G20 by the Global Forum on Transparency and Exchange of Information for Tax Purposes (PART I) http://www.oecd. org/tax/2013-OECD-SG-Report-to-G20Heads-of-Government.pdf ©OECD
26. The Phase 2 ratings, including the overall rating, will be applied on the basis of a fourtier system:
2 reviews are completed so as to ensure that jurisdictions continue to cooperate effectively. There is also a question of how the Global Forum should position itself in a rapidly evolving exchange of information environment where many members are participating in a wider variety of exchange relationships including automatic exchange of information. As the exchange of information environment evolves, the Global Forum is reflecting on how it can be proactive rather than reactive. Angel Gurría, Secretary General, OECD
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G8 Action Plan Principles to Prevent the Misuse of Companies and Legal Arrangements
G8 Lough Erne, Northern Ireland, 2013 Subject to our different constitutional circumstances, and understanding that a onesize-fits all approach may not be the most effective, the G8 endorses the following core principles that are fundamental to the transparency of ownership and control of companies and legal arrangements. These core principles, consistent with the FATF standards, are essential to ensure the integrity of beneficial ownership and basic company information, the timely access to such information by law enforcement for investigative purposes, as well as, where appropriate, the legitimate commercial interests of the private sector. The G8 also commits to publish national Action Plans based on these principles that set out the concrete action each of us will
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take to counter money laundering and tax evasion. To ensure G8 members are held to account for their commitments, the G8 agrees to a process of self reporting through
Companies should know who owns and controls them and their beneficial ownership and basic information should be adequate, accurate, and current. a public update on the progress made against individual action plans and to inform the Financial Action Task Force.
1. Companies should know who owns and controls them and their beneficial ownership and basic information should be adequate, accurate, and current. As such, companies should be required to obtain and hold their beneficial ownership and basic information, and ensure documentation of this information is accurate. 2. Beneficial ownership information on companies should be accessible onshore to law enforcement, tax administrations and other relevant authorities including, as appropriate, financial intelligence units. This could be achieved through central registries of company beneficial ownership and basic information at national or state level. Countries should consider measures to facilitate access to company beneficial ownership information by financial
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institutions and other regulated businesses. Some basic company information should be publicly accessible. 3. Trustees of express trusts should know the beneficial ownership of the trust, including information on beneficiaries and settlors. This information should be accessible by law enforcement, tax administrations and other relevant authorities including, as appropriate, financial intelligence units. 4. Authorities should understand the risks to which their anti-money laundering and countering the financing of terrorism regime is exposed and implement effective and proportionate measures to target those risks. Appropriate information on the results of the risk assessments should be shared with relevant authorities, regulated businesses and other jurisdictions.
5. The misuse of financial instruments and of certain shareholding structures which may obstruct transparency, such as bearer shares and nominee shareholders and directors, should be prevented.
Sanctions should be robustly enforced. 6. Financial institutions and designated non financial businesses and professions, including trust and company service providers, should be subject to effective anti-money laundering and counter terrorist financing obligations to identify and verify the beneficial ownership of their customers. Countries should ensure effective supervision of these obligations.
7. Effective, proportionate and dissuasive sanctions should be available for companies, financial institutions and other regulated businesses that do not comply with their respective obligations, including those regarding customer due diligence. These sanctions should be robustly enforced. 8. National authorities should cooperate effectively domestically and across borders to combat the abuse of companies and legal arrangements for illicit activity. Countries should ensure that their relevant authorities can rapidly, constructively, and effectively provide basic company and beneficial ownership information upon request from foreign counterparts.
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A Review of BusinessUniversity Collaboration in the UK By Professor Sir Tim Wilson DL Just as castles provided the source of strength for medieval towns, and factories provided prosperity in the industrial age, universities are the source of strength in the knowledge‐based economy of the twenty‐first century.
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-Lord Dearing, September 2002
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The words of Lord Dearing continue to ring true. The economic and social prosperity of the UK depends upon a healthy knowledge‐based economy. In our globally competitive economic environment, never before has there been a greater need for a talented, enterprising workforce, for constant innovation in product and service development, for a thriving culture of entrepreneurship, for dynamic leading‐edge scientific and technological development and for world‐class research that attracts investment. In collaboration with business, and with the support of government, the UK university sector has the capability to fulfil Lord Dearing’s vision: to be the source of strength in the UK’s knowledge-based economy of the twenty first century.
domains have a second dimension, defined by business sector ‐ for example: the creative industries, agriculture, communications, bio‐pharma and engineering. Universities operate in specific domains, meeting the needs of a range of businesses; no one university can operate in all domains. The needs of individual businesses align with different domains and successful businesses often collaborate with several universities to meet their needs. Increasingly, universities operating in different domains collaborate with each other to provide support for a particular industry or employer; the concept of collaborative advantage is gaining momentum within the university sector and needs to become common practice.
Universities are an integral part of the skills and innovation supply chain to business. However, this supply chain is not a simple linear supplier‐purchaser transaction; it is not the acquisition of a single product or service. This supply chain is multi‐ dimensional, it has to be sustainable, and it has to have quality, strength and resilience. These attributes can only be secured through close collaboration, partnership and understanding between business and universities.
To achieve world leadership in university‐ business collaboration, all domains in the landscape must attain excellence.
The multi‐dimensional nature of the supply chain is represented by a landscape of business‐university collaboration, consisting of a number of highly diverse domains of activity. For example: the education of highly skilled graduates; applied research in advanced technologies; bespoke collaborative degree programmes; ‘science’ park developments; enterprise education; support for entrepreneurs; industry‐ sector foundation degrees; higher‐level apprenticeships; collaborative research; and in‐company up-skilling of employees. Many
To achieve world leadership in university‐ business collaboration, all domains in the landscape must attain excellence; the strength of the supply chain is defined by its weakest link. Effective joined‐up policy in this field, therefore, has to be informed by knowledge of the entire landscape. Policy has to be balanced to ensure that the economic benefits derived from investment in one domain are not diluted by underperformance in others. That is both the present and the future policy challenge.
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Business schools and industry are waking up to the fact that their respective goals can be better achieved together than apart, leading to the forging and consolidating of mutually beneficial links. Forward-thinking companies are partnering with educational institutions by way of customised, accredited or short courses, as well as in respect of employee recruitment and development, research and innovation, technology knowledge transfer and also with a view to enhancing their CSR credentials. A case in point is Newcastle Business School (NBS) at Northumbria University which is held in high regard in respect of Continuing Professional Development (CPD). A collaborative and innovative approach which challenges conventional wisdom sees NBS’ Executive Development Centre develop thought leadership and promote innovation among senior leaders from across the private and public sectors. Meanwhile, bespoke work based learning opportunities involving uniquely tailored training programmes and assessments act to ensure that employees are up to scratch and that staff potential can be maximised for the greater good of the company. Another institution taking a notably industry-driven and client-centric approach is Salford Business School at the University of Salford, Manchester. Here,
Forward-thinking companies are partnering with educational institutions. The University of Exeter Business School is noteworthy in that it works in close concert with leading multinationals and SMEs in the fields of global economics, financial regulation, sustainability and fair-trade, with a view to all programmes being informed by a new world resource constrained approach to doing business, as epitomised by the flagship One Planet MBA. Whether at MBA or executive education level, businesses benefit both operationally and strategically from robust academic thinking combined with industry realities. Meanwhile, at Exeter’s Centre for Leadership Studies the underlying themes of leadership and leadership development are explored via a range of contexts such as organisational performance, personal leadership challenges and leader-follower relations.
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Stand Out UK Business Schools
current and future leaders are assisted in developing the skills, ethics and innovative thinking necessary to effectively manage change and so re-define their organisations’ strategic direction. It provides training, research, consultancy services and facilities and is strong on the Knowledge Transfer Partnerships (KTP) front, by way of providing specific business solutions, while its CPD activity is particularly well suited to the housing, construction and energy management sectors. In addition, its Institute of Directors (IoD) programme offers a range of courses specifically designed for Directors, senior executives, ownermanagers and entrepreneurs across the public, private or not-for-profit sectors
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IMD Insights
By IMD Faculty Professor, Stewart Black. What type of challenges do you work on? Over twenty-three years I have worked with a variety of clients across many industries. More than half the time, the development efforts I get involved in are designed to be a catalyst for, or at least a complement to, a broader strategic initiative in the company. In other words, the development effort is designed to provide capabilities and mind-sets that are necessary for the new strategy, or structure, or cultural shift, to be successful. What are the most successful approaches to overcoming these transformational challenges? Generally the challenge in these critical development initiatives is to help top executives see three things: 1. A new strategy, structure, or culture logically requires new capabilities. Rarely can you do new things ONLY with old, pre-existing capabilities. 2. Just because the firm has very talented leaders does not mean that those leaders can automatically or instantly execute new capabilities. As an analogy, just because someone is a great musician does not mean that he or she can play the violin proficiently the first time he or she picks it up. Or just because someone is a good runner does not mean that he or she can approach each distance or every type of terrain with the same training. Each new challenge requires specific concepts the leaders have to understand and techniques they have to master.
Just because the firm has very talented leaders (it) does not mean that those leaders can automatically or instantly execute new capabilities.
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3. All great athletes and artists reach world class levels only after they understand the key principles of their art, practice what they’ve learned, and get consistent feedback on their work. Leaders develop the same way.
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My job is to help top executives see how we can help their leaders gain the capabilities needed so the company can reach its objectives. What are the three things that make a client engagement successful? Three critical steps take place at the frontend of client engagement. They are easy to
say but hard to do well – and even harder to do so well that you differentiate yourself in a meaningful way from your competitors: I try to listen and question carefully to ensure I have a complete and deep understanding of where the top executives are trying to take the organisation. Without listening and enquiring well, and better than our competitors, we have no hope of presenting superior solutions. 1. I try to get a sense from the top executives what they think are the key capabilities needed in their leaders to achieve the new organisational objectives. 2. I try to add value by pointing to needed capabilities that they have not identified. If the executives have painted a complete picture of the key capabilities, I try to add value by suggesting which capabilities might be more or less important in achieving the organisational objective - so that we can start moving to a sense of priorities. In my experience, companies never have the budget or time to address all the needed capabilities. But
generally that is OK because usually the par ado principle applies and a limited number of capabilities have a disproportionate impact on the results. The key is identifying those high-impact capabilities.
I try to add value by suggesting which capabilities might be more or less important in achieving the organisational objective, so that we can start moving to a sense of priorities. If you could change anything about the world of executive development, what would it be? It would be nice if clients had sufficient resources to do everything they want to do; but that is unrealistic. Sometimes it
is a challenge to balance the realistic need for efficiency with the unrealistic hope of achieving large-scale organisational transformation with almost inadequate resources. In general, however, our clients recognise the important ways we can help them achieve their performance goals and are happy for the investment they make in us. Stewart Black (www.imd.org/black) is Professor of Global Leadership and Strategy at IMD (www.imd.org). He specialises in leadership, strategy, change, globalisation, human capital and stakeholder engagement. Professor Black has worked with a variety of for-profit and non-profit organisations in all major regions of the world but has spent more than half of his career living and working in Asia. Much of his consulting has involved working with senior teams to analyse their environment, formulate strategy, and align organisational and leadership capabilities to achieve business objectives. These engagements have involved process skills in getting the team through discussions and debates to points of decision and commitment, as well as content knowledge in key areas such as strategy, change, and human resources.
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Just because someone is a good runner, it doesn’t mean they can approach each distance with the same training.
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University Sponsorship Taken to Task By Richard Fuchs Struggling with tightening purse strings and shrinking research budgets, Germany’s universities are fighting back with funding from big business. A new online portal aims to publicise any dubious sponsorship deals. Berlinstudent Erik Marquardt sometimes feels like German universities are really just glorified advertising agencies. He sees a future where lecture halls will no longer be named after great thinkers and poets, but after discount stores and online dating companies. Cafeterias will no longer be decorated according to the seasons, but furnished year-round with the colours and slogans of cell phone networks. And new students’ introductions will no longer be organised by peer representatives, but by consultancy firms. “I personally don’t believe that it’s a positive development, especially when you think that, at the moment, there are no legal limitations,” the 25-year-old chemistry student at Berlin’s Technical University told DW.
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As the head of the Free Association of Student Bodies (FZS), Marquardt represents around 80 student groups from across Germany and has long been keeping a watchful eye on just how closely corporations and universities are connected through third-party funding.
The point of the project is not to attack commerce. “You wouldn’t want to perhaps risk having ad breaks during lectures in the Aldi Lecture Hall because of a lack of funding,” he said. Independence under threat Marquardt is skeptical about the partnership contracts between the University of Cologne and the pharmaceutical corporation Bayer, the details of which remain closed to the public. He’s also been observing Berlin’s two big universities, both of which ran an institute together with Deutsche Bank. Together with the Free Association of Student Groups and
the Berlin daily newspaper taz, Marquardt launched the University Watch project. The German chapter of anti-corruption organisation Transparency International is overseeing the project. “With University Watch, we want to draw attention to many questionable links that exist between universities and companies. But most of all, we want to get a better feel for how things actually are,” director Christian Humborg said. Four-hundred Wikipedia pages can be found on the University Watch website - one for every German university. For one year, users can enter onto the website details about cases where funding from big business could compromise a university’s intellectual independence. A team of journalists from the taz newspaper will investigate any accusations in order to ensure transparency. However, the point of the project is not to attack commerce, Humborg said: “University Watch isn’t an instrument to discredit thirdparty research. We believe it is practical for universities to collaborate.
Too close for comfort? If a partnership is questionable, then there are no blueprints for that, Christian Humborg explained. For that reason he’s expecting controversial debates to ensue. A discussion on the influence of Internet giant Google on academic research is something Erik Marquardt is hoping for. It can be assumed that issues concerning data protection would possibly not be as intensively explored as, for example, those relating to advertising at a Google-financed university institute, Marquardt said. It’s an assumption that Thomas Schildhauer strenuously denies. He’s the founding director of just such a university institute.
The Alexander von Humboldt Institute for Internet and Society at Humboldt University is located in Berlin, but 80 percent of the financing comes from US-based Google. In the first three years since opening in
Members of the public can read every funding contract, examine every annual report, and now they can access any information posted on the University Watch website. 2011, Google has invested around 4.5 million euros ($5.9 million) in the institute. However, Schildhauer has no worries about the influence of the Internet heavyweight on direction of research or staffing decisions.
“We have 20 people on the advisory board that evaluates us externally. That means that we have a large group of people who are totally neutral, people who have nothing at all to do with how the money is spent,” he said. For that reason, Schildhauer is relaxed about the prospect of any debate concerning the influence Google may or may not exert on the institute’s research. Members of the public can read every funding contract, examine every annual report, and now they can access any information posted on the University Watch website. For now at least, there’s no concrete evidence that Google exercises influence on Schildhauer’s institute registered on the site. Still, Internet users have a good year to look into it. This piece first appeared on www.dw.de in March 2013.
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And they should do that as well. But the question is always, under what conditions that happens. And that is the bit that we are interested in.”
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What Climate Change Means for Africa, Asia and the Coastal Poor As the coastal cities of Africa and Asia expand, many of their poorest residents are being pushed to the edges of liveable land and into the most dangerous zones for climate change. Their informal settlements cling to riverbanks and cluster in low-lying areas with poor drainage, few public services, and no protection from storm surges, sea-level rise, and flooding. These communities – the poor in coastal cities and on low-lying islands – are among the world’s most vulnerable to climate change and the least able to marshal the resources to adapt, a new report finds. They face a world where climate change will increasingly threaten the food supplies of Sub-Saharan Africa and the farm fields and water resources of South Asia and South East Asia within the next three decades, while extreme weather puts their homes and lives at risk.
The poor in coastal cities and on low-lying islands are among the world’s most vulnerable to climate change and the least able to marshal the resources to adapt. A new scientific report commissioned by the World Bank and released on June 19 explores the risks to lives and livelihoods in these three highly vulnerable regions. Turn Down the Heat: Climate Extremes, Regional Impacts, and the Case for Resilience takes the climate discussion to the next level, building on a 2012 World Bank report which concluded from a global perspective that without a clear mitigation strategy and effort, the world is headed for average temperatures 4 degrees Celsius warmer than pre-industrial times by the end of this century.
Small Number, Big Problem Communities around the world are already feeling the impacts of climate change today, with the planet only 0.8 ºC warmer than in pre-industrial times. Many of us could
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experience the harsher impacts of a 2ºC warmer world within our lifetimes – 20 to 30 years from now – and 4ºC is likely by the end of the century without global action. The report lays out what these temperature increases will look like, degree-by-degree, in each targeted region and the damage anticipated for agricultural production, coastal cities, and water resources. “The scientists tell us that if the world warms by 2°C – warming which may be reached in 20 to 30 years – that will cause widespread food shortages, unprecedented heat-waves, and more intense cyclones,” said World Bank Group President Jim Yong Kim. “In the near-term, climate change, which is already unfolding, could batter the slums even more and greatly harm the lives and the hopes of individuals and families who have had little hand in raising the Earth’s temperature.” The report, based on scientific analysis by the Potsdam Institute for Climate Impact and Climate Analytics, uses advanced computer simulations to paint the clearest picture of
each region’s vulnerabilities. It describes the risks to agriculture and livelihood security in Sub-Saharan Africa; the rise in sea-level, loss of coral reefs and devastation to coastal areas likely in South East Asia; and the fluctuating water resources in South Asia that can lead to flooding in some areas and water scarcity in others, as well as affecting power supply. “The second phase of this report truly reiterates our need to bring global attention to the tasks necessary to hold warming to 2ºC,” said Rachel Kyte, the Bank’s Vice President for Sustainable Development. “Our ideas at the World Bank have already been put into practice as we move forward to assist those whose lives are particularly affected by extreme weather events.”
Sub-Saharan Africa In Sub-Saharan Africa, the researchers found food security will be the overarching challenge, with dangers from droughts, flooding, and shifts in rainfall.
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Between 1.5°C-2°C warming, drought and aridity, will contribute to farmers losing 4080 percent of cropland conducive to growing maize, millet, and sorghum by the 2030s-2040s, the researchers found. In a 4°C warmer world, around the 2080s, annual precipitation may decrease by up to 30 percent in southern Africa, while East Africa will see more rainfall, according to multiple studies. Ecosystem changes to pastoral lands, such as a shift from grass to woodland savannas as levels of carbon dioxide increase, could reduce food for grazing cattle.
South East Asia In South East Asia, coastal cities will be under intense stress due to climate change. A sea-level rise of 30 cm, possible by 2040 if business as usual continues, would cause massive flooding in cities and inundate low-lying cropland with saltwater corrosive to crops. Vietnam’s Mekong Delta, a global rice producer, is particularly vulnerable to
sea-level rise. A 30 cm sea-level rise there could result in the loss of about 11 percent of crop production. At the same time, storm intensity is likely to increase.
In Sub-Saharan Africa, the researchers found food security will be the overarching challenge, with dangers from droughts, flooding, and shifts in rainfall. The study also describes rising ocean acidity leading to the loss of coral reefs and the benefits they provide as fish habitats, protection against storms, and revenuegenerators in the form of tourism. Warmer water temperatures and habitat destruction could also lead to a 50 percent decrease in the ocean fish catch in the southern Philippines, the report says.
South Asia Water scarcity in some areas and overabundance of water in others are the hallmarks of climate change in South Asia, the researchers found. Inconsistencies in the monsoon season and unusual heat extremes will affect crops. Loss of snow melt from the Himalayas will reduce the flow of water into the Indus, Ganges and Brahmaputra basins. Together, they threaten to leave hundreds of millions of people without enough water, food, or access to reliable energy. Bangladesh and the Indian cities of Kolkata and Mumbai will be confronted with increased flooding, intense cyclones, sea-level rise, and warming temperatures.
World Bank’s Response In his first year as president of the World Bank, Jim Kim has raised the profile of climate change in speeches and in conversations with leaders around the world,
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as well as within the institution. The Bank is currently working with 130 countries on climate change; it doubled its lending for adaptation to $4.6 billion in 2012 and put $7.1 billion into mitigation, in addition to its work with carbon finance and the Climate Investment Funds; and it now includes climate change in all country assessments.
In his first year as president of the World Bank, Jim Kim has raised the profile of climate change in speeches and in conversations with leaders around the world, as well as within the institution. The Bank is also developing a Climate Management Action Plan, informed by the Turn Down the Heat reports, to direct its future work and finance through a climate lens. Among other things, the Bank will: • Help countries develop strategic plans and investment pipelines that integrate the risks and opportunities of climate change. • Provide the tools that countries and cities need to better assess and adapt to climate change, including greenhouse gas emissions tracking, energy use and efficiency assessments, and assessments of resilience. • Create best practices and norms through its projects for making infrastructure resilient, not just today but decades into the future. • Use its convening power, financial leverage and targeted climate funds to increase support for clean energy, low-carbon development, and climate resilience. In order to help countries build resilience, the Bank will prioritise the most vulnerable areas, manage water availability and extremes, and increase its efforts to meet growing food demand. It will work with the world’s largest emitters to lower their impact through carbon emissions and short-lived climate pollutants. Its specialists are working on ways to help governments end fossil fuel subsidies while protecting the poor, connect global carbon markets, and make agriculture and cities climate-smart and resilient. “I do not believe the poor are condemned to the future scientists envision in this report,” Kim said. “We are determined to work with countries to find solutions.” © The World Bank: The World Bank authorises the use of this material subject to the terms and conditions on its website http://www.worldbank.org/terms.
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The International Cybercrime Assistance Programme
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Provided by the International Cyber Security Protection Alliance (ICSPA). Businesses operating in key western countries (such as the ‘Five Eyes’ nations, EU and elsewhere) know that the vast majority of cyber criminality targeted against their businesses and their customers, originates from countries external to the national borders in which they operate.
Businesses operating in key western countries know that the vast majority of cyber criminality...originates from countries external to the national borders in which they operate. The International Cybercrime Assistance Programme (ICAP) has been established as one of the programmes of work put in place by the International Cyber Security Protection Alliance (ICSPA) to provide financial support and other forms of practical assistance [1] to law enforcement units engaged in combating cybercrime in those countries that would benefit most from such assistance and who are willing to accept it. ICAP seeks to: 1. Identify countries that are being used as cybercrime bases and who are willing to accept external assistance of the type offered. 2. Identify multi-national companies operating in countries that are both the targets of cyber criminality and in those countries that criminals use as cyberbases. 3. Enlist as Members of the ICSPA, companies identified in Item 2. 4. Generate funding from ICSPA Members and from the Governments of nations that would benefit most from a more successful capacity and capability in foreign law enforcement cybercrime operations. 5. Work with our Member companies and the foreign Governments identified as willing to accept ICAP assistance (Item 1 refers), to channel funding and assistance to support their law enforcement units engaged in fighting cyber crime. 6. Form an international network linking governments, businesses and law enforcement units taking part in the ICAP initiative, to reinforce the assistance given and to generate good practice in important aspects of cyber crime operating techniques.
7. Form partnerships with existing organisations whose remit is complimentary to the ICAP initiative – organisations such as Interpol, Europol, the International Association of Chiefs of Police and similar bodies within the international business community. Benefits to multi-national companies: By providing this type of carefully focused assistance to law enforcement units in countries that face the greatest challenges, we achieve the following benefits for multinational businesses: 1. Improved cyber crime fighting capabilities in countries which are the unwilling hosts of cyber criminality and in which those companies are operating. 2. By running more successful cyber crime law enforcement operations in countries we are assisting, we expect to see a reduction in cyber crime attacks against businesses operating in Western markets. 3. By working closely together, we will be promoting stronger ties between those multi-national businesses that support ICSPA and its ICAP initiative and the governments and law enforcement organisations in the countries in which they operate. 4. By providing assistance locally to the countries in which they operate, multinational companies who are Members of the ICSPA can demonstrate a clear and very practical commitment to the local communities in which they operate and from which they draw their staff.
The concept of companies generating a sharedvalue strategy in tackling cyber crime underpins the entire ethos behind the establishment of both ICSPA and its International Cybercrime Assistance Programme. 5. By participating in this programme of work, multi-national companies will reap the economic and social benefits of this shared-value proposition. They will achieve this by gaining a better understanding of the issues that really matter to senior government and law enforcement officials in foreign countries. 6. By working with senior officials in the countries in which they operate, ICSPA Members will be able to assist their host nations by helping to develop
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new legislative and other public policy initiatives and to help deliver more effective programmes to combat cyber crime. Indeed, the concept of companies generating a shared-value strategy in tackling cyber crime underpins the entire ethos behind the establishment of both the ICSPA and its International Cybercrime Assistance Programme - even though at the time of establishing the ICSPA, we had not had the benefit of reading the article by Michael E. Porter and Mark R. Kramer which was published in Harvard Business Review in January 2011. “The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.”[2] Law enforcement organisations (and the governments they serve), their officers and staff (who would be the direct beneficiaries of the ICAP initiative), would benefit from:
• Improved cyber crime fighting capacity and capability.
• Improvements to the speed, efficiency
and effectiveness of international mutual law enforcement assistance activities in respect of the seizure of digital assets which are under investigation by law enforcement agencies.
• A better understanding of the impact of
cyber crime on multi-national foreign companies operating in their country and new opportunities to support those companies more effectively.
Countries...will undoubtedly benefit from improvements to their own economic stability from an increase in their law enforcement organisation’s capacity and capability to fight cyber crime. • Presenting a more unwelcoming posture
to cyber criminals targeting their country and thus deter foreign-based organised criminals from establishing cyber operating bases within their jurisdiction.
• Improved training and knowledge sharing
Benefits to countries taking part in the ICAP initiative
• Sharing good practice and information
Countries that are the unwilling and often unwitting targets of cyber criminality will undoubtedly benefit from improvements to their own economic stability from an increase in their law enforcement organisation’s capacity and capability to fight cyber crime. They will also benefit from:
opportunities with their law enforcement counterparts from countries such as Australia, Canada, Ireland, New Zealand, South Africa, the UK and the USA.
Pic by Aqua5
internationally on new cyber criminal techniques and methodologies.
• Improved knowledge sharing and
collaboration on cyber criminality issues with their international neighbours.
• Demonstrating that they are taking
active steps to present a more hostile environment to cyber criminality. This posture will encourage new external investment by multi-national companies who wish to establish operations there and will help reinforce the presence of existing foreign companies who will have the confidence to expand their operations.
• Internet security awareness public
information campaigns which will help their citizens become more aware of the threats that they face online.
• Their capability to extend government
services to their citizens using the Internet, in the knowledge that they are doing so in an environment with an improved capability to detect and deal with cyber criminality.
• An increased capability to defend their
national infrastructures from cyber attack – which, in turn, offers greater opportunities for national prosperity in an improved Internet environment.
[1] This assistance could be in the form of technical expertise, training in cyber crime techniques and public information marketing and communications campaigns to promote improved Internet security awareness. [2] From an article entitled: “Creating Shared Value” by Michael E. Porter and Mark R. Kramer, published in Harvard Business Review, January – February 2011 edition. (HBR Reprint R1101C)
For more information, please visit www.icspa.org
Photo CC by Stefan Munder As BRICs growth decelerates focus is shifting to a new tier of emerging markets, such as the Philippines.
By Kishore Rao, Principal, Strategy and Operations, Deloitte Consulting LLP, Ira Kalish, Director, Global Economics, Deloitte Services LP and Simon Mclain, Senior Manager, Strategy and Operations, Deloitte Consulting LLP.
Redraw the Global Map of Opportunity and Competition As growth slows in the BRIC countries, multinationals from developed nations may find seven new emerging markets to hold enticing opportunities. BRIC countries have been effective steppingstones for multinationals from developed nations. But as growth cools in the BRICs, where should multinationals turn? Seven new emerging markets are enticing alternatives, providing fresh opportunities and competition - for businesses in Western countries.
Overview The economies of Brazil, Russia, India, and China (the BRICs) have commanded significant attention in recent years as they transcended emerging market status and became global players. Now, as their growth pace decelerates, focus is shifting to a new tier of emerging markets, including Indonesia, Malaysia, the Philippines, South Africa, Thailand, Turkey, and Vietnam. The gross domestic product (GDP) growth in these new emerging markets
Building on the BRICs has caught up with and even surpassed that of some of the BRIC nations, creating large numbers of middle-class consumers and spawning competitive local businesses. Looking ahead, these new emerging markets could become significant B2B and B2C growth opportunities for multinationals from developed countries. But they are also producing tough competitors, both at home and abroad.
GDP growth in new emerging markets has caught up with and even surpassed that of some of the BRIC nations. What’s driving this trend? Five common traits of companies headquartered in the new emerging markets underscore the nature of this trend:
1. Bursting onto the global stage. Businesses anchored in these countries are effectively penetrating their own local markets and expanding aggressively into
other emerging and established markets globally. Current direct investment outflows from the new tier of emerging markets increased to $39 billion in 2012. South Africa, which has met with BRIC representatives at their annual summit since 2011, is the third-largest investor in least-developed countries, trailing only China and India. Further, 36 percent of executives based in Southeast Asian markets are making new market expansion a top priority. Multinationals entering these markets will likely face stiff competition from local firms, companies from other new emerging markets, and multinationals from other Western countries.
2. Hybrid business models. Companies in new emerging markets are leveraging innovative products and business models perfected in their home markets, even as they pursue expansion in other emerging markets. This is an important objective according to executives based in Southeast Asia, who cited expansion into both Asian and non-Asian emerging markets as among their highest priorities. We have seen this tendency in companies from other new emerging markets as well. They are likely to be strong contenders, given their home-market advantage and the cultural and socio-economic similarities of the markets.
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3. Proximity to home markets. This is an important consideration in the expansion plans of new emerging market companies. For example, two of the three companies featured in this report focused their expansion plans on countries within the same region - Eastern Europe and Africa, respectively. This inclination is further evidence that Western multinationals are likely to face formidable competition in new emerging markets.
Photo by Izmael
4. Focused innovation. Low-cost disruption is giving way to market-focused innovation and R&D as the basis of competition for local companies. Rather than merely offering “good enough” products at cheaper prices, these companies are focused on product and business model innovation to compete effectively. We’re not talking Silicon Valley-style innovation, but rather incremental shifts aimed at solving unmet needs, building brand strength, and improving customer service. Western multinationals may need to adjust their strategies to compete effectively against these approaches.
Lessons Learned: What Works and What Doesn’t Three main factors are helping companies in new emerging markets flourish - alongside their burgeoning economies. First, although China and India are expected to lead all emerging markets in terms of real GDP growth in the near term, countries in Southeast Asia, Eastern Europe, and Africa are seeing strong economic growth rates, equal to or greater than that of BRIC countries. They may even outperform Brazil and Russia by 2016. Such impressive GDP growth rates are the product of improved infrastructure and an expanding middle class. Local companies too are benefiting from strong organic growth at home and in similar nearby foreign markets. Of course, each country is growing at a different rate and, therefore, represents a different level of opportunity. But the opportunities appear to be strong overall.
Companies in new emerging markets often profit from local product and business model innovations.
China, along with India, is still expected to lead all emerging markets in terms of real GDP growth in the near term.
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Second, companies in new emerging markets often profit from local product and business model innovations. For example, many companies focus on just a few specialty product lines when they enter a new market, requiring fewer and lower-scale facilities. Such structural choices can create sustainable competitive advantage. Often, emerging market competitors are also willing to sacrifice profit margin on individual
Pic by Cienpies Design New emerging market companies possess many structural advantages, such as large, low-cost labour pools.
products to gain market share, whereas multinationals from other countries may not. Finally, participation in new emerging markets can require multinationals to undergo a steeper, more experimental learning curve than is typical in more developed countries. That learning curve is likely to be different in different markets, and may be steeper in some than others. Local companies, on the other hand, can often translate lessons learned from one emerging market to another more efficiently. This, when added to agile corporate governance structures, proximity to other emerging markets, advantageous cultural and ethnic factors, and a focus on longterm growth (rather than a capital marketdriven short-term focus), can enable these companies to redeploy assets and capabilities easily and effectively. These three drivers are self-reinforcing and multiplicative in nature. For example, strong growth often spurs strong investment in innovation, and that, in turn, can lead to timely deployment of assets, which reinforces and restarts the cycle.
Looking Ahead The Building on the BRICs trend has four broad implications for Western multinationals.
Business as usual will likely not prevail. Western multinationals expanding abroad into new emerging markets today may understand the importance of local relationships and use of low-cost operating
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models. But they also should understand hybrid business models, including: • Developing market-specific product lines; • Reviewing ROI metrics frequently with a willingness to redeploy assets in a timely manner to more profitable uses when necessary; • Dealing with structural impediments, such as limited telecom capabilities, slow or irregular supply chain partners, and undependable power supplies, by bringing more activities in-house;
(New emerging market) companies are likely to challenge multinationals in developed markets through disruptive innovation strategies. • Leveraging local market advantages, such as resources, labour, and willingness to adopt new technologies in a timely manner; • Adopting tactics used by emerging contenders, such as expanding in a timely manner into new markets, developing market-specific innovative products and services, and focusing on long-term growth.
Competitive threats from emerging market challengers will likely increase. Emerging market companies are winning in their home regions, and are now looking to expand into developed markets in Western
Europe, North America, and Japan. For example, while many smaller companies are making inroads through gradual footprint expansion, others have established a credible presence in a number of developed markets. This trend is likely to accelerate.
Competitors will likely exploit structural advantages. New emerging market companies possess many structural advantages, including streamlined operations and large, lowcost labour pools. They are also investing in R&D to drive higher product quality. Such companies are likely to challenge multinationals in developed markets through disruptive innovation strategies.
Conventional business models could become obsolete. New emerging market companies may deploy self-improvised, non-traditional business models that they have tested in emerging markets to overcome market constraints in developed countries. New emerging markets benefit from strong GDP growth and locally headquartered businesses that are both aggressive and innovative. For Western multinationals looking to build momentum, even as developed markets continue to sputter, these new markets could represent the next major frontier. But it won’t be easy. The leaders of the new emerging market companies could challenge Western multinationals, both in emerging markets and even in mature Western markets. Originally published March 2013 in Deloitte University’s ‘Business Trends 2013’.
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