CFI.co Spring 2015

Capital Finance International

Spring 2015

GBP 4.95 // EUR 5.95 // USD 6.95

AS WORLD ECONOMIES CONVERGE

Angela Merkel, Chancellor of Germany:

THE SENTINEL

ALSO IN THIS ISSUE // WORLD BANK GROUP: OIL EXPORTERS & RENEWABLES // IFC: BENEFITS SHARING US DEPARTMENT OF STATE: IMPROVING THE INVESTMENT CLIMATE // UNPRI: FIDUCIARY DUTY NASDAQ: STOCK EXCHANGES, EUROPEAN CAPITAL MARKETS, AND SUSTAINABILITY // WBG: BRICS APART

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Spring 2015 Issue

AN ICON JUST GOT LARGER

THE NEW NAVITIMER 46 mm

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Spring 2015 Issue

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Editor’s Column Merkel’s Dilemma: Opening Pandora’s Box or Not

Along the eastern fringes of Europe, no less than three simmering crises cause considerable concern: NATO’s move into the Baltic States to bolster their defence; Ukraine’s decision to rid the country of its Russian heritage by decree; and Greece’s continued struggles to find enough cash to service the country’s ballooning debt. Behind the headlines, this threepronged disturbance of the status quo stems from but a single source – and it is not one readily identified as troublemaker.

The European Union may have helped secure seven decades of blissful peace, its runaway ambitions now threaten to derail the complex arrangements – and demolish the edifice – that stabilised the continent and ushered in an age of extraordinary prosperity.

For all Mr Putin’s painfully obvious faults, shortcomings, and bravado, the Russian president has not been the instigator of the crises. He has merely reaped the benefits of the EU’s monumental diplomatic mishaps. It was, after all, the EU that actively tried to lure the Ukraine into its orbit. Though it probably had the best of intentions, that policy backfired, caused a regime change in Kiev, and thus created a vacuum for President Putin to fill.

Editor’s Column

The singularly inept EU High Representative for Foreign Affairs and Security Policy Catherine Ashton, since replaced, stumbled and blundered into every single trap laid by the Russians. From then on, the agenda was set, and periodically updated, by Moscow, leaving Brussels to merely follow the script as dictated.

The tensions now arising in the Baltic States are the fallout of the war-by-proxy festering in the Ukraine.

With NATO moving in hardware – but no soldiers yet – and dusting off its war plans, the Russians understandably feel some unease. Estonia, Latvia, and Lithuania – member states of both the European Union and NATO – also have reasonable cause to fear Russia’s newly-found proactive approach to furthering its interests. The three republics, home to sizeable minorities of ethnic Russians who have not

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always been treated with the utmost courtesy, may well visualise future troubles not unlike those that caused the Ukraine to split.

After the demise of the Soviet Union in 1991, an informal entente was reached whereby the Western Powers implicitly recognised Moscow’s reduced sphere of influence over some of its most-prized former possessions. The Ukraine, Belarus, and Moldova – nominally independent – all fell within this domain. It was understood that Moscow, while respectful of these countries’ sovereignty, would remain the preeminent power in the region. In return, Russia would accept without demur the absorption of its former satellite and client states in Eastern Europe into the EU and NATO. By breaking this geopolitical arrangement, the European Union ruffled feathers all round, sowed instability, and got thwarted – or rather diplomatically threshed. The European Neighbourhood Policy (ENP) now lies in tatters, as does the EU’s reputation. Any attempt at reviving either will only make matters worse. It is time to give it a rest.

The same holds true for the third crisis brewing: Greece needs a rest. After losing more than a quarter of its national income to mindless austerity – imposed and pursued at the behest of angst-ridden Germans for ideological rather than pragmatic motives – the country cannot reasonably be expected to passively continue on a path that only leads to utter destitution.

Refusing to prod both the European Central Bank and the International Monetary Fund for the speedy release of the remaining €7.2bn tranche of the bailout package, the EU is yet again allowing a blip on the radar to blot out the entire screen. As Greece desperately tries to come up with the cash it needs to pay off creditors – raiding municipal accounts in what The Guardian called the equivalent of turning the living room sofa inside out in the hope of finding some loose change – it stumbles from one deadline to the next, rocking financial markets and subjecting the country’s long-suffering banks to a slow, but

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steady and painful, run that further drains their already meagre capital reserves.

This issue’s cover is graced by Angela Merkel, the sentinel of all things European. It is a role thrust upon her, rather than one taken. The German chancellor has made a career out of avoiding change. As such, she is the ultimate conservative, employing her vast powers for the maintenance of the status quo, i.e. business as usual in order that her thrifty nation may accumulate ever more wealth.

In dealing with an assertive Russia, Chancellor Merkel is now tasked with cleaning up the mess made by the EU. To achieve this, she needs to keep the trigger-happy Americans at bay, and the expansive Russians engaged. So far, Mrs Merkel has managed to do both. However, she has been less successful in dealing with Greece, leaving the country to teeter on the edge of the precipice. Chancellor Merkel’s inaction on Greece has its origins in moral scruples: she balks at rewarding a nation she considers irresponsible in its ways.

Lofty as that may seem, allowing the Greek economy to crash and burn will most decidedly not remain without consequences for the rest of Europe. It is not so much the financial contagion that causes concern, as it is the precedent that failing Eurozone countries may fall overboard without the benefit of a lifejacket. Also, what if the Greek economy actually recovers after being set loose from the euro, as it is likely to do? Spanish and Portuguese voters would certainly be interested in, and draw lessons from, the experiment and act upon them.

A “Grexit”, thus, becomes Europe’s proverbial Pandora’s Box. I, for one, seriously doubt that Chancellor Merkel will feel adventurous enough to open it. If nothing else, she is a most sensible lady.

Wim Romeijn Editor CFI.co

Editor’s Column

Berlin: Brandenburg Gate

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Letters to the Editor

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There are still far too few female business leaders participating in the WEF Annual Meeting at Davos. Okay, there was a modest improvement in 2015, but remember that in previous years the percentage of women attending actually fell.

At this year’s meeting more than 80% of the participants were male. Yes, of course, the main problem is the dismally low rate of female representation in boardrooms and at senior executive levels in corporations, but the approach Davos takes to economic and social problem-solving suggests that something closer to equal representation of the sexes would make far more sense. The forum is to be congratulated on taking positive action a few years ago to encourage female attendance but nothing much has come of it. Mr Schwab, how about targeting one in four women as participants in 2016?

SYLVIA CHANDLER Washington, D.C. (USA)

I want to take issue with Mr Rosenwald who criticises India for developing a satellite to orbit Mars. He takes us to task for not prioritising the elimination of extreme poverty or tackling the marginalisation of parts of our society. Come to India, Mr Rosenwald, and look around to see what we have done in terms of improving the lives of our people and responding to their hopes and aspirations.

The space programme is but an add-on and an indication of what our country is capable of achieving. I am not going to gush on about this achievement or tell of the scientific value of the work we have carried out as this has been explained by some notable commentators. Suffice it to say that the project’s expenditure has been comparatively low. As our foreign minister pointed out, the Hollywood movie Galaxy cost a third more again than the $75 million we spent on the Mars programme. His argument – which is by no means a good one – could easily apply to the United States.

Do not try to hold us back because of who we are.

R RAMAMURTHY Mumbai (India)

It may be true that the election, in December last year, of Mr Essebsi represented a rejection of political and religious radicalism in Tunisia, but the resulting atmosphere of freedom this brought about (with many fundamentalists being released from jail) actually encouraged the radicalisation of many of our young people.

Tunisia has the sad distinction of producing more radicalised fighters than any other country. The attack on tourists in Tunis in March (for which Islamic State has claimed responsibility) is an outrage which our country must avenge. Yes, hope springs eternal with Arab Spring but we worry about its fragility in these troubled times.

WALID CHATTI Tunis (Tunisia)

You correctly report that Beijing is almost unfit for human habitation because of its frightening levels of air pollution (and that things are not much better elsewhere in the country). The mayor of this capital city has called for an all-out effort to fight the smog. Surely we can all agree on this as an obvious priority. But this all-out effort should include support to media efforts such as the outstanding film Under the Dome which took China by storm.

At first ministers and even the premier made encouraging noises but before too long the Communist Party stepped in to suppress the documentary. This shows once again that freedom of information in China is often just a species of cynical politicking at the top.

R LEE Singapore

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Spring 2015 Issue

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It is good to see that Mr Deverajan, chief economist of the World Bank’s MENA region, is hopeful for the longer term prospects of this diverse group of countries. He is right in saying that the current social contract between citizen and state has brought some significant benefits but that it should also take a share of the blame for present youth unemployment levels that are running at around 25 percent (the highest in the developing world). Mr Deverajan’s proposed new social contract focuses on encouraging competition in domestic markets (which should encourage SMEs) and bringing more accountability to the delivery of public services including education and medicine. We must bring down these levels of youth employment and remember that the dangers involved are not solely economic.

SYED ABDEL FATAH Cairo (Egypt)

Listen, if you will, to the roaring in the distance of the African economic lion. As you reported last issue, my country favours and rewards the brave investor and promises growth and progress. This assertion was made in the recent African Attractiveness Survey under the signature of the Big Four accounting firms. I note also that McKinsey forecasts a 40 percent increase (to $ 1.4 trillion) of consumer spending in the continent by the year 2020. I would like to offer two suggestions: my first is that investors should seek reliable advice so that they may take advantage of the as yet undiscovered opportunities here. Be safe in the knowledge that local business is capable, ready, and willing to collaborate with the brave. Second, there should be no raised eyebrows when you see our people partake in the little luxuries of life.

T WACERA Nairobi (Kenya)

Perhaps there should be a CFI.co boxing ring to accommodate the elegant spats between the editor and columnist Ross Jackson. And maybe we should look for a more decorous arena for resolution of his differences of opinion with the likes of Naomi Klein. Truth be told, this reader is very happy to see such contrary views in the magazine. How else could we be expected to make up our minds on matters outside our personal expertise?

So bravo too for your At Loggerheads debate: but this is more a fight with the claws out than a chess match, I would have thought.

JAMES CARVER Oxford (UK)

Foreign business and the diaspora could do well by responding to the challenge of the Palestine Investment & Development Company (PADICO) to take advantage of the countless opportunities to help further develop the Palestinian economy. PADICO has performed magnificently well in this regard during the past twenty years and we should take heed of their good advice. I notice that this organisation won a CFI.co award for their long years of hard and productive work - this distinction was certainly very well deserved.

AHMAD KHOURY Abu Dhabi (UAE)

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Editor Wim Romeijn

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Assistant Editor Sarah Worthington

COVER STORIES

Executive Editor George Kingsley

WBG: BRICS Apart

Production Editor David Graham

(12 – 14)

Editorial William Adam Ivan Chapman Diana French David Gough-Price Ellen Langford John Marinus

US Department of State: Improving the Investment Climate (24 – 25)

Columnists Otaviano Canuto Ross Jackson Tor Svensson

Nasdaq: Stock Exchanges, European Capital Markets, and Sustainability (26 – 27)

Distribution Manager Len Collingwood

Subscriptions Maggie Arts

Angela Merkel - Stealth at the Helm (28 – 32)

Commercial Director Jon Gerben

Director, Operations Marten Mark

Publisher Mark Harrison

Capital Finance International Meridien House 69 - 71 Clarendon Road Watford Hertfordshire WD17 1DS United Kingdom T: +44 203 137 3679 F: +44 203 137 5872 E: info@cfi.co W: www.cfi.co

Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk

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UNPRI: Fiduciary Duty (174 - 176)

UNDERSTANDING THE POLICY LIFE-CYCLE The process of public society has a number of classic stages which interact in a dynamic fashion: identification, information gathering, decision-making, implementation, evaluation, termination and renewal. Investors need to understand their role for each.

IFC: Benefits Sharing

UNDERSTANDING THE POLICY LIFE-CYCLE (194 – 198)

The process of public policy has a number of stages which interact in a dynamic fashion: identification, information gathering, decision-making, implementation, evaluation, termination and renewal. Investors need to understand their role for each.

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World Bank Group: Oil Exporters & Renewables IDENTIFICATION (202 – 204)

Decisions need to be made on what, whether and how to proceed. This will involve discussions about the issue, the information needed, the key actors to be consulted and the policy options that may be available.

Policy processes may be initiated by investors concerned about gaps in regulatory frameworks (e.g. Ceres call for the SEC to require the disclosure of climate change related information in SEC filings), or about weaknesses implementation of regulation (e.g. the Code CFI.coin the | Capital Finance International for Responsible Investing in South Africa was catalysed by investors concerned that asset owners were not sufficiently active in terms of corporate governance).

Spring 2015 Issue

FULL CONTENTS 12 – 33

As World Economies Converge

World Bank Group

Ross Jackson

Nouriel Roubini

Ann Low

Evan Harvey

Tor Svensson

34 – 45

Young Leaders

46 – 63

Europe

InverCaixa Gestión

DEG

NBG Securities

Silk Invest

Capital Trust Group

Luisa Nenci

64 – 86

CFI.co Awards

Rewarding Global Excellence

87 – 91

At Loggerheads

92 – 125

Africa

Alios Finance Group

Schlumberger

Absa bank

Pison Housing Company

Horizon Group

Simba Group

Lafarge

United Capital Bank

Shiekan

Medallion Communications

NamPro

BCI

126 – 151

Middle East

Emirates NBD

Grant Thornton

AJIL

BeitMisk

SEDCO Capital

Growthgate

Concord Group

UAE Exchange

152 – 163

Editor’s Heroes

Ten Men and Women Who are Making a Real Difference

164 – 183

Americas

BONUS

Corporate Properties of the Americas

Maran Group

UNPRI

184 – 205

Asia

AnandRathi

Banco Nacional Ultramarino

IFC

Quippo WBG

InstaForex

206

Seeking Centre Stage

CFI.co | Capital Finance International

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> Otaviano Canuto, World Bank Group:

BRICS Apart as Oil Prices Plunge The oil price plunge since last June has been deemed, overall, as a boon for the global economy. However, that depends on where one stands as a producer or user, as illustrated here with the divergence of impacts on BRICS economies.

LOWER OIL PRICES HERE TO STAY Brent crude oil prices fell to US$45 a barrel at the end of January, from as high as US$115 in June last year, marking the end of a four-year period of fluctuations in the range of US$93$118 (Chart 1 – left side). They have recently rebounded to levels close to US$60 but most forecasts point to prices oscillating between $50 and $80 a barrel through 2016.

Supply-side developments have played a major role. The steady increase of US shale oil production – together with other unconventional oil sources elsewhere – during the long-period of high prices led to a persistent excess of global production over consumption.

CFI.co Columnist

Saudi Arabia, the “swing” global producer, started breaking the previous price-setting norm in August of last year, by discounting prices to Asian consumers to protect market share. In November, the OPEC decision to uphold its production level corresponded to a structural break in oil price formation, in the sense that maintaining market shares clearly superseded targeting any oil price band. Given that shale oil production units can rise or decrease faster than conventional oil, responding to market price fluctuations, the change of the pricesetting regime seems to have come to stay for long (Chart 1 – right side).

“Supply-side developments have played a major role. The steady increase of US shale oil production – together with other unconventional oil sources elsewhere – during the long-period of high prices led to a persistent excess of global production over consumption.”

THE WINNERS AND LOSERS The overall net impact on global GDP is expected to be positive. Besides a boost to global demand derived from the transfer of purchasing power from oil producers to consumers, lower oil prices have widened the space for (temporary) expansive monetary policies and enabled lower government spending with fuel subsidies.

There have been winners and losers across countries and regions, but negative impacts on the latter are expected to be less globally significant than benefits to the former.

According to World Bank estimates: “… a decline in oil prices of about 50 percent could be associated with a 0.7-0.8 percent increase in global GDP over the medium term. (Basu, 2015)”

From a country standpoint in particular, it has all depended on the role and weight of oil production and consumption in its economy.

Net exporters (importers) of oil have received a negative (positive) impact from the deterioration (improvement) of terms of trade, accompanied by corresponding income shifts between producers and users within the country – Chart 2 exhibits non-advanced economies as net oil exporters and importers.

Fiscal impacts have been negative where taxes on exports/consumption of oil constitute an important source of government revenues, while positive with respect to outlays with energy subsidies – Chart 3 shows how some countries are fiscally dependent on oil revenues (left side), as well as that fossil fuel subsidies can be found on both net exporter and importer groups of countries (right side). Countryspecific contexts and policy responses have also weighed on the final outcome.

The country-specific nature of impacts of lower oil prices can be illustrated with the diversity of situations among the group of BRICS (Brazil, Russia, India, China, and South Africa) economies. Three distinctive positions can be pointed out.

RUSSIA FACES ADDITIONAL WHAMMY As oil and gas account for more than 70% of Russia’s exports and nearly half of its budget revenues (Chart 3), its economy has suffered a strong negative impact from lower oil prices.

The energy sector is responsible for 17-25% of its GDP. The oil price drop has come on top of economic sanctions from the EU, Japan, and the US related to the Ukraine crisis. While current account balances have remained positive, annual resident capital outflows were running at 4-5% of GDP last December.

Devaluation pressures on the rouble stemming from geopolitical risks increased after the oil price fall gathered pace. As a result, not only has annualised inflation moved above 10% this year, but the $600bn foreign debt of Russian

Chart 1: Oil market - recent developments. Source: Baffes et al (2015).

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Spring 2015 Issue

“As oil and gas account for more than 70% of Russia’s exports and nearly half of its budget revenues, its economy has suffered a strong negative impact from lower oil prices. The energy sector is responsible for 17-25% of its GDP. “ Chart 2: Oil prices - winners and losers. Source: Institute of International Finance (IFF).

banks and non-banking firms – already facing the sanctions bar from refinancing with US and European banks – became an increased source of concern. Although large foreign reserves may still serve as a buffer, real GDP is expected to slump by more than 3.5% this year, followed by another 1.5% in 2016.

CHINA, INDIA, AND SOUTH AFRICA BENEFIT According to estimates by the World Bank (2015a), a 10% decrease in oil prices is expected to lift growth in oil-importing economies by something in the range of 0.10.5 percentage points, depending on the share of oil imports in GDP. Positive fiscal and currentaccount impacts are also expected. China, India, and South Africa are beneficiaries.

Chart 3: Oil & gas revenues and fiscal costs of subsidies. Sources: IFF (left); Balles et al, 2015 (right).

In China, the World Bank estimates an activityboosting effect of lower oil prices in the range of 0.1-0.2%, given that oil comprises only 18% of energy consumption. A deflationary impact is also on the cards, although it will be limited as energy and transportation correspond to less than 20% of the CPI. Fuel subsidies amount to only 0.1% of GDP, so fiscal impacts will not be significant. On the other hand, as China remains the second-largest world importer, lower oil prices throughout 2015 will likely raise its current account surplus by 0.4-0.7 percentage points of GDP.

South Africa is also a net importer of oil and a beneficiary from lower prices, including by corresponding effects on inflation and the import bill (Chart 2). As far as current-account deficits and GDP are concerned, recent oil

Chart 4: Commodity price indices. Source: World Bank (2015).

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CFI.co Columnist

India has an oil import bill of 7.5% of GDP (Chart 2) and has derived high terms of trade gains from the oil price evolution.

Furthermore, its challenges with fiscal deficits and high inflation have been made easier. The government has already taken the opportunity to phase out diesel subsidies and hike taxes on oil derivatives. Falling oil prices have also helped to bring inflation down to less than 4.5% a year last December, opening space for some monetary policy loosening ahead.

price developments have come as a relief after the previous decline of prices of metals and minerals – see Chart 4 – that comprise a substantial chunk of the country’s exports and GDP. MIXED IMPACT ON BRAZIL Brazil has a small deficit on its oil foreign trade - as compared to the countries above (Chart 2) - and that qualifies it for potential benefits of declining prices both on its current-account deficit and as a facilitator for an undergoing domestic price realignment of oil derivatives.

On the other hand, the new international price regime and levels have come at a moment in which strong bets on future oil-related investments had been made in previous years, toward an expected crossing of the threshold to the group of net-exporting countries. Together with the unfolding corruption scandals in state-controlled Petrobrás, world oil price developments have prompted a full downward review of such investments.

PRICE PLUNGE BRINGS OPPORTUNITY Those oil-exporting countries that prepared themselves for the downward phase of the price cycle, constituting fiscal, and international reserve buffers during good times, have been able to cope better with the new scenario. For all the others, besides realising what a high premium must be attached to diversifying the economy from an excessive dependence on a single commodity, there is the template for future upward cycle phases left by those successful hoarders.

Finally, across the whole range of countries, the current oil price phase constitutes an opportunity to suppress existing distortive fossilfuel subsidies. As argued by Basu and Indrawati (2015), government expenditures with fuel subsidies should be reallocated to effective propoor policies. If that is accompanied by some sort of carbon taxation, cleaner energies may keep their development. i

CFI.co Columnist

ABOUT THE AUTHOR Otaviano Canuto is senior advisor on BRICS economies and ex-vice-president at the World Bank. All opinions expressed here are the author’s own and do not necessarily reflect those of the World Bank.

References Baffes, J et al, 2015. The Great Plunge in Oil Prices - Causes, Consequences, and Policy Responses, World Bank, Policy Research Note No.1, March.

Basu, K. 2015. Oil Price Plunge holds promise and peril, Let’s Talk Development, March 3.

Basu, K. and Indrawati, S.M. 2015. Cheap oil for change, Project Syndicate, February 9.

World Bank, 2015a. Global Economic Prospects, January.

World Bank, 2015b. Commodity Markets Outlook, January.

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> Ross Jackson:

A Silver Lining to Europe’s Troubles As we await the outcome of the four-month extension of the Greek credit arrangement with the Troika (EU, IMF, ECB), this is a good time to consider various possible scenarios. Indeed, I would like to outline the one scenario that has not been mentioned anywhere, as far as I know, but may well be the most satisfying for the Greeks in the long run. This scenario could well become an alternate strategy for a more humane solution to the raging economic crises suffered by Greece and many other countries.

I

am talking about a complete exit not only from the euro, but from the European Union and the World Trade Organisation (WTO) as well; I am talking about the Greek finally taking back control of their country from foreign interests. This may not seem likely right now in the midst of negotiations, but if the Troika upholds its hard line, as I expect it will, it may well be the least painful option open to Greece, and the only way for Syriza to survive as a political party with a minimum of credibility.

Let me put the problem in a larger framework as one facing Europe as a whole, and indeed the entire world. It is caused by a failed, but still dominant, economic system – the neoliberal model – that is literally strangling the global middle classes for the benefit of the wealthiest 0.1%. This elite is sucking real value out of everyone else, using a system that EU political leaders continue to support even as it slowly but surely destroys the European welfare state.

CFI.co Columnist

Many of us have warned for years what would happen if we failed to take action. My book Occupy World Street is just one warning out of many. Mainstream media have been very sceptical about such warnings. However, now reality is starting to bite even those who until now have ignored the opponents of neoliberalism.

WAKE-UP CALL Let me mention a recent wake-up call given to my own country, Denmark. This was an “aha” experience for many middle class working families as well as the trade unions – like “oh, is that what you meant all along?”. The consequences hit all concerned suddenly and harshly and did so in their own backyard, so to speak.

Scandinavian Airlines System (SAS), an icon of Nordic pride and cooperation for decades, is now fighting for its life as foreign competitors – not bound by the same high standards of labour relations, liveable salaries, and quality and safety – undercut SAS prices by using a combination of 16

“The fundamental problem – the one that has not yet been widely recognised – is that the playing field on which both domestic and foreign companies compete is strongly biased in favour of large multinational corporations.” tax evasion and employee exploitation in a period of high unemployment. For example, pilots and cabin employees are forced to take employment with daughter companies based in countries with no worker protection. They must work 60 to 70 hours per week for a minimal wage. They are also forced to pay for their own uniforms, pensions, etc.

In some cases, employees must become sole traders for tax reasons. One such low-cost airline, having forced all its pilots into a single daughter company, threatened to let that company go bankrupt if the pilots did not accept a further pay cut. In case they refused, the pilots were given the option of reapplying for their old jobs, albeit at a lower salary.

At some companies, employment conditions have deteriorated to such a degree that they have become akin to slavery. SAS is obliged to follow suit if it wishes to survive. The company took that course – with limited success – during its latest conflict with cabin personnel. It shocked the general public.

Mainstream media op-ed writers commented that the wages being offered were insufficient to actually live on in Scandinavia. The expression for this phenomenon is the “working poor” – people with fulltime jobs that cannot manage to make end meets even while pursuing the most modest of lifestyles.

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The trend started in the USA and is now common in Germany and Southern Europe. It is a bit of a shock to Scandinavians, who are experiencing the working poor phenomenon for the first time.

All the big network airlines are facing the same issue as are other industries.

And this is just the beginning: it will continue to get worse as long as neoliberalism reigns.

Consumers can only see the benefit of low prices.

They simply cannot envision the much higher price society will eventually pay as a way of life disappears and the tax base slowly crumbles.

Unfortunately, SAS is not likely to survive. Slavelike employment conditions are not about to improve.

BIASED PLAYING FIELD The fundamental problem – the one that has not yet been widely recognised – is that the playing field on which both domestic and foreign companies compete is strongly biased in favour of large multinational corporations. Almost all of the world’s countries are members of the WTO which was designed to satisfy the requirements of the largest multinational corporations – to be able to produce anywhere without regard for social and environmental impact; to sell anywhere; to use transfer pricing and intercompany loans to exploit differences in tax regimes; and to ultimately place their profits in tax havens where to are safe from their home jurisdictions.

No domestic company can compete with that.

The stark choice is between joining their ranks and foundering in what has been described as a race to the bottom. Many multinationals are now moving even their corporate headquarters to tax havens for even greater protection. It is the 0.1% elite that to all practical intents and purposes control these companies. This is, of course, why their wealth has exploded over the past thirty or so years. It is also how they managed to prosper in the aftermath of the 2008 financial crisis.

Recently, Oxfam reported that the 85 richest

CFI.co Columnist

Greece: Caryatides, Acropolis of Athens

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billionaires now own more wealth than the poorest three billion people of the world do. A few years ago, it took 300 billionaires to equal this wealth. It gets worse each day. How many billionaires will it take a decade from now?

In some countries, such as the USA, the 0.1% elite also control most politicians. It may be too late for reformers to rescue the American political process from the excessively rich; however, it is not too late to do so in Europe.

To me, the most fascinating aspect of what goes on is the apparent surprise of journalists, politicians, and citizens in general, as to what is happening to their societies as inequality grows.

I say fascinating because acerbating inequality was from the very beginning the whole point of neoliberalism and its global agents – WTO, IMF, World Bank. It was, of course, never openly stated in this way.

Furthermore, it was never intended that the “developing countries” would actually develop.

Their assigned role in the neoliberal world is to supply the rich countries with cheap raw materials. End of story.

BOATS STRANDED The actual selling point of neoliberalism was that free markets benefit everyone as in “the tide lifts all boats” and other analogies. It was never actually about economics: that was merely a façade. Neoliberalism constitutes an ideological / political plan conceived and executed very cleverly and cunningly by billionaires and their hangers-on.

CFI.co Columnist

All is going according to plan and we are currently observing precisely what was intended from the original game plan masterminded some thirty years ago. I find it incredible that so many commentators and politicians cannot fathom the real dynamics of what is going on, but continue to buy into a story that is destroying the very basis of their existence.

In principle, it is a relatively simple political problem to solve – provided the will is there. In practice it is, however, a rather complex issue.

Real change requires first and foremost rejecting a lot of our politically correct beliefs about the present economic system. For example, reformers will have to leave the WTO and establish new principles of trade with the sovereign nation state – and not foreign predators – in charge; not an easy task when we are constantly told that the sky will fall if we ever leave the WTO. For a Eurozone member state, change will prove particularly hard to implement due to a designflaw that prevents countries using the euro from issuing their own currency and tinkering with its exchange rate as their economies and inflation rates diverge. I have stated before that the only viable long-term solution for the Eurozone is its split into two blocks: one group of countries that revert to their own currencies, and another group 18

“The very concept of a single currency zone was a disastrous one and totally uncalled for.” that forms a new Euro State with both a single currency and government.

Until such a division happens, the European Union will be in continually plagued by crises and may even come to collapse. However, with a split the EU could possibly continue as a major political and economic force with a viable and unified internal market.

The very concept of a single currency zone was a disastrous one and totally uncalled for. What the EU should have done, is to allow – as it once did – national currencies to float within a set, and periodically adjusted, range. Ironically, the most peaceful period in the history of the European Monetary System (EMS) ran from 1993 to 1999 when the system collapsed just before the euro came into being.

During this unique period, European national currencies floated within a range of +/- 15% which allowed for a gradual adjustment of exchange rates without speculator movements or other disruptions. Speculators are often most attracted to pegged – as opposed to floating – currencies. Traders are usually ogling a central bank’s currency reserves and love nothing better than a central bank depleting its reserves defending a hopelessly out-of-date exchange rate set in stone.

It is here that Greece may inadvertently have been assigned the role as the first (but not the last) country that gives up the whole system as the nation realises that it has nothing to lose.

Should it come to this, Greece will at least have control over its own destiny and has the opportunity to will and re-establish a new sense of community and solidarity.

In practice, giving up on the system would mean leaving the euro, the European Union, and the WTO. So why must Greece leave the WTO and the EU once a new drachma has come into being? Rebuilding the economy will require capital controls which are not permitted by the EU. It will also require checks on imports which the WTO disallows. Without these controls, the Greek economy would be like a cork floating in the sea and, as such, remain under the continued influence of foreign interests.

END NOT NIGH Greece may have to declare bankruptcy. Of itself, that would probably not be the end of the world as we known it. The American economist Michael Hudson repeatedly reminds creditors that “debts that cannot be paid, will not be paid.”

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The Greek will have to reorganise the economy and will need to produce essential goods domestically – creating many jobs in the process.

The export of products and services should be limited to the bringing in of the foreign exchange needed to acquire essential imports the country cannot produce itself.

A policy of no new foreign loans must be implemented. An exception could be made for the financing of export-oriented projects that will generate enough foreign exchange to allow the initial loan to be paid off quickly. Also, the privatisation of public assets should stop immediately.

Greece should decide unilaterally which foreign companies and products will be allowed into the country and which foreign investment is aligned with domestic priorities. This will require new trade patterns with a few selected partners on a quid pro quo basis. It is quite doable. Note that if all countries did the same (they will eventually), the 0.1% elite would soon be consigned to history along with the destructive and undemocratic neoliberal system they espouse.

I predict that all countries will eventually ditch neoliberalism and take back control as a simple matter of survival. In fact, I predict that the abovementioned model will be used to reorganise the nation state within one or two decades from now.

This is when the current system will be replaced by one that celebrates the almost forgotten concept of a sovereign nation actually controlling its own economy.

Of course, all this will take time. However, bottomup radical reforms – inspired by new political parties like Syriza in Greece, Podemos in Spain, and The Alternative in Denmark – will inevitably happen and hopefully before the current system collapses entirely. The only long-term alternative is that of an unacceptable neo-feudal world order, cleansed of its middle class and with a handful of superrich masters controlling the destinies of billions of working poor trying to survive on $2 a day. This is the bleak future that awaits us should business continue as usual.

Greece has an historic opportunity to become the first country to experiment with the new economic model – perhaps a silver lining to its current hardships.

ABOUT THE AUTHOR Ross Jackson, PhD, worked for close to a quarter century in the foreign exchange world as currency adviser to international corporations, a currency fund manager, and research head of a team of mathematicians and IT experts. Mr Jackson is currently the owner of Urtekram, Denmark, the major Scandinavian organic foods wholesaler. He is the author of Occupy World Street: A Roadmap for Radical Economic and Political Reform (Chelsea Green, 2012).

Spring 2015 Issue

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> Nouriel Roubini:

The Negative Way to Growth?

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EW YORK – Monetary policy has become increasingly unconventional in the last six years, with central banks implementing zero-interestrate policies, quantitative easing, credit easing, forward guidance, and unlimited exchange-rate intervention. But now we have come to the most unconventional policy tool of them all: negative nominal interest rates.

Such rates currently prevail in the eurozone, 20

Switzerland, Denmark, and Sweden. And it is not just short-term policy rates that are now negative in nominal terms: about $3 trillion of assets in Europe and Japan, at maturities as long as ten years (in the case of Swiss government bonds), now have negative interest rates.

At first blush, this seems absurd: Why would anyone want to lend money for a negative nominal return when they could simply hold on to the cash and at least not lose in nominal terms?

CFI.co | Capital Finance International

In fact, investors have long accepted real (inflationadjusted) negative returns. When you hold a checking or current account in your bank at a zero interest rate – as most people do in advanced economies – the real return is negative (the nominal zero return minus inflation): a year from now, your cash balances buy you less goods than they do today. And if you consider the fees that many banks impose on these accounts, the effective nominal return was already negative even before central banks went for negative nominal rates.

Spring 2015 Issue

In other words, negative nominal rates merely make your return more negative than it already was. Investors accept negative returns for the convenience of holding cash balances, so, in a sense, there is nothing new about negative nominal interest rates.

Moreover, if deflation were to become entrenched in the eurozone and other parts of the world, a negative nominal return could be associated with a positive real return. That has been the story for the last 20 years in Japan, owing to persistent deflation and nearzero interest rates on many assets.

One still might think that it makes sense to hold cash directly, rather than holding an asset with a negative return. But holding cash can be risky, as Greek savers, worried about the safety of their bank deposits, learned after stuffing it into their mattresses and walls: the number of armed home robberies rose sharply, and some cash was devoured by rodents. So, if you include the costs of holding cash safely – and include the benefits of check writing – it makes sense to accept a negative return.

Beyond retail savers, banks that are holding cash in excess of required reserves have no choice but to accept the negative interest rates that central banks impose; indeed, they could not hold, manage, and transfer those excess reserves if they were held as cash, rather than in a negativeyielding account with the central bank. Of course, this is true only so long as the nominal interest rate is not too negative; otherwise, switching to cash – despite the storage and safety costs – starts to make more sense.

Bern: National Bank of Switzerland

“At first blush, this seems absurd: Why would anyone want to lend money for a negative nominal return when they could simply hold on to the cash and at least not lose in nominal terms?”

But why would investors accept a negative nominal return for three, five, or even ten years? In Switzerland and Denmark, investors want exposure to a currency that is expected to appreciate in nominal terms. If you were holding Swiss franc assets at a negative nominal return right before its central bank abandoned its euro peg in midJanuary, you could have made a 20% return overnight; a negative nominal return is a small price to pay for a large capital gain.

And yet negative bonds yields are also occurring in countries and regions where the currency is depreciating and likely to depreciate further, including Germany, other parts of the eurozone core, and Japan. So, why are

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investors holding such assets?

Many long-term investors, like insurance companies and pension funds, have no alternative, as they are required to hold safer bonds. Of course, negative returns make their balance sheets shakier: a definedbenefit pension plan needs positive returns to break even, and when most of its assets yield a negative nominal return, such results become increasingly difficult to achieve.

But, given such investors’ long-term liabilities (claims and benefits), their mandate is to invest mostly in bonds, which are less risky than stocks or other volatile assets. Even if their nominal returns are negative, they must defer to safety.

Moreover, in a “risk-off” environment, when investors are risk-averse or when equities and other risky assets are subject to market and/or credit uncertainty, it may be better to hold negative-yielding bonds than riskier and more volatile assets.

Over time, of course, negative nominal and real returns may lead savers to save less and spend more. And that is precisely the goal of negative interest rates: In a world where supply outstrips demand and too much saving chases too few productive investments, the equilibrium interest rate is low, if not negative. Indeed, if the advanced economies were to suffer from secular stagnation, a world with negative interest rates on both short- and longterm bonds could become the new normal.

To avoid that, central banks and fiscal authorities need to pursue policies to jump-start growth and induce positive inflation. Paradoxically, that implies a period of negative interest rates to induce savers to save less and spend more. But it also requires fiscal stimulus, especially public investment in productive infrastructure projects, which yield higher returns than the bonds used to finance them. The longer such policies are postponed, the longer we may inhabit the inverted world of negative nominal interest rates. i ABOUT THE AUTHOR Nouriel Roubini is Chairman of Roubini Global Economics and a professor at NYU’s Stern School of Business.

Copyright: Project Syndicate, 2015. www.project-syndicate.org 21

> Tor Svensson:

CFI.co Columnist

Ten Guiding Principles to Encourage Foreign Direct Investment

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orldwide, foreign direct investment (FDI) volumes are shortly expected to breach the $3tn mark – representing fully 4% of the global GDP. Foreign direct investment and trade liberalisation, two faces of the same coin, are seen as key drivers of economic development and powerful enablers that allow countries to escape poverty and thus realise their full potential.

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However, as was pointed out at this year’s Davos Summit of the World Economic Forum, there is currently no comprehensive multilateral legal framework or global institution that oversees investment flows and activities. Instead, investment flows face a bewilderingly complex overlay of bilateral, plurilateral, and interregional treaties that do little to encourage the growth of FDI volumes. If investment volumes grow, as they CFI.co | Capital Finance International

do, it is in spite of – rather than because of – this mesh of countervailing agreements.

Trying to make sense of the FDI universe, participants of the fifth Annual Investment Meeting (AIM) celebrated in Dubai between March 30 and April 1, at length debated ways to ease and encourage investment flows. The 2015 edition of the meet focused on FDI as an agent

Spring 2015 Issue

Tor Svensson (at lectern, right) - chairman and columnist of Capital Finance International (CFI.co) - moderating a plenary session at the 2015 Annual Inevstment Meeting (AIM) which took place from March 30 to April 1 in Dubai and was hosted by that country’s Ministry of Economy. CFI.co was a knowledge partner of the event.

Photo Copyright © CFI.co.

for sustainable development via innovation and the transfer of technology.

In their final declaration, attending ministers and other government representatives called upon the United Nations to include the critical role of foreign direct investment in the attainment of the sustainable development goals (SDGs) that are expected to be adopted later this year by the UN General Assembly. The ministerial declaration emphasises that FDI can contribute towards ensuring food security and help countries exploit their competitive advantages. The ministers further concluded that in order to increase investment volumes to the level necessary for SDGs to be fully met, it is necessary for recipient nations to put a stable and predictable policy framework in place.

As an AIM 2015 knowledge partner, CFI.co teamed up with the Deputy-Director Ann Low of the Office for Investment Affairs at the US State Department and officials of the UAE Ministry of Economy to draw up a list of ten guiding principles for effective FDI policies.

The principles aim to help countries compose a legal framework that facilitates FDI flows and ensures key elements are put in place that encourage sustainable development.

TEN GUIDING PRINCIPLES FOR GOVERNMENTS’ EFFECTIVE FDI POLICIES

“In their final declaration, attending ministers and other government representatives called upon the United Nations to include the critical role of foreign direct investment in the attainment of the sustainable development goals (SDGs) that are expected to be adopted later this year by the UN General Assembly.”

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The objective of these principles is to be effective: the government policies and actions they encourage should result in the transfer of technology and encourage innovation, including by small and medium-sized enterprises. i ABOUT THE AUTHOR Tor Svensson is the Chairman of Capital Finance International.

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CFI.co Columnist

1. Play on Strengths (comparative advantage) 2. Be predictable and Friendly (clear rules and welcoming attitude) 3. Create Incentives (encourage investors) 4. Do Not Discriminate (all are equal in the eyes of the law) 5. Regulate for Sustainability (growth now and in the future) 6. Protect Intellectual Property Rights (shield creativity from pirates) 7. Remove Red-Tape (minimise bureaucracy) 8. Provide Access to Finance and Risk Management Services 9. Fund FDI-Agencies and Listen to their Feedback (data and research are essential) 10. Communicate, Communicate, Communicate (keep talking and listening)

> Ann Low, US Department of State:

Improving the Investment Climate – a Roadmap for Governments A contribution to the Annual Investment Meeting 2015, Dubai, UAE

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oday, countries all over the world compete to attract foreign investment.

Since companies and investors have many choices, countries must make deliberate and visible efforts to continually improve their investment climate.

Companies invest where they can make profits and manage risks. When companies invest outside their home market, they assume greater risks due to unforeseen business challenges and a foreign country’s unfamiliar laws, customs, market practices, and enforceability of contracts.

To compensate for these risks, companies impose risk premiums on their foreign investments. In some cases, when they perceive the risks as too costly to manage, or processes for doing business too complex, they avoid investing in, or even exporting to, some foreign markets altogether.

When a company’s business model depends upon intellectual property (IP) protection, in the form of patents, trademarks, copyrights, or trade secrets, the risks of investing abroad are potentially intensified, depending on the effectiveness of IP protection in a particular country. Since intellectual property protection is territorially-based, patent and trademark protection in one country does not automatically carry over to another country.

Typically, a company must register its patents and trademarks separately in each country where it needs protection. In that process, a company must trust the foreign government to effectively protect the sensitive test data contained in its regulatory filing and efficiently prosecute infringements. The greater the company’s reliance on its intellectual property, the greater the risks it faces from doing business in countries perceived to have ineffective IP protection – the greater the risk that a theft of intellectual property could occur and that theft could undermine the company’s competitive advantage.

At the same time, it is often those very countries with ineffective IP protection that could benefit enormously from the technology and know-how of innovative businesses, and their investments.

So how can governments improve their countries’ investment climates? What can they do so that desired beneficial investment takes place, franchises are granted, trade in branded hightech products thrives, and locals are trained to use and manage technology?

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“All governments should have faith that their people can innovate.”

The answer is “everything.” An attractive investment climate depends upon an entire ecosystem of good policies, investments in human and physical capital, and time to show results. However, “everything” is impossible to achieve quickly. Instead it requires a systematic approach that outlines the key areas where improvement is needed. What a government can do immediately is signal its commitment to continuously improving its investment climate by systematically improving its economic policies and publicising the impact of those better policies.

My office, the Office of Investment Affairs at the US Department of State, oversees our embassies’ production of annual investment climate statements. These reports identify barriers and market distortions that deter US investment, and policy and administrative improvements that facilitate it. These statements, which are posted on our website (www.go.usa.gov/3cu63), cover over 170 countries, and can be a useful resource for foreign governments seeking to improve their investment regimes.

I would like to highlight three key areas where a government can fairly quickly signal its commitment to improve its investment climate: 1. Ensuring the enforceability of contracts; 2. Intellectual property protection and enforcement; and 3. Business facilitation.

In each of these areas, the government leads and results are measurable. The government has the convening authority to bring businesses and other stakeholders together to identify challenges, design effective solutions, and prioritise actions. The government makes and enforces the rules. It can monitor implementation and be the catalyst for continuous learning and policy improvements. If the rules and laws are clearer and more efficiently enforced, risks for businesses are reduced, and incentives for doing business are increased. The virtue of undertaking reforms in these areas is that the same policy CFI.co | Capital Finance International

improvements that attract foreign investment with world-class technologies also spur domestic innovation, start-ups, and job creation. Even if a country is not focused on attracting foreign investment, these actions are worth pursuing to create the environment necessary to unleash its own citizens’ creativity and entrepreneurial zeal.

The United States has benefited from sending these signals for over 200 years. A legal system that provides for basic contract law and intellectual property protection are part of America’s roots. For example, the protection of intellectual property is enshrined in our constitution. Article 1, Section 8, clause 8 empowers the United States Congress “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” In President Lincoln’s words, the patent system adds “the fuel of interest to the fire of genius.”

All governments should have faith that their people can innovate. Innovations do not come only from well-funded national laboratories, world-famous universities, or giant multinational tech firms. Access to the Internet – through smart phones and broadband systems – and to local and global supply chains offer opportunities – especially to young people and rural residents – to adapt local and foreign technologies and ideas to meet local needs. Local businesses need trademark protection to build their brands. Local artists and musicians need copyright protection for their creative work. Academics need better connectivity to collaborate and advance their research, and patents to enable them to commercialise their most promising discoveries.

Over the long term, a government can signal to investors its commitment to enforceable contracts by building a strong legal system, taking a public stance against corruption, and mandating transparency. For example, a government can increase transparency by publicising draft laws and regulations on the Internet and during public events, with sufficient lead time for stakeholder consultations and implementation by businesses.

In the short term, governments can signal a commitment to enforceable contracts and investor protection through bilateral investment treaties and investment chapters of free trade agreements.

Spring 2015 Issue

AIM 2015: Ann Low. Copyright © CFI.co.

These agreements increase predictability and accountability for all parties involved by defining government responsibilities, increasing market access, removing barriers to trade and investment, and providing well-defined processes for resolving disputes. Open, transparent, wellregulated and non-discriminatory environments for trade and investment create synergies between governments and businesses, where governments implement good policies and businesses create jobs, spur innovation, and efficiently allocate resources in response to market conditions. Consumers in these markets enjoy ever larger selections of higher quality, lower cost products, and are inspired to create new products and services – reinforcing this synergistic relationship, and providing a sound basis for sustainable development.

A government can signal its commitment to intellectual property protection through transparent registration processes, robust legal protection, and effective enforcement. First, a government can create a transparent, credible, and efficient process for granting patent, trademark, and copyright protection. It can offer a fee structure with lower charges for individuals and small companies. Bringing an innovative idea or product to the marketplace requires substantial investments of time, labour, and money in research, product development, and marketing.

If others can steal an idea, undermining the creator’s ability to recoup the cost of his or her

innovative investment, the incentive to create is reduced. Second, a government can establish a legal framework to efficiently prosecute IP violations and dispose of counterfeit products.

Third, a government can invest in computer systems, Internet access, and training that enable its customs officials to identify and stop counterfeit products at its borders. Talent travels, so governments that wish to keep their most creative, entrepreneurial citizens at home must invest in the governance infrastructure that will nurture those individuals’ talents and allow them to benefit from their work.

A government can signal its commitment to business facilitation by simplifying its administrative processes and putting them online. This can be particularly important for small- and medium-sized enterprises, both foreign and domestic. My office has been working with the United Nations Conference on Trade and Development (UNCTAD) and the Kauffman Foundation’s Global Entrepreneurship Week to do just that in the area of business registration.

We have created a website, GER.co, with links to all online business registration websites in the world. Our goal is to make it easier to register a business anywhere. GER.co lets entrepreneurs know what to expect in terms of the time, costs, and complexity of business registration in each country, and brings investors directly to each country’s official business registration website. The site helps governments identify best practices for business facilitation and can CFI.co | Capital Finance International

be a catalyst for improving, not only business registration websites, but also other online administrative procedures, as governments look at each other’s websites and learn from them.

Finally, underlying all three signals is an open Internet, which facilitates the rapid exchange of ideas and data and allows collaboration across borders. An open Internet – combined with a government’s commitment to enforceable contracts, intellectual property protection, and business facilitation – helps enable countries and all their citizens to enjoy the benefits of new technologies, to attract investment, and to accelerate their development prospects towards a more sustainable and prosperous future. i

ABOUT THE AUTHOR Ann Low is deputy director of the Office of Investment Affairs at the US Department of State. She has over 25 years of experience working on multilateral and economic affairs.

Ms Low has served as the US Representative to the Asia Pacific Economic Cooperation (APEC), the OECD Working Party on State Ownership and Privatization Practices, and several United Nations’ bodies (UNCTAD, UNDP, UNICEF, DHA, ECOSOC, UNGA). Ms Low graduated from Georgetown University’s School of Foreign Service and has a Masters of Management degree from Northwestern University’s Kellogg School of Management. She has served as a visiting diplomat and adjunct professor at Columbia University.

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> Evan Harvey, Nasdaq:

Stock Exchanges, European Capital Markets, and Sustainability Sustainability is already part of the global market ecosystem. Exchanges and regulators have embraced it, researchers and academics have validated it, and the law in many places already requires it. Even if the perspective remains limited to the US Supreme Court’s definition of materiality or SEC disclosure guidance, sustainability data is likely part of the total mix of information that investors require.

A

s listing venues, stock exchanges do everything possible to support their issuers, provide them with access to long-term capital, and help them grow their business. They have no desire to simply pile new requirements on top of old ones, even if it results in better sustainability data flows. But exchanges also have more farreaching obligations. To be sure that the interests of many different market participants are fairly represented, exchanges are working together to create change in their industry.

The Sustainable Stock Exchanges (SSE) initiative is an UN-backed project, exploring how exchanges can collaborate with investors, regulators, and companies to enhance corporate transparency, and ultimately performance, on environmental, social and corporate governance (ESG) issues. It is dedicated to finding ways to encourage responsible, liquid, and long-term investment.

Another effort comes from the World Federation of Exchanges, which is the only trade association binding virtually all of the world’s stock exchanges together. Their Sustainability Working Group (SWG) has been embarked on a two-year quest to determine the material need (if any) for exchanges “to seek, standardise, and/or publish environmental, social, and corporate governance (ESG) data.” The SWG has been scouring traditional sustainability data disclosures and reporting frameworks for fresh insights. Its group members are tasked with interpreting the real impacts of exchange intervention, both positive and negative, on their business.

But because several kinds of exchanges participate in this group – and make up the membership rolls of the WFE – it does not limit its investigation to the ESG disclosure space.

This group also considers sustainability indexes and financial instruments, energy futures and commodities, and the larger role that exchanges as financial engines can play in the formation and sustenance of a fair, open, and transparent national economy.

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“The Helsinki Exchange was also the first exchange in the world to receive a WWF Green Office diploma, and one of the first in the world to go carbon neutral.”

THREE LEADING EUROPEAN EXCHANGES These projects are made up of multiple exchange participants from a diverse array of economies and markets. European participation is an integral driver. Five of the nineteen exchanges in the SSE, for example, represent European markets.

Deutsche Börse (DB), an active member of both the SSE and SWG, makes its case for corporate transparency directly to issuers. DB provides detailed sustainability reporting guidance (the ESG Practice Guide) to all of its listed companies.

The reasons for doing so are deeply rooted in investor concerns: “ESG information goes beyond a company’s financial figures to show an additional facet of the company in question and is therefore significant to its well-founded evaluation and reliable assessment of the risk/return profile of an investment.”

DB has publicly signalled its support for the Global Reporting Initiative (GRI), the German Sustainability Code (GSC), and the International Integrated Reporting Council (IIRC). It provides thorough training on sustainability issues, ranging from capital market communication strategies to specific ESG reporting frameworks. The exchange has created a number of sustainability-based indexes as well.

In some notable cases elsewhere (South Africa, Brazil, and Singapore), exchanges have simply mandated sustainability disclosures as part of their listing rules. Listing rules at the London Stock Exchange (LSE), however, are set by the regulator – not the exchange. The UK market has better corporate disclosures (thanks to the 2013 debut of the Companies Act) for greenhouse gas emissions, human rights, and diversity performance. Companies must now disclose those metrics in annual reports.

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The LSE has organised seminars and other events on best practices in ESG disclosure for corporate audiences, in collaboration with established partners like the Carbon Disclosure Project and the IIRC. FTSE, which is owned by the LSE Group, provides some of the oldest and most detailed ESG ratings and data to the global investment community. FTSE also works with asset owners, asset managers and banks to develop specialized ESG services.

A 2014 Corporate Knights study, which measured corporate disclosure of first-generation sustainability indicators, put the Helsinki Exchange (part of the Nasdaq OMX Group) at the top of the list. “No stock exchange in the world,” the authors of the study concluded, “comes close to the Helsinki Stock Exchange when it comes to the proportion of large listings disclosing quantitative sustainability data.”

The Helsinki Exchange was also the first exchange in the world to receive a WWF Green Office diploma, and one of the first in the world to go carbon neutral. It has continued to maintain its carbon neutral status for several years in a row. It has also been a member a member of the Finnish Business & Society Ry (FiBS) since September 2011.The FiBS enterprise network was established in 2000 to specifically promote financially, socially, and ecologically sustainable business in Finland.

THE FAR REACH OF EUROPEAN REGULATORS It’s not just exchanges that are making significant headway. European regulatory moves are not only part of the global discussion; they are driving compliance measures in non-European markets.

The European Union (EU) Council adopted a new directive in 2014, establishing guidelines for nonfinancial disclosure by companies with 500 or more employees.

This directive imposes a comply-or-explain obligation on its corporate targets, asking them to disclose “existing policies on environmental, social, employee, human rights, anti-corruption, and bribery matters, including a description of

Spring 2015 Issue

the outcomes of their policies, relevant non-financial key performance indicators, and main risks related to these matters. Companies which do not pursue policies for these matters will have to provide a clear and reasoned explanation for their choice.�

More than 6,000 companies both inside and outside the EU are apparently subject to the directive.

SUSTAINABILITY VS. SHORT-TERMISM Preparing detailed reports is nothing new for public companies. They must constantly research, publish, and defend repetitive financial disclosures. Analysts and investors draw meaningful inferences (and make economic decisions) based on quarterly achievements or setbacks. This unrelenting pattern churns data every quarter without offering real or enduring insight – and it sometimes prohibits companies from engaging the public on longer-term strategies.

Stock exchanges see this dynamic played out every day. Sustainable capital formation starts with informed investment decisions, because they tend to produce longer-term investments. Providing investors and other stakeholders with a better understanding of key performance metrics makes markets more transparent, efficient, and sustainable.

Comprehensive and common-sense disclosure of even a small number of sustainability metrics can propel businesses to better plan and execute longterm strategy. In theory, this offsets any resource or cost burdens related to developing expertise in sustainability management.

Simply getting more corporate data into the system may not suffice; there must also be an eventual shift of focus from reporting to performance measurement.

But better data access (and more harmonised structure) will lead to better analytical research and modelling of shareholder returns, rates of turnover, and so on.

ESG screens are now part of equity strategy, but also increasingly essential to fiduciary oversight. i

ABOUT THE AUTHOR Evan Harvey is the Director of Corporate Responsibility for Nasdaq. He also serves on the Board of Directors for the UNGC US Network and chairs the Sustainability Working Group at the World Federation of Exchanges.

CFI.co | Capital Finance International

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Stealth at the

Helm The Manifest Destiny of Angela Merkel

By Wim Romeijn

As the Greek debt crisis inches to its climax, the euro’s guardians soften their tone of voice; not quite so sure any longer that contagion – and financial Armageddon – may yet be avoided.

Over the past few weeks, the assurances that Europe will be fine, should Greece decide to drop out, have been gradually replaced by appeals to common sense. Jeroen Dijsselbloem, president of the Euro Group of finance ministers, spoke to no-one in particular when he asked all concerned not to play a game of chicken to see who can hold out longer.

Cover Story

M

r Dijsselbloem also stressed the need for a quick deal on Greece. The International Monetary Fund (IMF) chimed in as well with its managing director, Christine Lagarde, calling on the European Union to relax its demands on the struggling country.

Meanwhile back in Berlin, where real power resides, German Chancellor Angela Merkel intervened decisively to stop a rift between Greece and its creditors from developing into 28

a break. She invited Prime-Minister Alexis Tsipras for a face-to-face talk, signalling her determination to keep the wayward nation aboard and the euro intact.

However, the world’s most powerful lady has so far been unable to defuse the time bomb ticking away in Athens, opting instead to periodically set back the clock. It is the Merkel Way: wield soft power to keep the flock together but ignore the larger issues that cause sheep to wander off.

THE DECLINE OF VISION Angela Merkel (60) leads a generation without leaders. Her peers in contemporary Europe’s concert of nations and supranational entities – François Hollande, David Cameron, Mariano Rajoy, Matteo Renzi, Jean-Claude Juncker et al – have but limited appeal to voters and utterly fail to inspire the people whose destiny they hold.

Mere pragmatics who favour technicalities and formalities over ideas and visions, the current crop of European presidents and prime-ministers administers the continent, rather than lead it.

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Spring 2015 Issue

Chancellor Angela Merkel’s remarkable rise to power – and her tenacity at clinging to it – may perhaps be ascribed to Europe’s singular success in forging unity and prosperity – the twin pillars of political stability. In politics it is an accepted truth that comfortable nations, those at peace with themselves and others, do not usually bring forth politicians of great stature. Mutti Merkel essentially rules by default.

Contrast Europe’s present ruling class with the one holding the reins of power just a single generation ago when Helmut Kohl, Margaret Thatcher, François Mitterrand, and Felipe González set the agenda in Western Europe while Václav Havel, Lech Wałęsa, and Mikhail Gorbachev reshaped the map east of the Oder-Neisse Line. Each of these titans was inspired, and propelled, to greatness by a vision or an ideal.

For all her power, Chancellor Merkel is but an administrator, albeit an exceptionally conscientious and skilled one. The Germans like it that way. Only Konrad Adenauer, Germany’s first post-war chancellor in office from 1949 to 1963 and architect of the wirtschaftswunder, has ever commanded a standing comparable to that of Angela Merkel.

Even after almost a decade in power, Chancellor Merkel is nowhere near the end of her career in domestic politics. She is widely expected to run for a fourth consecutive term in 2017 and has stoically refused to entertain ideas regarding international high office. She has been tipped as future president of the European Council and secretary general of the United Nations.

NO FIG LEAF Chancellor Merkel would much rather save the euro and with it, the European Union. As British Prime-Minister David Cameron discovered to his own detriment, Mrs Merkel is fully committed to the European project and will not tolerate – and ruthlessly deal with – anyone even considering moving the EU goal posts. Mr Cameron’s whimpering about the burden imposed on Britain by freedom of movement – one of the four foundational freedoms on which the entire union has been erected – received little, if any, sympathy in Berlin. The PM’s proposed tinkering with that freedom resulted in a rotund “nein” from the chancellor – end of.

As long as Germany sticks to defending the European Union, the country is allowed to employ its considerable might for the common good,

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Cover Story

While Prime-Minister Cameron, prodded into action by Nigel Farage and his UK Independence Party, takes on a quixotic fight he cannot possibly win, Chancellor Merkel tries to keep Europe together for her own ends. Hers is a particularly challenging – and thankless – task: holding the continent’s purse strings and heading its largest – and arguably most successful – nation, she also has to refrain from resorting to power politics when imposing her will.

as Mr Cameron found out when he was sent home without as much as a fig leaf to cover his failure. Good Germans are good Europeans – and nothing more. However, when Berlin attempts to suggest EU member states follow its exemplary lead on economic, financial and other affairs, howls of indignation immediately rise up, often accompanied by thinly-veiled references to a few less savoury aspects of Germany’s past.

The Greek are not the only ones still harbouring anger over unfortunate events now covered by seventy years of peace: scratch the civilised outer surface, and the façade of many a European nation takes on a different look. So far, and perhaps understandably given the country’s sorry plight, the Greek are the only ones openly venting their frustration by reminding Germany of its past. France, a veritable depository of wisdom regarding Germany and its role as European powerbroker, opts to just play along while steadfastly doing its own thing – politely ignoring any and all ukases emanating from, or inspired by, Berlin.

DO MENTION THE WAR While it is quite ok to mention the war, the question is which one? As her handling of the crisis in the Ukraine shows, Chancellor Merkel seeks precedent in the lead-up to the First World War rather than in events such as the 1938 Sudeten Crisis – the prelude to the Third Reich unleashing its power for destruction. Taking a cue from 1914, Chancellor Merkel has tried – and succeeded – to stage the second act of Germany’s famed Ostpolitik (Eastern policy) of the 1970s that preferred engagement over confrontation when dealing with a recalcitrant Moscow.

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Mrs Merkel is known to have been deeply impressed by reading Sleepwalkers: How Europe Went to War in 1914, an exhaustive study by Australian historian Christopher Clark, professor in Modern European History at the University of Cambridge. Prof Clark argues that the First World War was primarily caused by a breakdown in communication between the great powers.

Skirting that pitfall, Mrs Merkel wants to keep talking to the continent’s current antagonists.

A debate organised in March 2014 by German Foreign Minister Frank-Walter Steinmeier between Prof Clark and his colleague Gerd Krumeich, retired from a professorship at Heinrich-Heine University in Düsseldorf, concluded that diplomatic dead ends – and a monumental failure of diplomacy coupled to a dialogue interrupted by the incessant rattling of sabres – caused a localised conflict in the Balkans to ultimately drag an entire continent into war.

At the end of the debate, which took place in the jam-packed atrium of the German Historical Museum, Foreign Minister Steinmeier emphasised that, back in 1914, there was nothing inevitable about war breaking out: in 30

fact, it could have been stopped at any time had the protagonists decided to keep talking instead of mobilising their armies.

SHIELDING PUTIN FROM HIMSELF While most the entire world was screaming abuse at President Vladimir Putin of Russia for ordering the annexation of the Crimean Peninsula, Chancellor Merkel kept the lines with Moscow open. Though the Russian president’s conversational tone was reportedly blunt, and quite unlike that of a gentleman, Chancellor Merkel delivered her missives nonetheless – appealing to both reason and calm even when, during a meeting at his summer residence in Sochi, Putin failed to restrain his outsized black labrador knowing full well of the chancellor’s fear of dogs. She was badly bitten by a dog in 1995.

It certainly helps that Mrs Merkel is fluent in Russian and Mr Putin speaks impeccable German which he picked up while stationed in East Germany as a KGB agent. While by no means a cheerleader for the Russian president, Chancellor Merkel insists that his country must not be pressed into a corner or be made to suffer economic and social chaos: sanctions are fine as an expression of severe displeasure but may not cripple the nation. At the same time, Mrs Merkel has little patience with Mr Putin’s empirebuilding exercise which she considers an atavism that has no place in modern Europe.

Threading a fine line between the need to contain Russia’s expansionist tendencies and the necessity to keep that country diplomatically engaged and economically alive, Chancellor Merkel needs to draw on her capacity for stealth – brawn must give way to brain. And that is precisely the game she has been playing all along.

THE POWER OF STEALTH As it happens, most people never saw her coming. Angela Merkel’s rise to power equates to a fastball out of left field, arriving with pinpoint precision at the plate to the surprise of all and sundry. After all, Angela Merkel was not destined for success. She had three strikes against: she is a woman (divorced, remarried, no children) in Germany’s still male-dominated society; a scientist (quantum chemistry) and thus somewhat of a nerd; and – most damaging of all – an Ossie, the product of a state that failed to produce anything of note but for a silly little car.

The oldest of three children, Angela Merkel – née Kasner – spent her childhood in Templin, a small town in the heavily-forested Uckermark District of Brandenburg, just north of Berlin. Here, she lived with her family at the Waldhof, a seminary and care home for mentally and physically disabled people maintained by the officially-sanctioned East German branch of the Lutheran Church.

Born in Hamburg in 1954, Angela Dorothea Kasner was only a few months old when her stern and demanding father Horst moved the CFI.co | Capital Finance International

family eastwards across the border to take up an ecclesiastical position in the German Democratic Republic – then colloquially known by its German acronym DDR. Meanwhile hundreds of thousands of East Germans were fleeing in the opposite direction.

Horst Kasner made a name for himself as an exceptionally pliable minister, faultlessly adhering to whatever instructions were handed down from party headquarters in Berlin.

According to Joachim Gauck – a fellow Lutheran pastor and a dissident who in 2012 became the country’s last president after the only free multiparty elections ever celebrated in the DDR – people knew Horst Kasner as the Red Minister: “Most in the Lutheran Church preferred to stay well away from him.”

ALL WORK, NO PLAY As a teenager, Angela seemed utterly uninterested in nice clothes, outward appearances, or boys.

She also steered clear of politics. Former classmates remember her as exceptionally intelligent, but always colourless and unfailingly serious. There was no flirtation with life or any other sign, however dim, of joie de vivre.

Academically, Angela did get ahead smoothly: she studied physics at Leipzig University. Not running afoul of the strictly enforced party line, the local branch of the Socialist Unity Party of Germany (SED) recommended the pastor’s daughter be allowed to pursue her studies and obtain a graduate degree at the Central institute for Physical Chemistry of the Berlin-Adlershof Academy of Sciences. Here, she received a doctorate in quantum chemistry (aka molecular quantum mechanics) and was promptly kept on as a researcher. Subsequently, Mrs Merkel churned out a number of peer-reviewed scientific papers.

It was only after the wall had come down in 1989 that Angela Merkel displayed any interest in politics. She joined the Demokratischer Aufbruch (Democratic Awakening) Party during the last hectic days of the DDR’s existence and soon became deputy-spokesperson for the Christian Democratic caretaker government of Prime-Minister Lothar de Maizière who voters had put in charge of the state’s dissolution and its absorption into a unified Germany.

Receiving less than one percent of the vote and only four seats in parliament, Democratic Awakening merged in 1990 with the East German Christian Democratic Union which was, in turn, absorbed into its Western counterpart CDU. Mentored by Mr De Maizière, Mrs Merkel soon worked her way up the CDU hierarchy without ruffling feathers or calling attention.

Seizing the moment, she acted fast. The German reunification process was more akin to an outright annexation of the east by the west which meant that – if only for appearance’s sake – a fair number of ossies needed to be awarded top

Spring 2015 Issue

Photo by Tobias Koch

functions in government. By now a member of the Reichstag for the constituency of StralsundNordvorpommern-Rügen, Angela Merkel was an obvious choice. De Maizière arranged for Chancellor Helmut Kohl to meet the young Mrs Merkel and the next day suggested he appoint her to a cabinet post.

as less welcoming, and fitting, to ossies.

THE ANTECHAMBER OF POWER Much to her own surprise, Angela Merkel was immediately named minister of women and youth affairs. However, surprise soon turned into frustration: she was not the least interested in feminism. Youth affairs could only marginally pique her interest. Nevertheless, Mrs Merkel applied herself with characteristic vigour and discipline to the task at hand.

Alan Posener of Die Welt agrees: “The issues that motivate the CDU – single mothers, gay marriage, divorce, etc. – for the most part did not mean a thing to her.” Mr Posener adds that most of Chancellor Merkel’s opinions stem from learned attitudes: “Her knowledge regarding Germany’s transatlantic alliance with the United States, the country’s democratic system and institutions, and even more recent events that shaped the nation such as the 1960s counterculture, and the violence perpetrated by the BaaderMeinhof Group, stems from books, manuals, and briefings. Her upbringing was not shaped by these developments. In that sense, she remains an outsider.”

Though the new minister seldom spoke during cabinet meetings, she soon caught the eye of the ever-jovial Helmut Kohl who began addressing her as “mein Mädchen” – his girl. As such, Chancellor Kohl introduced her to visiting foreign dignitaries: a curiosity from the east. Mr Kohl never failed to mention that “his girl” even had to be taught how to use a credit card when she first arrived at the ministry.

SPOILED BRATS Mrs Merkel still has difficulty grasping the vast cultural divide between what were formerly East and West Germany. The upheavals of 1968 – the 68er Bewegung which marked the birth of contemporary Germany – were to Angela Merkel’s mind but tantrums thrown by spoiled children.

At first, she could not recognise the need of a generation to tear down the societal edifice that had served the Third Reich and to bring moralspreaching parents, teachers, and other figures of authority to task for their complicity with the Nazis.

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Mrs Merkel failed to relate. Her upbringing was quite different. It had focused on self-discipline, will power, and silence. The DDR made Merkel – and millions of others – into human automatons: success was attained only by those who made absolutely no errors and kept quiet all the while.

That stealthy and ruthlessly efficient approach served her well when in November 1999 the CDU became enmeshed in a major scandal over illicit campaign donations. Both Helmut Kohl and his successor as party chairman Wolfgang Schäuble – the country’s current minister of finance – were implicated and had their reputations tainted.

POWER GRAB Without warning, Mrs Merkel struck a deadly blow.

She submitted an opinion article – more akin to an oedipal war cry – to the Frankfurter Allgemeine.

The piece, as blunt as venomous, called on the party to dump Kohl and the other old warhorses in order to wipe its slate clean. Kohl’s mädchen had stepped out of the shadows, no longer content to dwell in the curiosity cabinet.

A few months later, Angela Merkel was elected to the chair of the CDU. Asked at a dinner party what made Merkel turn on him, Helmut Kohl is reported to have answered with a single word: “power.” He 31

Cover Story

Diligent, observant, hard-working, and an eager student, Mrs Merkel soon learned plenty more than just swiping a card: she discovered how the play the political game. Her secret weapon was not belonging: though part of the CDU – the Christian Democratic juggernaut of German political life – for a long time Mrs Merkel used the party as merely a temporary shelter – its social-democratic counterpart being perceived

“Until quite recently, she was strange to everything in the party. It was only a function of her power, nothing else,” says parliamentary correspondent Karl Feldmeyer of the Frankfurter Allgemeine Zeitung.

It was only in 1968 that Germany managed to break out of the straitjacket the nation had been lashed into by the hypocrites and cynics who, in the post-war years, smoothly switched allegiance from Hitler to the Allied Occupying Powers. It was also in 1968 that Germany first dared look in the mirror and face up to its past.

“The shifting sands of German diplomacy – cajoling a reluctant continent to embrace financial prudence, keeping the American cowboys at arm’s length, and taming Russian irredentism – all show a country looking for a role to assume and an identity to embrace.” then went on to lament bringing Mrs Merkel into his cabinet: “I brought in my own killer. I put the snake on my arm.”

Over the years that followed, Angela Merkel smartly outmanoeuvred her rivals inside the party; stepping back to let others suffer defeat at the ballot box, keeping quiet while they fought over the meagre spoils, and administering a slight push whenever a challenger wobbled. Former US Ambassador to Germany John Kornblum has no room for doubt: “If you cross her, you end up dead.

There’s nothing cushy about her. There’s a whole list of alpha males who thought they would get her out of the way, and they’re all now in other walks of life.”

Unpretentiousness, patience, and stealth are Angela Merkel’s weapons of choice. They brought her to power in 2005 after an electoral showdown against two vain old boys – Gerhard Schröder and Joschka Fischer, political streetfighters with a penchant for wine and women – who made the fatal mistake of underestimating their opponent and, as a result, were summarily relegated to the wastelands of German politics.

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RUNNING THE SHOW The same qualities that made her chancellor, allowed Mrs Merkel to fend off opponents and to steer the continent. Keeping her options open to deal with both Moscow and Athens as she sees fit, Chancellor Merkel at times may seem aloof or even opportunistic. Her former defence minister, KarlTheodor zu Guttenberg, has the impression that the chancellor hides behind a “cloud of complexity” so that she can seamlessly change her mind on any given issue without suffering politically for it: “Almost no-one sees this happening.” The approach has its advantages: “It sows confusion amongst opponents and antagonist alike while allowing policies to adapt to changing realities.”

Chancellor Merkel’s unwavering support of a united Europe – one of only a few constants throughout her time in office – is born out of German self-interest rather than an ideal or even a sense of history. Europe makes Germany a world power. Thus, it negates Henry Kissinger’s truism that “Germany is too big for Europe, yet too small for the world.” However, now that the country has taken the lead and moved onto the world stage, Germany seems paralysed by Chancellor Merkel’s mixed messages and a mild form of existential angst.

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Russian advances on the Crimea and the Eastern Ukraine rudely disturbed the sense of peace and prosperity Germans had come to hold so dear.

Suspended in between American talk of military intervention and the roar of Russian tanks and artillery on the roll, Chancellor Merkel had little to say or offer. She ruled out any and all military options and timidly called Moscow’s offensive attitude “unacceptable.”

However, most Germans couldn’t care less about the Ukraine, or its plight, and are uncomfortable confronting the country with which they share terrible memories of over twenty million dead.

Germany’s symbiotic relationship with Russia is based on that of perpetrator and victim – Germans will not move against Russia, ever.

Chancellor Merkel is much aware of the nation’s unwillingness to defend its Western values against Russian aggression, whatever form the latter takes. She has no option other than to wait for her opponent to self-destruct.

TURNING THE TABLES ON PUTIN That, however, confers more power upon Germany than would seem at first glance. After Mr Putin, in May 2014, came out in support of the referendum organised by Ukrainian separatist in the Crimea – something he had promised Chancellor Merkel he would not do – she refused to take the Russian president’s phone calls for a week. Russians diplomats, stunned by the unspoken rebuke, promptly switched into panic mode: Germany was the last of the western powers they could talk to and the one country they could not afford to lose.

Using backchannels, Moscow got the word to Berlin: “We went too far. What can we do to make amends?” The tables had turned.

While estranged in public, behind the scenes Chancellor Merkel and President Putin remain engaged with a modicum of civility. With the United States, the relationship is precisely the other way round. While over time Merkel and Obama established a reasonable rapport, the revelations of whistle blower Edward Snowden on US spying activities in Germany introduced a sour note.

When it became known that the Americans had been listening in on Chancellor Merkel’s phone calls for over a decade, the sense of betrayal turned into a nationally trending topic. The sour note had become an overtone. With President Obama refusing to publically apologise for the CFI.co | Capital Finance International

eavesdropping, and the Americans declining to sign a bilateral no-spying agreement, insult was added to injury and Berlin-Washington relations went into the cooler where they have stayed ever since – public displays of affection notwithstanding.

GERMAN ROLE & IDENTITY The shifting sands of German diplomacy – cajoling a reluctant continent to embrace financial prudence, keeping the American cowboys at arm’s length, and taming Russian irredentism – all show a country looking for a role to assume and an identity to embrace.

Taking a hint from Thomas Mann – who in 1916 interrupted his writing of The Magic Mountain to compose Reflections of a Non-Political Man, a collection of essays on the German national character – the contemporary Germany of Chancellor Merkel slowly drifts back to its conservative, slightly authoritarian, and apolitical roots. As a unified Germany – with an economy that dominates a continent – gains strength, the country becomes more German and less Western, shedding the skin it received from the victors and rediscovering its own roots.

Back to Greece and the time bomb ticking away in Athens. While bordering on the insignificant in the grand order of things European, Greece’s plight will ultimately not be allowed to endanger, let alone derail, the European project: the stage Germany needs to ensure its peace and prosperity.

For all the posturing and lecturing, it is likely that – when the clock can no longer be turned back and hard reality needs to be faced – Mutti Merkel will offer just enough succour to keep Greece solvent.

Chancellor Merkel knows that her continued reign, the fourth term in office, will only be possible if her administration manages to perpetuate the nation’s feel-good times. Joschka Fischer of the Greens, a former foreign minister and vice-chancellor, explains: “Mrs Merkel is governing Germany at a time when the sun is shining every day. Germany under Merkel is akin to the Biedermeier Period between the end of the Napoleonic Wars in 1815 and the revolutions that began in 1848. Central Europe was at peace and concerned with amassing wealth and living in style. However, then as now, there was almost no intellectual debate. Such periods usually end with of clash of some sort.” i

Spring 2015 Issue

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> Spring 2015 Special:

Young Leaders Setting Examples, Providing Inspiration

I

t requires some talent, and intellectual finesse as well, to realistically portray the East German Stasi as a machine capable of producing empathy. The secret police of the now defunct state gained notoriety as a ruthless agency of repression, operating with implacable Teutonic efficiency to root out even the most innocuous forms of perceived dissent.

Portraying the Stasi true to form and with an attention to detail that is both uncanny and disconcerting, German filmmaker Florian Henckel von Donnersmarck captured that eerie moment, just before the wall came down, in The Lives of Others (Das Leben der Anderen), while still managing to paint an inspiring portrait of human deliverance from the forces of dogmatic evil. Blurring the line that separates the good from the bad, Mr Von Donnersmarck ends his movie in the most touching of ways: one that enables viewers to rekindle their hope in – and for – humanity.

That is what young leaders do: show the way forward and convince the rest of us that tomorrow will be better still or – for the more pessimistically inclined – not as bad as today. Australian Jeremy Howard is another believer in a future filled with wonder. This teacher of robots wants his pupils to help humans overcome their limitations. Rather than robots taking over people’s jobs – and the world – Mr Howard wants his digitalised minions to cure the sick and process all the world’s knowledge.

While humans may today access most of the information ever generated through the Internet, they simply lack the processing power to put the all that data to efficient use. Robots, and the computers that drive them, are much better at the job. Mr Howard thinks that before long, robots will outperform even the most gifted of physicians in the setting of diagnoses and the suggestion of treatments.

Each year, the Forum of Young Global Leaders – an initiative supported by the Swiss government

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and launched by Klaus Schwab of the World Economic Forum – invites a number of under-40s to join the organisation as members for a six year tenure. Inductees are chosen to represent most sectors of human endeavour: business, political, societal, intellectual, arts and culture, and the media. Every region of the world is invited to help select candidates. Only people who have already demonstrated outstanding leadership qualities are invited to join.

Offering members access to a global peer network of unequalled breadth and depth, the young global leaders are given all support necessary to excel in their field and collaborate in order to tackle challenges and reach effective solutions based on commonalities. The forum partakes in the Annual Meeting of New Champions – colloquially known as the Summer Davos. The event also includes the Global growth Companies get-together.

Added to the agenda of the World Economic Forum as the “voice of the future and the hopes of the next generation,” the young leaders regularly launch or support initiatives to address major global issues that have been largely overlooked by others. In 2012, the forum put its considerable weight behind Deworm the World – a global drive to expand deworming programmes aimed at vulnerable school children.

The initiative has so far reached over forty million children in 27 countries.

The Forum of Young Global Leaders is also fighting hunger, water shortage, poor access to information technology, and a host of other societal ills.

The ten young leaders that CFI.co features in this issue of the magazine are all members of the forum. They represent but a tiny sample of a vast universe comprised of bright stars. These are not super novae that illuminate the skies only briefly before fading away, but people who have dedicated their lives to excellence: their accomplishments will touch us all. i

CFI.co | Capital Finance International

Spring 2015 Issue

CFI.co | Capital Finance International

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> MA YANSONG The Modular Rhythms of Human Experience

Urban Forest. Courtesy MAD Architects.

“This guy should not be allowed to practice architecture.” Just one reaction, not atypical, to the biophilic designs of Chinese architect Ma Yansong whose work tends to evoke strong feelings. Seeking a novel – and radical – approach to the nature-versus-civilisation debate raging amongst architects since the dawn of time, Ma Yansong unfailingly comes up with structures that link people to their surroundings in atmospheric ways – reaching high to touch deep.

Founder of MAD Architects, Mr Yansong draws his inspiration mostly from the exquisitely detailed shan shui ink paintings. The style first arose in the 5th century during the Lui Song Dynasty (420-479) and allows artists to depict nature as embellished by their own imagination while adhering to a basic set of rules on composition, colour, and elements. However, Mr Yansong prefers not to get embroiled with the much more rigorous prescriptions of the feng shui harmonisation model which is sometimes considered an extension of shan shui.

Offering a contemporary interpretation of the timeless eastern spirit, MAD Architects designs 36

spaces that, while appearing futuristic, are rooted in China’s past. The studio was founded in 2004 and gained worldwide recognition – or notoriety – two year later with the winning design for a pair of residential towers in Toronto. The resulting Absolute Towers – affectionately dubbed the Marilyn Monroe Towers by local residents – parallel the fluidity of life’s natural contours.

MAD Architects went on to conclude major projects that redefined cityscapes. In Harbin, the studio designed both the China Wood Sculpture Museum and Culture Island, an urban park with an opera house and cultural centre set amidst the wetlands bordering the city.

In 2011, the firm caused quite a sensation with its design for the Ordos Museum, an amorphous building seen as a bold statement that aims to subvert the orderly and strictly geometric master plan at the root of the new city erected on the shifting sands of the Gobi Desert of Inner Mongolia.

Mr Yansong makes no secret of his dislike of everything mass-produced: “Much of today’s CFI.co | Capital Finance International

architecture is served up as a consumer product and lacks in spirit. It is almost disposable.

Use once, and then throw away. I much prefer timeless designs that move and inspire people, and make them feel and think.”

Born in Beijing, in 1975, Mr Yansong graduated from the University of Civil Engineering and Architecture where he now holds a professorship.

He obtained a Master’s Degree in Architecture from Yale University. Mr Yansong insists that new technology is, though useful, not the answer to the trials faced by architects as they attempt to erase the boundaries between their designs and nature.

According to Mr Yansong, this dichotomy is perhaps best addressed by downplaying green architecture’s dependence of space-age materials, automation, and gadgets: “It is time to stop confusing new architecture with new technology. The two are not interchangeable.”

For Mr Yansong, buildings must, above all else, awaken a desire towards nature: “the sun, wind, and sky that echo the modular rhythms of the human experience.”

Spring 2015 Issue

> MARTHA LANE-FOX Dot Everyone to Reclaim the Net for Civil Society company through the worst of the crisis that followed the burst of the bubble in 2000.

From 2009 onwards, Lady Lane-Fox has held a number of official appointments to further the digital cause in Britain. She also chairs the Go ON UK charity dedicated to transforming Britain into the world’s most digitally-skilled nation. Delivering this year’s highly-anticipated Dimbleby Lecture, Lady Lane-Fox proposed the creation of a new entity – provisionally named Dot Everyone – to represent civil society in the debate about the Internet’s future.

Dot Everyone would seek to rebalance the power over the Net, now mainly entrusted to large corporations and purely technical agencies such as the World Wide Web Consortium (W3C) established by British computer scientist Tim Berners-Lee who in 1989 invented the web.

The entity Lady Lane-Fox envisions must keep digital citizenry alive – safeguarding individual freedoms, and ensuring equal access to the virtual world.

“It is in within our reach for Britain to leapfrog every nation in the world and become the most digital, most connected, most skilled, most informed on the planet. We need a new national institution that would lead an ambitious charge – to make us the most digital nation on the planet.

We’re going too slow, being too incremental. We need to be bolder. A new institution could be the catalyst we need to shape the world we want to live in and Britain’s role in that world.”

Seeking succour for the digitally-challenged, Britain’s Martha Lane-Fox – or Baroness LaneFox of Soho as she is known around Westminster – is determined to get Britain online – all of it.

Appointed digital commissioner by the last Labour government, she was kept on by the present Tory one to talk, and sometimes gently cajole, especially older people to venture onto the Internet.

In Britain, over ten million people are still reluctant to navigate the web. Most are hampered by either misconceptions about the Net or a dearth of knowledge regarding its possibilities: “This precludes them from leveraging the

transformative power of the Internet,” says Lady Lane-Fox who emphasises that mastering basic digital-literacy skill is as essential as learning to read and write.

Co-founder of the online travel agency Lastminute.com – acquired in 2005 by Sabre Holdings of Travelocity fame for £577 million – Lady Lane-Fox pocketed a cool £13 million for her share of a company that never produced a penny in profits. In all fairness, the baroness could have stepped out at the height of the dot com bubble when Lastminute.com was floated on the London Stock Exchange. She preferred to stay on instead and managed to guide her CFI.co | Capital Finance International

Paraphrasing Internet activist Aaron Swartz, who in 2013 committed suicide after suffering legal harassment and intimidation by US prosecutors, Lady Lane-Fox said that it is now “no longer ok not to understand the Internet.” More than just a voice of the online civic society, Dot Everyone is to become an educational institution, guiding and coaxing millions of Britons onto the Internet. As such, Dot Everyone is envisioned as the vehicle of choice with which to tackle the Internet’s three main challenges: education, inequality, and regulation.

Lady Lane-Fox has her work cut out: speaking at a digital conference, she recently expressed doubts that any of her peers in the House of Lords understands the Internet and its importance: “I would argue that a kid mucking around on Facebook doesn’t understand the internet as much as I would argue one of my fellow peers doesn’t understand the internet. Lady Lane-Fox also expressed dismay at the lack of interest displayed by most political parties in issues relating to the Internet and its transformational power.

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> PRANAV MISTRY Technology as an Afterthought more likely than not concealed in the button of a shirt or blouse, picks up on this gesture and promptly takes the picture and crops it to remove the hands from the image.

More than just a smart camera, SixthSense is the common denominator of a vast array of technologies that aim to reduce computers to near invisibility and integrate their unobtrusive, yet powerful, remains into wearables. SixthSense bridges the gap between the digital and physical worlds.

While at the Massachusetts Institute of Technology (MIT), Mr Mistry came up with thirdEye: a pair of glasses that allows for the delivery of graphic information to be customised. Not to be confused with the ill-fated Google Glass, thirdEye is less intrusive, ambitious, and socially awkward.

Mr Mistry’s glasses merely aim to adjust the information displayed to personal preferences.

As such, it allows viewers to simultaneously display different channels on a single television screen. To reiterate the life-affirming notions of the politically incorrect: while dad watches his sports game, mom may enjoy the latest episode of Downton Abbey while the kids are entrusted to the wholesome entertainment provided by the Disney Channel – all on a single set offering quality time for the entire family. Both Sony and Samsung took note and are in the final stages of developing thirdEye-enabled flat screens due for release in 2016.

Science fiction fails to impress him, yet Pranav Mistry sees no reason to wait for tomorrow when the future may be had today. Instead of dreaming about technological marvels yet to come, the Indian computer scientist has set out to just make it happen. Sometimes that leads to gadgets vanishing altogether: the ubiquitous mouse, deemed indispensable until recently, is one such a device Mr Mistry made disappear. A laser beam and a miniscule infrared camera, both tucked away inside a display, track hand motions just as well.

Mr Mistry is the quiet genius behind many of the innovations launched by South Korean electronics behemoth Samsung as it battles for high-tech supremacy against US rival Apple. In 2012, Mr 38

Mistry was invited to lead Samsung’s research department. He has since become the company’s global vice-president. Pranav Mistry is widely considered the Asian counterpart of Apple’s much more media-savvy CEO Tim Cook. Where Mr Cook clearly revels in playing his audience for added suspense and marketing impact, Mr Mistry prefers a low-key approach.

Mr Mistry is perhaps best known for his work on the perfection of SixthSense – a suite of technologies powered by a gestural interface. For the geek-speak challenged: SixthSense uses body motions to interact with gadgets. So, instead of pointing a camera to take a picture, SixthSense enables users to frame an image with the thumb and index finger of both hands. The camera, CFI.co | Capital Finance International

Mr Mistry has a great many other tricks – and gadgets – up his sleeve such as a system that allows files to be transferred between devices by finger touch. One of the hottest names in today’s high-tech sphere, Mr Mistry is, refreshingly enough, not out to make a bundle. In fact, he flatly refuses to even contemplate setting up shop and raking in the millions: “I just like to think outside the box, see where that takes me, and then figure out a way to actually get there.”

While so engaged, Mr Mistry is also expending considerable effort at making technology more accessible: “It is all very nice that Appel keeps updating its iPhone continuously, but how is that relevant to a villager in India?” When he moves his thinking out of the box, it is mostly about leaving the container behind that traditionally housed the computer – laptop or desktop. Mr Mistry argues that increased mobility is key: “we even need to go past the notion that technology is all about computers. The mobile era is about the integration and minimisation of technology in such a way that it no longer intrudes on our lives but merely complements it.” IT as an afterthought, albeit a rather sophisticated one.

Spring 2015 Issue

> NATALIA VODIANOVA Rags to Riches Russian Style Her face has graced the cover of all the major magazines, from Cosmopolitan to Marie Claire to Vogue in its many incarnations. Natalia Vodianova is one of the world’s top-earning models and the protagonist of a rags to riches fairy tale – Russian style.

When just a toddler, her father walked out never to return. Selling fruit on the streets of Nizhny Novgorod – Gorky in Soviet times, named after the writer Maxim Gorky who was born there – Natalia helped her mother supplement a meagre state income. Peddling bananas, Natalia Vodianova was discovered aged 17 and whisked away to a life of luxury as the face of high-end brands such as Calvin Klein, Stella McCartney, Louis Vuitton, Gucci, and many others.

While her daughter was raking in millions, back in Nizhny Novgorod her mother Larissa kept the fruit stall; not for want of help, but simply an independent lady unwilling to give up work and insisting she provide for her family. In London, Natalia Vodianova continued on her rags to riches journey: in 2001 she married Justin Portman, heir to some 100 acres of prime central London real estate. Ten years and three children later, the marriage stranded.

Not one to suffer bachelorette status for long, Ms Vodianova met and hooked up with Antoine Arnault, CEO of Berluti footwear and son of luxury goods purveyor Bernard Arnault, founder of the Luis Vuitton / Moët Hennessy (LVMH) conglomerate. Living the good life, Ms Vodianova has not forgotten her past, nor her roots. In fact she ascribes her success to the trials and tribulations of days long gone: “I live a very different life now, with incredible privileges, but looking back I realise that growing up in Russia gave me tools that other people don’t necessarily have – such as the will to push that bit further, to make things happen, to succeed. I try to use these now to help other people.”

And so she does. In 2004, Ms Vodianova founded the Naked Heart Foundation to help disadvantaged children in Russia. The charity aims to provide a safe and caring environment to kids in impoverished areas of the country.

The foundation was set up in response to the horrors inflicted upon children during the Beslan school siege when over 1,100 people, including 777 children, were held hostage by separatist militants. An assault by Russian security forces resulted in the death of 186 children and 199 adult hostages.

Ms Vodianova supports an impressive number of other worthy causes such as an initiative to help fight the spread of HIV in Africa and the Tiger Trade Campaign, a group of 38 organisations

dedicated to halt the sale of products derived from tigers. Russia is home to the last 350 Siberian tigers surviving in the wild.

Her activism has not gone unnoticed: last year CFI.co | Capital Finance International

Ms Vodianova was chosen one of the Glamour Women of the Year for her charity work and strength in the face of adversity. She has also been honoured by Harper’s Bazaar for being an inspiration to women the world over.

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> JEREMY HOWARD Make Way for the Smart Machine

Uber cabbies may have built their careers on modern technology, their job prospect is none too bright all the same. While old-school drivers wielding clubs pose the immediate threat to life, limb, and headlight; it is the robots who will do them in.

Over the next twenty odd years, robots are set to replace human workers in almost half the world’s professions and trades. Please direct any anger at Jeremy Howard. He is the one teaching robots how to run the world – or at least 50% of it.

A leading authority on machine learning, Mr Howard develops highly complex algorithms that enable innate objects to learn from data.

As machines gather data through a multitude of inputs, this flow of information is then stored, compartmentalised, analysed, and otherwise processed and used to expand the device’s situational awareness and its responses to changing externalities. Machine learning begets artificial intelligence (AI).

Mr Howard is after the holy grail of AI: the point at which machine learning becomes akin to a self-fulfilling prophecy and the rate of data acquisition and processing takes off in a vicious – and hopefully benevolent – circle of learning that allows the contraption to become as smart as a human being, if not considerably more so.

Technology is not quite there yet, but it is catching 40

on at a disconcertingly fast and dizzying pace.

Late last year, Mr Howard founded a company that will try to apply machine learning and deep learning technology to medical tools used for the diagnosis of illness and disease. Mr Howard is convinced that machines are already now vastly better than humans at collecting and analysing medical data and thus able to set a much more accurate diagnosis.

“Medical diagnostics is, at its heart, a data problem. Recent machine learning breakthroughs have shown that computers can rapidly turn large amounts of data into deep insights, and find subtle patterns.”

With his start-up company, Mr Howard makes no secret of the fact that he hopes to emulate Star Trek’s Dr Spock – the endearing Vulcan addicted to high logic – who worked his medical magic aboard Starship Enterprise with the help of Data, a Soong Type android with scanning powers and a positronic brain that can access all information ever generated. Data unfailingly sets diagnoses with pinpoint precision, devoid of any and all human idiosyncrasies. This certainly seems to facilitate the healing and recovery of frail human bodies.

Meanwhile back in Australia, Jeremy Howard continues his esoteric pursuits by coupling big data to another relatively obscure science – deep CFI.co | Capital Finance International

learning, on offshoot of machine learning – in an attempt to make sense of the universe. With fellow Australian Brian Schmidt, an astrophysicist and Nobel Laureate, Jeremy Howard is developing ways to have machines, rather than humans, unlock the secrets of the universe.

All this heady stuff also has more down-to-earth applications such as self-driving vehicles and real-time translations generated by machines and delivered in a natural sounding humanoid voice. While Google is busily bolting together the driverless car, Microsoft-owned Skype has been tinkering with translation algorithms based on deep learning principles in order to finally demolish the Tower of Babel and have the world talking again.

In between his research into robotics and AI, Mr Howard has also found time to develop a new way of acquiring basic Chinese language skills in under a year. Geared towards humans, his model is named spaced repetitive learning and prompts learners to remember information just moments before forgetfulness kicks in. It also has the power to become excessively annoying.

However, Mr Howards readily admits that his novel approach to language learning may have a limited shelf life as Skype will have us shortly speaking Chinese and any other language without breaking a sweat.

Spring 2015 Issue

> AHMED MATER Flower Power, Saudi-Style questions facing the nation: its transformation, religious heritage, and related existentialist queries. Is humanity more than just the sum of bodily parts, and if so: what is it?

The interest of the British Museum was piqued and it promptly acquired Mater’s opus magnum Prognosis: a series of collages depicting quintessentially Saudi vistas – the Ka’aba, the Grand Mosque, and other cultural references – superimposed on x-ray sheets in a nod to the artist’s background as a physician.

Concerned about the impending loss of heritage, Mr Mater has moved to the forefront of the opposition against the large scale redevelopment of Mecca that threatens a number of historical sites, including what some Islamic scholars contend was the birthplace of the Prophet – the Mawlid House.

I shop, therefore I am. Globalisation has arrived in the Middle East and with it the brand-name accoutrements of the consumer society. Entire cities have been erected to celebrate this new age of unbound consumption, or of consumerism on steroids. Ikea may have descended on Riyadh and Abu Dhabi; the real impact is made by the likes of Hermès, Harry Winston, Bréguet, and other purveyors of ultra-high-end indulgencies.

This is a rarefied segment of the luxury market that considers Louis Vuitton merely a staple – rather too ordinary to be publically associated with.

What is an artist to do? Well, join the hype.

Surrounded by the relentless demand for instant gratification generated by a society cast adrift from its roots, the art scene is positively buoyant – if not flourishing – in Saudi Arabia and the adjoining countries along the southern shore of the Arabian Gulf.

It makes perfect sense: in times of plenty, patronage of the arts goes on the ascendant. In fact, Saudi Arabia is currently in the midst of a Golden Age not unlike the one that produced

the Dutch masters of 17th century – Frans Hals, Johannes Vermeer, Jan Steen, and Rembrandt van Rijn. At that moment in history, the Dutch Republic was the most prosperous country in the world. This is no coincidence: the analogy holds.

In keeping with the times, art is now a globalised industry. At its Saudi vanguard is Edge of Arabia, a collective of independent artists pushing Arab art onto the world stage. In 2009, Edge of Arabia presented eight Saudi artists at the 53rd Venice Biennale, widely seen as a portal to Art Basel – the world’s largest commercial venue for modern and contemporary art.

After its debut in Venice, Edge of Arabia embarked on a world tour to the wide acclaim of critics, dealers, and the general public.

Returning home to the kingdom, the collective’s founders extended the scope of their initiative to include educational programmes offering mentoring, workshops, and symposia to budding artists from the region.

One of those founders is Ahmed Mater who, through his art, seeks to address the deeper CFI.co | Capital Finance International

The multi-billion dollar project aims to adequately equip the city so that it can safely handle the growing number of pilgrims arriving annually to carry out the Hajj. Mr Mater’s Artificial Light / Desert of Pharan – an urban exploration – illustrates the dissonance, questions the makeover, and expresses the concerns.

Often described as an illuminator of forms and ideas, Mr Mater abhors habits and routine, preferring lightness and surprise instead. His art is also served with a dash of humour. Mr Mater’s Yellow Cow Project – a self-described “ideologically-free product” – constitutes a frontal assault on the naïve presumption that humans may gain value by drifting away from the primordial mud of creation. “Real power is the ability to be a flower.”

Not entirely unlike Andy Warhol’s Exploding Plastic Inevitable of the late 1960s, Mr Mater strikes a blow against the grain: “When everything is materialised, everything becomes stony – even one’s heart.” He takes no prisoners either: “If this sounds absurd, just rush out and buy some Yellow Cow products. It is an open market, ready to consume you – bon appétit.”

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> SALMAN KHAN Good Looking, Mischievous, and Generous He is perhaps India’s most eligible bachelor: Salman Khan – Bollywood’s answer to Brad Pitt, albeit sans sidekick Angelina. Starring in well over eighty movies, and a number of television shows, Mr Khan is undoubtedly one of Bollywood’s hardest working actors. He is also India’s most loved enfant terrible, making headlines for all the wrong reasons: hunting a protected species of gazelle, being involved in a 2002 hit-and-run road incident, and breaking up with a former Miss India in a hail of wild accusations that easily trumped any soap opera plot.

Yet, Mr Khan has also leveraged both his fame and fortune to further worthy causes via the Being Human Foundation he set up. The charity markets an increasingly popular collection of prêt-à-porter fashion with all proceeds destined to support relief projects for India’s poor. The clothing brand is now expanding overseas with Dubai its first port of call. The range is now also available to socially-discerning shoppers in the UK, the US, Ireland, and South Africa.

Mr Khan kick-started the Being Human Foundation using his own money. Moreover, in 2011 Mr Khan launched a production company to channel the box office receipts of some of his movies to the foundation. SKBH movies, so far mostly directed at young audiences, have already claimed a number of prestigious awards and generate significant revenue.

Carefully cultivating his image as a largerthan-life superstar, Salman Khan may perhaps be chivalry-challenged; he also boasts a welldeserved reputation for generosity. Stories abound how he showers beggars with money, bankrolls scholarships, and is struck by epiphanies that see him gather his film crew to paint an entire village – as happened to Hatluni, near Karjat in Maharashtra State.

Mr Khan regularly makes the news with grand gestures. Shaken by the plight of about 400 prisoners in Uttar Pradesh State who served their sentences, but had no money to pay for their release, the actor disbursed about $63,000 to pay for the legal charges.

A gifted portrait painter, Mr Khan also auctioned off a number of his highly-prized paintings for charity. Recently he donated over four million dollars towards improved treatment facilities for cancer patients. While by no means Mr Perfect, Mr Khan is dedicated to more than just churning out blockbuster movies; he is one of India’s most active advocates of social inclusion and leads the way when it comes to demolishing social barriers.

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Content to live in a one bedroom apartment, Mr Khan readily admits that he has little use for money, other than to fill his foundation’s accounts: “Perhaps if I were without money, I’d value it a little more. However, as it is, I do happen to earn quite a bit and am perfectly happy to use that cash to help others less fortunate.”

Mr Khan is currently Bollywood’s highest earner. However, what impresses him more than financial success is how some people manage to overcome disadvantages and still make it big: “that never fails to amaze me and makes me think we should perhaps gain better insight into who succeeds, why and how. There are valuable CFI.co | Capital Finance International

lessons to be learned here.”

For now, Mr Khan prefers to keep it simple.

Notwithstanding his superstar status and the success of his fashion collection, he prefers flipflops, torn jeans, and t-shirts to a more flashy attire. It’s a conscious choice too: “I would hate it if kids would start pestering their parents to buy new clothes when they may not be able to afford them. I am an actor and try to do some good here and there; not a walking and talking fashion statement.” Even so, readers of People magazine in the US ranked Mr Khan the seventh best looking man in the world. Readers of the Indian edition of the magazine begged to disagree and placed Mr Khan in the top spot.

Spring 2015 Issue

> TAWAKKOL KARMAN Nobody’s Pawn The lady speaks her mind and would appreciate an opportunity to do so without getting harassed – or silenced – in the process. Tawakkol Karman, who shared the 2011 Nobel Peace Prize with two Liberian peace activists, is one of the many faces that marked the Arab Spring. Though the popular movement may have fizzled out, it did leave an indelible imprint behind.

Mrs Karman steadfastly refuses to be classified or boxed-in. Though an active member of Al-Islah – the Yemeni branch of the Muslim Brotherhood – she declines to speak on behalf of the party and, pointedly, does not endorse its more extreme positions. She also opposes any kind of Islam-inspired revolution: “The ousting of President Ali Abdullah Saleh in 2012 was not meant to solve political issues. The aim was to address societal problems.”

Bringing a whiff of pragmatism to Yemen’s often tumultuous political scene, Mrs Karman deplores the continued interventions by a host of foreign powers that destabilise the country and do little or nothing to address the plight its population. She has repeatedly called on the US government to end its drone strikes, arguing that the policy not only violates Yemeni sovereignty and international law, but also swells the ranks of terrorist groups such as Al-Qaeda.

Mrs Karman has devoted much of her energy to furthering the cause of Arab women in Yemen and elsewhere. She has drawn worldwide attention to the malnutrition suffered by many Yemeni girls, as boys are habitually awarded priority access to whatever little food may be on the table, and is an advocate for a ban on child marriages.

She shed the traditional niqab and now sports colourful hijabs instead, arguing that Yemeni women should stop seeing and feeling themselves as part of the problem, and dare become part of the solution: “We have been marginalised for far too long and need not ask anybody’s permission to stand up and become active members of society.”

More recently, Mrs Karman has accused disgraced former President Saleh of being in cahoots with the Iran-backed Houthi (Ansar Allah) rebels who have long dominated the northern governorates and last February forced the constitutional government of President Abd Rabbuh Mansour Hadi to vacate the capital Sana’a and move to Aden in the south of the country.

When the insurgents marched south in hot pursuit, President Hadi had to flee the country

by sea. Egypt and neighbouring Saudi Arabia, already annoyed by the Shi’ite presence along its southern border, unleashed yet another storm on the Arab Peninsula; building up an intervention force and sending in bombers to rain destruction from the sky.

Recent developments have thus confirmed Mrs Karman’s worst fears: domestic strife, fuelled by outside interest, denies Yemen society the opportunity to set a national agenda suited to its aspirations. “Injustice is exploding while opportunities for a good life are coming to an end.”

Leading the Women Journalists without Chains group, Mrs Karman continues to rally against CFI.co | Capital Finance International

the violation of her country. She recently asked the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, for help in setting up an independent radio and television station for Yemen to enable a new generation of female reporters to receive training and offer a counterweight to maledominated official media outlets.

After meeting Turkish Foreign Minister Mevlut Cavusoglu in Ankara just days after the start of the Egypt / Saudi offensive against the Houthi rebels, Mrs Karman delivered a passionate plea for help, stating that the Yemeni people deserve deliverance from the Shi’ite militias that have overrun the country. “While I encourage the Houthi to remain active as a political party, they cannot be allowed to hijack the nation.”

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> EMMANUEL JAL Hip Hop to the Rescue what it really looks like. Shanghaied by the Sudan People’s Liberation Army (SPLA) at aged seven after his mother was killed by government soldiers, Emmanuel Jal was trained to kill at a rebel base disguised as a United Nationssponsored primary school.

He subsequently spent a number of years toting a Kalashnikov and fighting in both Ethiopia and Sudan, only to break ranks in utter desperation at the senseless violence he had helped perpetuate. After an epic bush journey lasting three months, the now 12-year old war veteran stumbled into Waat – a village in South Sudan – where he met, and was adopted by, Emma McCune, a British aid worker married to a guerrilla leader who went on to become the first vice-president of the country. In 1993, Mrs McCune was run over and killed by a matatu minibus in Kenya. She is credited with having saved over 150 Sudanese war children, amongst whom Emmanuel Jal. Growing up in a Nairobi slum, Emmanuel discovered hip hop and the power of music to ease the pain of his memories. Countless songs later, he formed a band and managed to record and release a single which – to his own astonishment – promptly received airplay in the UK and became a hit in Kenya. Mr Jal got his ticket out of misery to tell the world about the huddled masses balancing between hope and fear as their fate remains in the hands of those beckoned to power by greed.

A latter-day Rastafarian and former child soldier from South Sudan, Emmanuel Jal treads in the footsteps of Bob Marley to deliver a message of hope to the desperate, oppressed, and haunted of this world. Spokesperson for the Make Poverty History campaign, Mr Jal is an ardent advocate of mixing art and politics for the benefit of humanity.

Mr Jal is also quite vociferous in his opposition to the US hip hop culture which he considers a mere vehicle used to establish street cred – promoting gangsterism and associated evils such as greed, drugs, and sexual violence – instead of delivering a more constructive worldview. “People really get into the lyrics, trying to understand the message.

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If they constantly hear that might is right, this then becomes the norm.”

Through the song 50 Cent, Emmanuel Jal appealed to the eponymous rapper to change his tune and stop being a destructive influence on children. Mr Jal also deplores that contemporary US society insists on showering the likes of 50 Cent – Curtis James Jackson III off stage – with accolades in the form of numerous Grammy, Billboard, and other awards. “It is quite sad that violence gets hailed and praised this way.”

Mr Jal is no stranger to violence and – contrary to the former drug pusher, wannabe tough guy, and overall narcissist from Queens – knows CFI.co | Capital Finance International

For most young people it is hard, if not impossible, to imagine – let alone relate to – the levels of violence Mr Jal has experienced during his childhood. Deserting with a few hundred fellow child soldiers from an SPLA camp, only sixteen kids survived the gruelling trek to safety: most died of starvation or shot themselves in despair. Now a self-proclaimed warrior for peace, Mr Jal travels the world reaching out to teenagers in an attempt to create awareness of the plight of child soldiers and others affected by extreme violence.

Celebrated as the living proof that child soldiers can be rehabilitated, Mr Jal shares his story in the hope that the world doesn’t give up on these kids. “We may be worlds apart, but share the same dreams. I am convinced that genocide can be prevented through music and activism.” Setting the example, Mr Jal donates his not inconsiderable earnings as a musician to the Gua Africa charity he founded in order to provide schools for Sudanese war survivors in both South Sudan and Kenya, and so allow them an opportunity to overcome the trauma and attain peace.

Spring 2015 Issue

> GRAF HENCKEL VON DONNERSMARCK Life outside the Comfort Zone Anderen), a remarkable true-to-life drama about the East German Stasi which went on to claim the Oscar for Best Foreign Language Film in 2007.

Careful to accept only projects that merit his touch of class, Mr Von Donnersmarck avoids serial releases. The “blissfully unpretentious” staples of Hollywood hold no appeal to the German filmmaker: “I don’t think that I shall ever make a film [The Tourist] like this again, because it helped me see how much better it feels for me to work in my default position. But at the same time I know that if I had never done what I perceive to be a real Hollywood film, I would always have regretted it,” he confided to The New York Times in December 2010, adding that his life has always tended to stray outside the comfort zone.

That is not to say that Mr Von Donnersmarck fails to appreciate the entertainment value of feel-good movies. In his book Kino! – published earlier this year and as of yet only available in German – Mr Von Donnersmarck argues that many of today’s movies fail on aesthetic grounds: “Impact on the audience is mostly sought through effects with a high wow-factor, as opposed to more thoughtful stratagems.”

An admirer of time travel films such as Run Lola Run, Back to the Future, and Groundhog Day, Mr Von Donnersmarck insists that movies can deviate from tried-and-tested scripts and still deliver solid financial returns to the studios.

A perfectionist bordering on the neurotic, not unlike Stanley Kubrick, Mr Von Donnersmarck is currently dedicated to helping the German film industry expand both at home and abroad. He advocates for a stronger marketing effort and has even proposed the introduction quota system that would mandate a set percentage of movies shown in cineplexes and other venues to be German productions.

You have geniuses and then you have Florian Maria Georg Christian Graf Henckel von Donnersmarck; filmmaker extraordinaire, fluent in five languages, pupil of Richard Attenborough (the elder brother of David), and a direct descendant of General Gebhard Leberecht von Blücher, Prince of Wahlstatt and ally to the Duke of Wellington of Waterloo immortality.

The sheer scale of the name-dropping is jawdropping.

The earl has an Oscar too, besides a vast collection of lesser awards. A citizen of the world, travelling about on a German passport, Henckel von Donnersmarck (for brevity’s sake) grew up in New York City, Brussels, Frankfurt, and Berlin

before moving to Leningrad – now rechristened St Petersburg – where he read Russian Literature at the State University. He followed his Soviet sojourn with a stint at Oxford to obtain a graduate degree in philosophy, politics, and economics.

Comfortably riding the wave of Hollywood’s ongoing love affair with German directors, Mr Von Donnersmarck in 2010 delivered The Tourist – starring Angelina Jolie and Johnny Depp – a romantic comedy with an added thriller dimension that went on to score almost $280m in box office receipts. However, the film was far less well received than Mr Von Donnersmarck’s 2006 debut The Lives of Others (Das Leben der CFI.co | Capital Finance International

Meanwhile, academics are keeping busy studying the limited, but highly acclaimed, work of the German filmmaker, debating his “self-conscious rejection of Hollywood freneticism” and the ways in which Hollywood could benefit from a European cultural perspective that enhances, rather than critiques, its core values. A book on Mr Von Donnersmarck’s contributions to the US film industry was released by Cambridge University Press.

The man himself – all 6’ 8” of him – now spends most of his time with his wife and their three children in Los Angeles: close to the source where his next, undoubtedly carefully crafted, masterpiece will eventually spring from.

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> Europe:

Russia - Moving Borders Politely

Vladimir Putin’s index finger is hovering over the, presumably red, button that activates nuclear Armageddon. The president of Russia threatened to bring the finger down should NATO further reinforce its defence of the Baltic States or make any attempt, covert or otherwise, to wrestle control of the Crimean Peninsula away from Moscow. President Putin had his disconcerting habit of fumbling with nuclear control buttons conveyed to US intelligence officers during a meeting – cloaked in secrecy of course – with their Soviet Russian counterparts. The spy summit reportedly took place in Moscow earlier this year.

The get-together allowed the Russians to give their American peers a heads-up regarding the intentions of the Putin Administration. The Russian president is said to mull responses “ranging from nuclear to non-military” in order to undermine NATO’s presence in the Baltics where a rapid reaction force to counter Russian advances is now taking shape. In their post-meeting assessment, the American spooks concluded that Russia probably aims to “unsettle” the Baltic States with cyber-attacks and by stoking up ethnic tensions. Lithuania, Latvia, and Estonia all have sizeable populations of ethnic Russians that eventually may need rescuing.

St. Petersburg, Russia: The Church of the Savior on Spilled Blood

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CFI.co | Capital Finance International

Spring 2015 Issue

CFI.co | Capital Finance International

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his dovetails nicely with the domestic charm offensive that the Russian Army recently unleashed. With the full blessing of the top brass, the design bureau of the Ministry of Defence has produced a formidable new weapon: a fashion line. It is aptly – albeit rather predictably – named The Army of Russia. The collection was unveiled to oohs and aahs at the Mercedes-Benz Fashion Week in Moscow which ended March 31.

The design bureau’s director Leonid Alexeev was on hand to present the balaclavas, boots, tops, sweatpants, and accessories that seek to cash in on the Russian public’s love affair with the nation’s armed forces. The apparel comes emblazoned with curious slogans. One of these – “Politeness Conquers Cities” – seems to refer directly to the events of 2014 when Russian forces “politely” requested the Ukraine military to vacate the Crimea.

FAILED DIAGNOSIS The Russians’ reading of what Western powers consider an invasion followed by an annexation is more than the deferred post-imperial syndrome usually diagnosed. While many Russians applaud their country’s geopolitical ascendancy, there is more at play than just jingoism. In the most basal of terms: President Putin is buying support; his cross-border forays are merely an added dimension.

Though at times statistics may be misused to underwrite flights of fancy; they can also shed light on otherwise inscrutable developments.

Abraham Lincoln remarked that: “You can fool all the people some of the time, and some of the people all the time; but you cannot fool all the people all the time.” Honest Abe forgot to mention that you can actually buy people.

President Putin knows this only too well: it has kept him in power.

Where have all the white ribbons gone that enlivened the failed Snow Revolution of December 2011? This was when protesters filled Moscow’s Bolotnaya Square in the tens of thousands to express collective disgust with the widespread vote rigging that allowed President Putin’s United Russia Party to cling to a narrow majority in the State Duma. At the time, polls showed that well over 40% of the population supported the protesters’ demands to at least some degree. More than half of the Russians queried felt that corruption had significantly increased and constituted the country’s most serious challenge.

While the crackdown on political dissent certainly contributed to the restoration of order, it remains curious that relatively few people actually joined the protests before the repression hit. Most Russians kept their grumblings private and their heads down. Sociologists have pondered this pervasive indifference exhaustively and concluded that, while to most Russians the outlook may have seemed bleak, their actual circumstances in 2011-2012 were none too bad.

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This helps explain why the protests in Russia failed to gain traction whereas those elsewhere – Ukraine, Egypt, Tunisia – did succeed in toppling presidents. Here, the present moment looked so atrocious that the future – whatever its shape – could only bring improvement.

SPREADING CASH AROUND With oil prices at or near historical highs, Russia in 2012 raked in over $512bn in export revenue.

Part of that cash was spread around. While in 2011 the country’s GDP expanded by 4.8% and government revenue increased by 8%, average salaries shot up by 13.6%. Another statistical jewel shows the proportion of welfare payments in relation to overall incomes. Between 2005 and 2007, social benefits represented slightly over 12% of the total salary pie. By 2012, the share of social pay-outs had increased to 18.1%.

Simultaneously, pay derived from entrepreneurial activities decreased as a share of total income: from 20.6% in 2007 to barely 14% in 2012.

Finally, the income of workers employed by the state – about one in three Russians are on the government’s payroll – increased 1.6 times faster than take-home pay of people employed by private business.

These numbers paint an interesting picture: people exposed to the vagaries of the free market fared markedly less well than those dependent on the state, either as workers or benefit claimants.

At the time of the protests, most Russians doubted that their prosperity would last; however, President Putin made sure it did and thus removed the publics’ anxieties.

By vastly increasing the number of people coopted into the system, the Putin Administration not only managed to survive, but actually saw its popularity explode. Now that the bread had been provided, the games could begin.

President Putin is quite frank when discussing his government’s mission: it is to cast a New Russia along the historical, cultural, religious, and geographical lines that existed during the weaning years of the Romanoff Dynasty.

President Putin denies that he wishes to impose a state doctrine based on religious and historical values to replace Marxism as the driver of national purpose. However, he does seem to value a reappraisal of lost cultural values and the introduction of a vaguely termed “qualitative democracy” not necessarily linked to conventional electoral arithmetic.

TAKING A CUE FROM PORTUGAL Eschewing the anthropocentric ways of the perfidious Western powers, President Putin proposes a more benevolent corporatist alternative not unlike the Estado Novo (New State) created

by António Salazar, Portugal’s prime-minister and virtual dictator between 1932 and 1968: not so much fascist state as conservative, technocratic, nationalist, and authoritarian one.

Parallel to the Estado Novo – which aimed to CFI.co | Capital Finance International

preserve and perpetuate Portugal’s vast colonial empire through its doctrine of Lusotropicalism – President Putin’s New Russia can only come about if it manages to re-establish the country’s role as the powerbroker in Eastern Europe.

Although the Crimea was easily snatched and Eastern Ukraine quickly destabilised, these were but the low hanging fruits. The geopolitical objectives – or irredentism – pursued by Moscow to implement Putin’s grand vision may yet result in the reabsorption of the Ukraine’s rump.

However after that, Russia will need to reach higher, punching – perhaps – above its weight.

Attempts at regaining its influence on the Balkans have not produced any tangible results, with even its formerly staunch ally Bulgaria turning west.

The amorous looks cast by Greece are merely the result of that country’s sorry predicament.

Athens’ flirtations thus seem narcissistic in nature; not the stuff President Putin can use to further his goals.

Then again, Belarus is firmly in Moscow’s pocket and the Kaliningrad exclave adds a nice touch as well; but that’s about it. Crossing any other meridians to the west will meet with a response that may cause President Putin’s trigger-finger to itch.

Determined to stay in power, President Putin has to deliver: either rising incomes or adding territories – politely or not. Both the United States and the European Union would be well-advised to recognise two plain facts: Vladimir Putin will hang on to power and Russia needs some room to throw its weight around – preferably in a gentlemanly way.

DEVOID OF SENSE In light of these facts, the biting sanctions currently in place have stopped making sense.

Their efficiency, which even surprised the imposing parties, is undermining Russia’s economy. GDP growth has petered-out to a barely measurable 0.6% in 2014, while inflation is rampant at over 16%.

It is only a question of time before the public’s returned anxieties boil over into protests. For now, President Putin enjoys popular admiration – if not adulation – for his geopolitical accomplishments.

Since he cannot deliver sustained growth, President Putin has no choice but continue his quest to reconquer lost lands.

It is a rather simple either-or proposition. Lifting the sanctions – for which surely a politically expedient excuse can be phrased – would allow the Putin Administration to fire-up the bread oven instead of the military rhetoric. The man will not be unseated without a fight of possibly global consequences. Western powers could do worse than to just deal with the facts and draw a line that allows their foe some wiggling room. The steady progression of time – though it may not be accelerated without causing great disruption – will eventually stop even President Putin in his tracks. i

Spring 2015 Issue

> CFI.co Meets the InverCaixa Gestión Fixed Income Fund Management Team:

Proactive Approach in Fixed-Income Fund Management InverCaixa Gestión, a wholly-owned subsidiary of CaixaBank Group, earlier this year received the Best Fixed Income Fund Management Team Spain 2015 Award.

L

ast year, InverCaixa Gestión registered a particularly strong growth of its fixedincome funds which ballooned by 89%, thus affirming CaixaBank’s new leadership position in the Spanish fund industry with a market share of 17,02%.

The InverCaixa Fixed-Income Team – with around EUR8bn in assets under management – is a sevenperson group headed up by Carmen Lumbreras de la Gándara. The team’s professionals are euro market experts with vast experience in trading a variety of bonds ranging from investment-grade to high-yield securities.

“We strive to excel and are relentless in our pursuit of the best possible result,” says Mrs Lumbreras.

Each individual’s opinions merit respect within the team: “When you are privileged enough to work with professionals of this calibre, you need to foster participation; respecting and pooling opinions and evaluating return versus risk on a joint basis. The client remains a key consideration at all times. Our approach to the market also involves a continuous evaluation of both what we did right and where improvements may be made.”

The team has been together since 2008. That year, Carmen Lumbreras and Guillermo Viñuales were brought in from Morgan Stanley Gestión.

In 2013, Carmen Pinyol and M Antonia Muñoz joined the team to bolster management of fixedincome securities issued by financial institutions and corporations.

The remaining members of the Fixed-Income Team are Luis Merino, Juan Manuel Blanco, and Carlos Robles. All boast extensive experience working with InverCaixa. “There is genuine cohesion within the team, and strong ties amongst the members”, says Mrs Lumbreras.

As well as leading the team, Mrs Lumbreras runs FonCaixa Renta Fija Flexible – a euro fixedincome fund that registered rapid growth in 2014 and now has in excess of EUR3bn in assets under management. The FonCaixa Renta Fija Flexible is a flexible fund that can have a negative duration, allowing up to 30% investment in high-yield bonds and up to 10% in currencies. The fund’s portfolio is assembled taking into account the team’s best ideas.

InverCaixa Gestión: Fixed Income Fund Management Team

Mrs Lumbreras also manages the recently established FonCaixa Estrategia Flexible fund which can invest up to 15% in equity. “We are very excited to take up this challenge”, she says.

and supranational bonds. His main contributions come in peripheral bonds; managing products for all kinds of customers, including institutional clients.

Another of InverCaixa’s noteworthy funds is the FonCaixa Ahorro. Managed by Luis Merino, this fund caters to the requirements of risk-averse clients, offering highly attractive risk/return ratios. Mr Merino is also in charge of covered bonds and ABS (asset-backed securities).

In addition to an outstanding team of individuals, Mrs Lumbreras emphasises the importance of the investment process itself which combines top-down and bottom-up decision-making, as well as internal and independent analysis: “We are perpetually engaged in brainstorming. The team believes in sharing ideas and monitoring positions on a daily basis. If a strategy isn’t working, it gets promptly changed.”

Another key product is the FonCaixa Monetario Rendimiento, a fund managed by Juan Manuel Blanco. Mr Blanco has extensive experience and is a money market specialist. He helps enhance the value generated from investment products appealing to more conservative clients.

Guillermo Viñuales is in charge of FonCaixa Renta Fija Corporativa. He is also head of credit. Mr Viñuales, Carmen Pinyol, and M Antonia Muñoz create these portfolios and offer recommendations that are applied to the entire range of InverCaixa funds.

Finally, Carlos Robles is a specialist in sovereign CFI.co | Capital Finance International

The results provide ample evidence of the team’s superior quality and professionalism.

Over the last three years, all funds representing the different fixed-income risk profiles have consistently outperformed their benchmark indices.

“What is particularly striking about the InverCaixa Fixed-Income Team is its proactive approach and the exceptionally high levels of cooperation and trust between the members,” concluded Mrs Lumbreras after accepting up the CFI.co award. i 49

> CaixaBank’s InverCaixa Gestión:

Spain’s Leader in Asset Management CaixaBank is Spain’s third largest banking group and the biggest in the domestic market by business volume with a customer base of 13.4 million.

CaixaBank is also one of the most solvent amongst banks in the Eurozone with a CET1 fully-loaded of 12.3% by the end of 2014.

I

n 2015, CaixaBank also became leader of the Spanish asset management market, supported by a robust performance from InverCaixa Gestión – a wholly-owned subsidiary of CaixaBank Group.

CaixaBank is an integrated financial group engaged in banking, insurance, and asset management. The group also holds stakes in a number of international banks and leading companies in the services. At the end of December 2014, attributable profit had more than doubled from EUR316 million to EUR620 million while net interest income was up to EUR3,955 million (up 5.1% on 2013), seeing the bank consolidate its leadership position in the Spanish retail banking market.

CaixaBank assets amounted to EUR338,623 million and gross customer loans totalled EUR197,185 million, with total customer funds standing at EUR271,758 million. Moreover, the bank has a strong liquidity position of EUR56,665 million and is one of the most solvent amongst banks in the Eurozone with a CET 1 (Common Equity Tier 1) fully-loaded of 12.3% by the end of 2014. Furthermore, CaixaBank shares gained 15.1% in 2014 with a quoted price of EUR4.361 per share as of December 31, 2014, outperforming the average for the Spanish financial sector by 2.5%.

On January 2, 2015, CaixaBank acquired the retail banking, asset management, and corporate banking arms of Barclays Bank in Spain (excluding investment banking and Barclaycard).

CaixaBank leads the Spanish financial sector in terms of innovation. The bank has four million mobile service users and has registered over ten million downloads from its mobile app store. It also has more than nine million online banking customers and, according to the American Internet analytics company Comscore, is the most visited banking website in Spain. CaixaBank is widely considered a global leader in innovation and new technologies.

Isidro Fainé, Chairman of CaixaBank and Gonzalo Gortázar, CEO

While CaixaBank’s focus is on Spain, it has also established an international network via strategic investments in banks. CaixaBank’s foreign banking interests comprise Banco BPI (Portugal - 44.1%), Boursorama (France - 20.5%), Grupo Financiero Inbursa (Mexico - 9%), The Bank of East Asia (Hong Kong - 18.7%), and Erste Group Bank (Austria - 9.9%). CaixaBank also has stakes in Telefónica and Repsol.

CaixaBank’s strategy is to internationalise operations in economies with high growth potential and to work closely with international partners to expand services. CaixaBank also maintain a number of representative offices around the world: four in Europe (Frankfurt, London, Milan, and Paris) and nine in the rest of the world (Beijing, Shanghai, Bogotá, Cairo, Dubai, Istanbul, New Delhi, Santiago de Chile, and Singapore). Offices due to open in New York, São Paulo, and Algiers. International branches are operating in Warsaw, Casablanca, Tangier and it will open soon one in London.

On the other hand, “la Caixa”, the main shareholder of CaixaBank, also funds social, environmental, scientific, cultural, and research initiatives via its social programme. The “la Caixa” Banking Foundation is Spain’s leading private foundation and the second largest in Europe. The foundation intends to keep its Welfare Projects budget unchanged at EUR500 million for 2015.

This figure has remained unchanged for the last seven years.

InverCaixa Gestión, founded in 1985 with Asunción Ortega as chairwoman and Guillermo Hermida as CIO, is the specialised asset management arm of the CaixaBank Group. The firm is one of the most outstanding subsidiaries of the group and is expected to play a major role in CaixaBank’s internationalisation.

InverCaixa Gestión is a consolidated management company based in Spain and committed to attracting foreign institutional investors. With close to EUR40bn under management and advisory

“In 2015, CaixaBank also became leader of the Spanish asset management market, supported by a robust performance from InverCaixa Gestión.”

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CFI.co | Capital Finance International

Spring 2015 Issue

“InverCaixa Gestión is a consolidated management company based in Spain and committed to attracting foreign institutional investors.”

Investment Team which selects the top managers for each strategy option and establishes optimal combinations.

Headquarters: Barcelona

and close to a million clients, InverCaixa Gestión has now overtaken its nearest rival for the top spot on Spain’s ranking of the largest domestic mutual fund managers. InverCaixa Gestión has seen its AuM (assets under management) grow significantly over the last two years.

teams: Fixed-Income, Equity, Alternative Investment, Value at Risk (VaR), and Funds of Funds. Focused management teams provide assessment to the Asset Allocation Team which manages balanced and global funds by optimising strategic risk and tactical implementation.

Investors added EUR12bn to the total net assets during this period. Though overall market trends helped, performance excellence and savvy decisions on the part of the management team underwrote the outstanding growth of InverCaixa Gestión’s AuM. The integration of financial groups has also contributed to the growth in net assets, albeit to a lesser extent. The integration of Barclays Wealth Management, with EUR2.4bn AuM, is scheduled for the first half of 2015.

The Equity Team has ten industry/sector specialists covering Europe and Global Mega Caps. The investment process is based on fundamental analysis of companies, seeking GARP (growth at a reasonable price) or valuations with clear catalysts. Said analysis is specialised by major sectors and regions and closely supported by third-party research. The team places emphasis on company selection based on high conviction investment ideas.

The Spanish mutual fund market is not only exceptionally buoyant, it is highly competitive as well, with volumes growing at an annual rate in excess of 25%. Being part of a financial services group that includes the Spanish leader by market share, InverCaixa Gestión benefits from privileged access to a universe of over 13 million clients.

InverCaixa Gestión’s management capabilities are focused on Europe where it directly implements investment decisions in both equity and fixed income assets. Investment decisions in other universes are implemented via funds of funds, making use of international third-party fund managers of demonstrable excellence.

InverCaixa Gestión’s growth is powered by the expertise of close to 140 professionals, 50 of whom work exclusively in analysis and identifying investment opportunities, examining a range of different assets and investment management styles.

To this end, InverCaixa has developed a proprietary model for fund selection with a track record extending over more than twelve years.

It identifies the best funds not only based on quantitative and qualitative analysis, but also on the right strategies. Portfolios are built by optimising fund weightings, taking into account their contributions to differential risk and harnessing active fund strategy management.

At InverCaixa Gestión investment decisionmaking is a top down process based on a structure of committees composed of experienced asset class managers. Ongoing portfolio monitoring and risk control is conducted by an independent department.

InverCaixa has five specialised management

InverCaixa also has two teams specialising in total return investment: the Value at Risk Team, focused on discretionary mandates for institutional investors (with close to EUR3bn under management), and the Alternative CFI.co | Capital Finance International

The fund management firm designs and manages an extensive range of products – funds, SICAVs (open-ended collective investment schemes), and discretionary mandates – investing in a wide variety of assets and harnessing different management styles. Thus, InverCaixa Gestión is able to provide clients with products carefully tailored to their needs, catering to different levels of risk-tolerance and income expectations, as well as addressing all personal requirements.

On the other hand, the CaixaBank Global SICAV was launched in late 2013. This UCITS (undertakings for the collective investment in transferable securities) established by CaixaBank, and managed by InverCaixa, was designed to cater to growing customer demand for asset management in Luxemburg. With more than EUR600 million under management as of January 2015, going forward InverCaixa may launch further mirror funds in Luxemburg for its Spanish product range.

InverCaixa Gestión’s strategic approach is grounded firmly on the specific values and convictions it shares with CaixaBank. These include providing added value for clients, product quality, transparency, flexibility, responsibility, efficiency, and security.

The Fixed-Income Team won the 2015 award for Best Fixed-Income Fund Management Team Spain. The CFI.co judging panel was particularly impressed by InverCaixa Gestión’s active fixedincome team, boasting unique insight into long-term trends and an ability to capitalise on short-term opportunities. The expertise of the Fixed-Income Team also means it is able to directly and efficiently harness such insights and opportunities that most benefit funds under management.

InverCaixa’s success has been reflected in the awards that it has won over the years. The 2015 CFI.co judging panel was emphatic: “Successfully pursuing transparency in its management of assets, while maintaining streamlined operational procedures, has taken InverCaixa Gestión to the very top.” i 51

> DEG:

Turkey - Growth Market and Bridge to the East

By Alexander Klein

Turkey was long considered especially promising in the group of emergingmarket countries. However, political developments and Turkey’s susceptibility to recent turmoil in financial markets means that the perception has now shifted.

But which is the correct impression? Do current political events simply shroud the country’s economic potential? It’s a fact that many companies continue to operate successfully in Turkey, and are consolidating their position in the domestic market, as well as in the East. And yet, the development of the past years suggests a differentiated view needs to be taken of the opportunities and risks.

F

ollowing on from the successfully marketed concept of the BRIC states in 2001, Goldman Sachs presented the “Next Eleven” in 2005, as the “successor” to these booming emergingmarket nations. Turkey was part of this group, besides countries such as Nigeria and Egypt.

The reform economic policies of Recep Tayyip Erdogan, the prime minister elected in 2003 and former mayor of Istanbul, proved popular, and the country seemed to be well on the way to leaving behind the impacts of 2001’s economic crisis, as well as the fiscal austerity imposed as part of the IMF-assistance and structural reforms. The foundations seemed to be laid for Turkey to join the ranks of the industrialised nations.

Yet the euphoria has now subsided. Observers are perturbed by Erdogan’s authoritarian behaviour in particular, for instance his handling of the Gezi protests in the summer of 2013, or his reaction to allegations of corruption against members of government at the start of 2014.

And still, Erdogan won the absolute majority in 2014’s presidential elections.

The economy too, is worrisome for several observers. The announcement by the US Federal Reserve to review its current monetary policy in the medium term, led in 2013 to capital flight from emerging markets. States reliant on foreign capital bore the brunt of this including Turkey, with its currency depreciating substantially during this period. In the end, Turkey was even considered as one of the “fragile five”.

The focus of this concept, marketed by Morgan Stanley at the end of the summer of 2013, was on the major emerging-markets, capital market relevant nations with a high susceptibility to 52

“The underlying economic conditions are still promising: the economy, with its population of approximately 80 million and a GDP of almost $900bn, is a heavyweight, not only in its own region.” capital outflows. Brazil, South Africa, India, and Indonesia joined Turkey in this group. In view of this development, the question is whether the previous euphoria regarding Turkey was excessive, and how to assess the situation.

The underlying economic conditions are still promising: the economy, with its population of approximately 80 million and a GDP of almost $900bn, is a heavyweight, not only in its own region. GDP growth has now evened out at about three to four per cent annually due to monetary and fiscal countermeasures after a short-term slump in economic output during the global financial crisis 2008/2009, and the temporarily increased volatility caused by the above mentioned global capital outflows from emerging-market countries in 2013.

This growth level is, in fact, lower than in the years preceding the global crisis, but on the other hand it is more sustainable. After years of creditdriven growth in the recovery phase, a few years of consolidating are now on the agenda, even though, during this “breather”, Turkey is still faring considerably better than the EU countries.

CFI.co | Capital Finance International

Turkey has a demographic advantage compared to many industrial countries, due to its young and frequently well-educated, growing population. In the past ten years, a strong middle class has emerged and the previous disparity in income between urban and rural areas has diminished.

Turkey also now has a much better transport and energy infrastructure than a few years ago.

Turkish entrepreneurs have played the economic reforms to their advantage, and alongside the versatile small and medium-sized enterprises have generated successful international groups which are well represented in many sectors today.

For instance, Turkey has now grown to become the second largest steel producer in Europe.

International consumer goods manufacturers, such as Beko, have long been expanding beyond European borders, and the shipbuilding industry, which has fared well since the start of the 20th century, is market leader in a number of niche segments.

The services sector was subject to strict regulation in the past, but still developed successfully in the major industrial centres. Alongside tourism, banking should also be highlighted. Additional impetus for growth and innovation was generated by further opening up the service sector.

In addition to the domestic market, the export business offers opportunities. Turkey would also benefit from an improved economic climate in the EU countries, as the EU is Turkey’s most important trading partner due to its membership in the EU Customs Union. About 40% of Turkish exports, valued at around $60bn annually, are destined for the EU. Turkey’s most important trading partners within the EU are Germany,

Spring 2015 Issue

diversification. Accordingly, in 2009, direct investments from the EU amounted to more than three-quarters of the annual overall investment volume. This share is now declining in favour of companies from Asia and the Middle East.

Alongside changes in the share of source country, the increasing importance of services has also changed the sectorial distribution, because it has been recognised that there is potential besides the manufacturing industry. For instance banks from China, Japan, and the Gulf States have recently expanded their presence in Turkey through investing and opening branches.

These developments and the strategic alignment of many multinational companies clearly highlight that Turkey’s potential as a growth market and a bridge between the East and the West is still important. But although the potential in the dynamic environment in the markets on Europe’s doorstep should not be underestimated, neither should the risks be.

The International Monetary Fund (IWF) recently cautioned Turkey about its susceptibility to external shocks due to its dependency on foreign flows of capital for financing its chronic current account deficit, and at the same time, urged the country to instigate desperately needed structural reforms. Increasing Turkey’s competitiveness is important in order to avoid remaining in the “middle-income trap” and achieving a growth level of over 5% p.a. in the medium to long term.

Author: Alexander Klein

Great Britain, and Italy. In 2014, Germany delivered goods to Turkey amounting to almost EUR20bn; mainly cars and car parts, machinery, and chemical products.

However, Turkey’s membership in the EU Customs Union also has a downside. It obliges the country to lower its import duties towards third countries with which the EU has negotiated bilateral free trade agreements – without automatically benefiting from customsfree market access itself. As Turkey is only a member of the customs union, it is not party to the bilateral EU agreements and is therefore compelled to negotiate separate agreements with these countries.

Against this backdrop, Turkey is concerned about the free trade agreement being discussed between the EU and the USA, which would not only open the door for competitive American companies to Turkey’s European sales market, but to Turkey itself too – without automatically granting permission for Turkish goods to flow in the other direction. As a result, Turkey is drawing on its geo-strategic position to build up additional economic ties and in doing so, focus on the countries in the Middle East, as well as those located on the Silk Road all the way to Asia.

Iraq, for example, is Turkey’s largest bilateral trading partner after Germany. Ten years ago, the country’s share in Turkish exports was less than three per cent. Now, around seven per cent of Turkish exports find their way into Iraq. The Shanghai Cooperation Organisation (SCO), a regional organisation for economic and military collaboration, is a further example of additional markets beyond the EU. The members include China, Russia, Pakistan, India, and Iran some of whom only have observer status. While Turkey is, at present officially a dialogue partner, in 2013 it applied for the next highest level which is observer status.

All in all, Turkey shows great economic potential, but is more volatile in comparison to a number of European countries. Many foreign companies use this potential not only through trade relations, but also through direct investments. In doing so, companies have an eye both on the large Turkish domestic market and the region as a whole. In the latest survey of the International Investors Association (YASED) around a third of the multinational companies polled stated that they have a local headquarters for working in the region based in Turkey.

The changing regional source of direct investments also mirrors this regional CFI.co | Capital Finance International

Turkey’s further economic success will therefore hinge on whether the recent doubts regarding rule of law, and for example the independence of the central bank, prove to be justified, or not, and the government is prepared to push forward on further economic reforms after the parliamentary elections in the summer of 2015.

Despite these risks, Turkey remains a growth market in which activities can be carried out successfully supported by experienced partners.

An experienced financing partner for investments in future markets is DEG – Deutsche Investitionsund Entwicklungsgesellschaft mbH, which has a representative office in Istanbul. i

ABOUT DEG DEG, a subsidiary of the KfW development bank finances investments of private companies in developing and emerging markets. As one of Europe’s largest development finance institutions, it promotes private business structures to contribute to sustainable economic growth and improved living conditions.

ABOUT THE AUTHOR Mr Alexander Klein is the senior macro economist in the Corporate Strategy and Development Policy Department at DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH. 53

> NBG Securities:

Expertise, Quality, and Safety NBG Securities, the investment banking and brokerage arm of NBG Group, headquartered in Athens, Greece, and with a presence in London, Bucharest, and Nicosia, is one of the leading brokerage firms in Greece and services more than 66,000 retail and more than 130 institutional clients. The company’s knowledge and size guarantee a consistently optimum quality of services from a single trade to large block trades and complex orders.

N

NBG Securities’ success lies in what is clearly defined in the company’s mission statement: “To offer investment services with expertise, quality, and safety that meet customers’ changing needs,” backed by: • Talented personnel • Strong capital base • Innovative products & services • Regional presence • Robust systems Expertise, quality, and safety are key ingredients of success and constitute the long-lasting characteristics of this company. Based on these elements, employees work for and with their clients to reach the best possible results. The aim is but one: to provide services of exceptional quality covering the changing needs of clients and building long-term relationships that have the capacity to grow.

Apart from its positioning as a leading player in brokerage services, NBG Securities is also a leading regional player in investment banking with a proven track record in delivering successful investment banking transactions.

More specifically, the company offers a full suite of M&A (mergers and acquisitions) and strategic advisory services. NBG Securities has the expertise needed for the creative structuring and robust execution of capital market transactions in all aspects of raising capital, including advisory and underwriting services. The team is backed by a highly-skilled sales force in London.

The management team’s deep roots in the financial industry, its expertise, skills, and talent coupled to NBG Securities’ strong corporate

“Expertise, quality, and safety are key ingredients of success and constitute the long-lasting characteristics of this company.” values provide the foundation of both individual and corporate action. This is what drives the company’s history, reputation, and long-lasting relationships. It also leads to the fulfilment of the company’s vision to be a “Leading regional player, a point of reference for the provision of integrated and innovative investment services.”

The management team is comprised of high-calibre business leaders with local and international experience. The team’s primary responsibility encompasses the company’s strategic management, sales, resource allocation, and middle- and back-office operations.

Panos Goutakis is chairman of the board and CEO of NBG Securities and general manager of Investment Banking at the National Bank of Greece. Mr Goutakis has a long track record in the banking sector. Some of prior his roles included senior advisor to the CEO at the Bank of Piraeus, and managing director and country head at Morgan Stanley. As chairman of the

board and CEO of NBG Securities, Mr Goutakis in 2013 successfully incorporated the Investment Banking Division of NBG. He guided the company to profitability, despite the adverse economic environment in Greece, and set the basis for sustainable growth going forward.

Spyros Kapsokavadis, the General Manager and Member of the Board of NBG Securities, joined the company in 2013. His background includes leading positions in asset management and brokerage firms. Mr Kapsokavadis holds significant experience in the financial services sector in the areas of risk management, finance, audit, and operations.

Yannis Katsarakis, the most recent addition to the NBG Securities Management Team, is Director of Investment Banking. He brings over eleven years of experience to the company. Mr Katsarakis spent a significant part of his career advising clients in relation to Mergers and Acquisitions as well as raising funds through the capital markets. Throughout his career, Mr Katsarakis has focused on clients and transactions in Greece and Central Eastern Europe (CEE). Prior to joining NBG Securities, Mr Katsarakis spent seven years at the UBS Investment Bank in London where he advised corporates, governments, and banks in Greece and the CEE. Earlier in his career, he worked in strategy consulting and private equity.

Kostas Theodorou is the Managing Director of Research & Institutional Sales. Mr Theodorou heads the analyst teams in both Athens and Bucharest, as well as the institutional sales teams in Athens and London. Mr Theodorou has extensive experience on sell-side equity research, having held the position of Research Director at

“The management team’s deep roots in the financial industry, its expertise, skills, and talent coupled to NBG Securities’ strong corporate values provide the foundation of both individual and corporate action.”

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Spring 2015 Issue

Integrated Business Model Brokerage Institutional & Retail

   

Research

Equities Derivatives Fixed Income DMA Access

66,000+ Retail clients 130+ Institutional clients

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Broad coverage of sectors and companies

Workforce in Greece, Romania, UK & Cyprus

€15.4m

Daily average volume 2014 (retail & Institutional)

# 3rd

# 7th

2014 Market share in Greece

2014 Market share in Romania

# 2nd

Tripled market share

Extel 2014 Survey Greece: Equity Sales

Romania: Fastest growing pace y-o-y among all brokerage houses in 2013

+3x

Investment Banking 6 4 analysts based in Athens 2 analysts based in Bucharest

85%

80%

28 stocks representing c.85% of local Mcap

14 stocks representing c.80% of local Mcap

Advisory

Capital Markets

    

M&A Privatizations Fairness opinions Corporate restructurings Other corporate finance

 Equity capital markets  Debt capital markets  Tender Offers

15 High skilled professionals, with long-lasting experience in global banks (Romanian and Greek speakers)

# 6th

# 2nd

2014 M&A

2014 M&A

# 3rd

# 2nd

# 6th

# 1st

Extel 2014 Survey Greece: Country Research

Extel 2013 Survey Greece: Country Research

2014 Equity Capital Markets (excl. deals in financial sector)

2014 Equity Capital Markets (excl. deals in financial sector)

# 4th

# 2nd

#4

Romania: Average of 4 out of 5 stars across the coverage universe on Thomson Reuters Starmine rankings

2014 Debt Capital Markets 2014 Debt Capital Markets (excl. deals in financial sector) (excl. deals for in financial sector) Ranking among all banks

Ranking among Greek banks

“Our leading market positioning, our full suite of products and services coupled to our strong values system define our corporate culture and character, and guide our everyday actions and behaviour.” leading international and Greek brokerage firms such as Crédit Agricole, Cheuvreux, National Securities, and Alpha Finance.

Zois Mpeloumpasis is the Director of Retail. Mr Mpeloumpasis heads the biggest retail division in Greece which services thousands of customer accounts and has accumulated a vast experience in sales and trading. Mr Mpeloumpasis has been leading the company’s Retail Division for more than fifteen years. In terms of domestic market shares trading the company ranks in the top position.

George Goufas is the Director of Institutional Trading. Mr Goufas is responsible for global brokers, global buy-side investment houses and asset managers and hedge funds. His team provides local expertise and tailor-made services and prides of long-lasting client relationships. Mr Goufas’ professional career includes over twelve years of experience in institutional sales and trading.

Maria Manola is Director of Operations and manages a team of 26 employees. Mrs Manola brings an overall experience of fifteen years in retail investment operations and treasury units.

Her prior experience includes Head for Citibank Greece Wealth Management Operations.

THE NBG SECURITIES BROKERAGE TEAM “Our clients are our priority. We work for and with our clients to reach the best possible results.

We are committed to providing services of exceptional quality that cover our clients’ needs.

This is what differentiates us and give us the privilege of maintaining long-lasting relationships with our customers.”

“Our brokerage division is the biggest one in Greece and is staffed with certified and highlyexperienced personnel. We service more than 66,000 retail clients and have successfully managed to retain our position as one of the leading brokerage firms in Greece.”

The team’s enduring success is based on: • Expert and certified personnel • High quality services provided to all customers • A strong adherence to the internal values system which is reflected by the way the team conducts business • A solid and robust IT infrastructure that guarantees exceptional quality in orders execution • A local and international network of branches (London, Bucharest, and Nicosia in addition to five local branches) that provide clients with easy access • Agreements with global investment banks that allow the team to offer its clients access to all major stock exchanges around the globe (Europe, US, Japan, Singapore, and Hong Kong) and to emerging and frontier markets such as Russia, Bulgaria, and Serbia.

• A trading platform which offers some unique features for the Greek market such as Reuters

CFI.co | Capital Finance International

news feeds, a live Athens Stock Exchange (ASE) feed, online ASE derivatives trading, real-time alerts, and NBG Securities research products “To our retail and institutional clients we offer a full suite of products and services with expertise, quality, and safety. Our size and market knowledge guarantee the optimum quality of services from a single trade to large block trades and complex orders. We provide timely and efficient execution of orders and act as liquidity providers in almost all major stocks in the domestic cash equity and derivatives market. Specifically in the derivatives market, our team has the capacity and experience to facilitate building of complex strategies and promote innovative products.”

“Through our international branches and group companies, our experienced International Equities Desk provides access to the neighbouring exchanges of Turkey, Romania, and Cyprus.”

“In the fixed-income market we have direct access to market liquidity and offer competitive pricing, especially on the Greek corporate issues.

Apart from the secondary market, we have a solid presence in the primary market either as an arranger or a market participant.”

“For the Greek market, we are the only market maker for all three Greek stock indices ETFs (exchange traded funds): FTSE Athex Large Cap, Athex General Index, and GT30 Index (GreeceTurkey).”

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1

NBG Securities Brokerage Team

“Customer satisfaction, service quality, safety, integrity, respect, and responsibility reflect our leading value drivers and serve as a compass for our behaviour and actions, and define our relationships with clients, employees, and the environment we live and operate in.”

“Our Institutional Desk serves an extended client base of domestic and international institutional clients trading Greek equities, derivatives, and fixed-income products. Our prime services include corporate access, value-added market updates, and trading ideas covering a wide spectrum of entities listed on the Athens Stock Exchange, regular research reports, analysts’ calls and one-on-one meetings that facilitate the frequent conveyance of timely information to our clients.”

“To our institutional clients we offer zerolatency, highly-redundant FIX-enabled DMA (direct market access) to the Greek, Turkish, and Romanian cash equity markets as well as to the Greek derivatives market.”

“Our leading market positioning, our full suite of products and services coupled to our strong values system define our corporate culture and character, and guide our everyday actions and behaviour.”

“Customer satisfaction, service quality, safety, integrity, respect, and responsibility reflect our leading value drivers serve as a compass for our behaviour and actions, and define our relationships with clients, employees, and the environment we live and operate in.” i 56

NBG Securities: HQ Offices

CFI.co | Capital Finance International

Spring 2015 Issue

> Silk Invest:

Deep Insight Empowers Frontier Market Specialist

S

ilk Invest was founded in 2008 in London by Zin Bekkali and a veteran team of investment professionals with proven expertise in frontier and emerging markets.

The team’s investment process incorporates seasoned institutional managers with local market expertise. These managers represent thirteen frontier countries and between them are fluent in eighteen languages. They operate from offices in London, Egypt, Morocco, UAE, and Kenya. Shortly, Silk Invest will establish a local presence in Pakistan and Nigeria.

open up to global investors, this trend is expected to further accelerate.

Frontier markets are inefficient and underresearched. Our local analysts not only have regular access to their universe of companies; they understand how non-investment factors such as unexpected management changes, or shifts in the political landscape, may affect a company’s growth. They also consume the products, use the services, and get first-hand product, company, and market feedback. The investment approach of Silk Invest is built upon these insights and perspectives.

Co-Founder, CEO and Group CIO: Zin Bekkali

Silk Invest has gained a solid reputation as a leading frontier markets specialist with a deep insight across investment opportunities.

Besides its deep ad well-established investment products, Silk Invest also offers advisory services for sophisticated institutions, family offices, and corporates who are using the firm’s services to assess new investment opportunities and to project-manage execution.

Silk Invest has three independent frontier markets investment teams: public market equities, fixedincome, and private equity. It manages three unique frontier and African equities strategies: a global alternatives mandate, a frontier African fixed-income fund, and an African food & beverages private equity fund.

The primary investment focus is on Africa, the Middle East, and Asian frontier markets with an emphasis on having local presence in the targeted regions. Silk Invest has pioneered investment strategies that capture consumer-driven trends in these markets and was also the first firm to launch a dedicated frontier fixed-income fund and a consumer sector-based Pan-African equity fund in Europe.

A DISTINCTIVE PERSPECTIVE Silk Invest has a distinct perspective and experience in frontier markets that derives from a dedicated team of investment professionals with specialist knowledge and outstanding track records in their respective local markets. This enable them capitalise on unrivalled investment opportunities. Over the past two decades, the frontier markets, including Africa, have become increasingly relevant to the global economy.

Foreign direct investment (FDI) has grown sixfold, mainly driven by intra-regional transactions.

Silk Invest’s strategy in these dominant markets is to invest in stocks and local companies that will both outperform their local peers and become true leaders in their field. As the economies of these rapidly developing countries continue to

The firm strongly believes in the short- and longterm structural opportunities in frontier markets and the advantages for investment analysts and decision makers to be on the ground to capitalise on it.

Silk Invest’s investment process incorporates fundamentally-driven, bottom-up stock analysis, designed to outperform the overall market over the longer term with reduced volatility. The firm maintains an unconstrained, non-benchmark approach and invest in companies with successful local business models whose demand is driven by local consumers. The portfolio building process, while taking into consideration ESG standards, is designed to maximise annual returns while maintaining maximum diversification across the regions and sectors.

HIGHLIGHTS • Most frontier/emerging markets are inefficient and under-researched. Silver Invest local analysts not only have regular access to their companies; they consume the products, use the services, and get first hand local product, company, and market feedback. They have an organic local network resulting in a constant flow of information which, combined with regular company visits, gives the analysts broad and valuable insights and data points on which to make decisions. The investment approach of Silk Invest is built upon this conviction.

• Bottom up fundamental analysis in key markets allows Silver Invest analysts and portfolio managers to research and monitor a larger number of investment opportunities than most of their peers. It also allows the firm to gain a better insight into the on-going dynamics of each market.

• The consumer opportunity is one of the most attractive and long-term investment themes in frontier markets. The firm invests in companies with successful local business models that will benefit from the rising middle class in this region and across sectors.

• Deeper market access adds value and investment across market capitalisations can be CFI.co | Capital Finance International

Investment Director, Head of Africa Public Markets: Funmi Akinluyi

Director & Head of Investment Solutions: Malick Badjie

achieved by building on deeper coverage of the markets and the ability to perform successful bottom-up stock selections. Silver Invest portfolios are tilted to smaller/middle capitalisation companies as a result of the company’s bottom-up stock-picking approach.

• Limited exposure to beta commodity stocks and deeper more diversified portfolios allow the fund to have a lower volatility. This can be achieved by a solid framework of diversification both in terms of country and sector exposure.

• Portfolio managers should have regional investment track records. i 57

> Capital Trust Group:

Private Equity Driving Development Established in 1985, Capital Trust Group (CTG) is a private equity, real estate, and corporate finance advisory firm operating in Europe, the Middle East and North Africa (MENA), and the US. The primary business of the group in the MENA is private equity fund management. In October 2014, CTG held a first close on EuroMena III LP – the group’s fourth generation MENA private equity fund and tenth fund overall. A final closing is scheduled during the second half of 2015, targeting total capital commitments of around $200 million.

MENA TRACK RECORD Between 1986 and 1998, the group’s activities in the MENA were centred on acting as a financial sponsor/promoter and a corporate finance and mergers and acquisitions (M&A) advisor: • Promoter and/or founding shareholder of pioneering entities in their respective markets: Rana Investment Company (1986), Arab Palestinian Investment Company (1994) and Lebanon Invest (1995).

• M&A: In 1997, CTG advised on the public market acquisition of a majority stake in the SAMIR refinery in Morocco following its privatisation.

PRIVATE EQUITY FUNDS • MENAVEST LP (1998 vintage) – With total commitments of $54 million, MENAVEST made and successfully exited eleven investments in Egypt, Lebanon, Jordan, Palestinian Territories, and Morocco. This fund’s core strategy was devised to take advantage of the improvement in the MENA capital markets at that time.

MENAVEST targeted minority investments in companies which were expected to be listed on local stock markets as the primary exit route.

• EuroMena LP (2006 vintage) – With total commitments of $63 million, EuroMena is

“The fund aims to set up a strong link between the GCC and MENA as well as help bring the MENA region closer together economically, and thus politically.” fully invested in nine companies in the Levant and North Africa (as illustrated in the pie chart below). This fund is currently in its exit phase with five exits to date realising a 2x return on capital, with similar levels of returns expected for the remaining portfolio investments.

• EuroMena II LP (2009 vintage) – With total commitments of $90 million, EuroMena II is fully invested in six companies in the Levant and North Africa (as illustrated in the pie chart below).

EuroMena II is executing the same strategy and targeting similar returns to EuroMena LP. This fund is currently in its monitoring/exit phase.

• EuroMena III LP (2014 vintage) – The first close of EuroMena III took place in October 2014 at $100 million. The final close is EuroMena II Country Allocation

EuroMena I Country Allocation Jordan

Lebanon

Egypt 6%

Palestinian Territories

Lebanon

13%

Egypt

Algeria

Regional

19%

37% 35%

18%

46%

26%

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scheduled to take place in H2 2015 targeting total commitments of $200 million. EuroMena III will continue to execute the same strategy as its predecessors with the target geography being enlarged to include Sub-Saharan Africa in addition to the Levant and North Africa.

EUROMENA FUNDS - EUROMENA III EuroMena III shares the same strategy as EuroMena I and EuroMena II with larger investment tickets and a widened regional coverage to include investments and countries of Sub-Saharan Africa where the MENA diaspora is heavily represented. The fund will invest in private companies operating in pre-identified growth sectors and industries that have the potential to expand from a country level onto a regional one within MENA. In each sector, it is anticipated that each company will be grown to form a Regional Leading Group (RLG) with clear brand recognition; enhanced profitability achieved through greater efficiencies; efficient management according to international standards and corporate and social policies; and an optimised legal and tax profile.

The fund aims to achieve an emerging market level of return on a medium to long-term basis, from a combination of capital appreciation and current income from direct equity and equityrelated investments.

Targeted investment countries are Algeria, Egypt, Iraq (including Kurdistan), Jordan, Lebanon, Libya, Morocco, Palestinian Territories, Tunisia, and countries in Sub-Saharan Africa.

VISION The fund aims to set up a strong link between the GCC (Gulf Cooperation Council) and MENA as well as help bring the MENA region closer together economically, and thus politically. The Gulf has a host of investors looking for investment opportunities and diversification and the MENA region is in need of funding.

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EXIT STRATEGY The fund will prepare the RLGs to become ideal targets for Arab, European, and international groups looking to have - through a single acquisition – a strong foothold in the MENA region.

Alternatively, the RLGs will be ideal candidates for IPOs or secondary buyouts by regional or international private equity funds.

THE TEAM The Fund Management Team, based in Beirut, is the same as that of EuroMena and EuroMena II, led by Mr. Romen Mathieu and seconded by Mr Gilles de Clerck along with the senior members of the team, Ali Mahmoudy and Frederic Dib with Maya Mansour as internal legal counsel. The Team has proven its ability to source attractive regional deal flow, execute investments across MENA, manage its portfolio companies and transform them into RLGs and to exit them successfully achieving high returns.

The team is considered to be amongst the most active and efficient in the region. It advises and assists its portfolio companies on important issues including growth strategies, financing, establishing partnerships with regional and international groups, implementing loyalty and incentive programs for managers, and corporate governance. Team members sit on the boards of its portfolio companies as well as on key executive committees.

The team is supported and complimented by its colleagues in London: Olga Aburdene, Guy Hodgson, and Raney Aburdene with regards to investor relations, deal sourcing, and fund administration.

THE GENERAL PARTNER Bassam Aburdene and John Oswald have held the role of general partner / investment committee members on all ten CTG funds as well as on five non-CTG investment committees. Having driven the success of the group and nurtured strong investor relations, they are able to lend their expertise and add value to all elements of deal sourcing, monitoring, and exiting.

THE FOUNDATIONS FOR THE DEVELOPMENT OF THE MENA REGION The success of Capital Trust Group and the EuroMena strategy has attracted leading institutional emerging market investors. The European Investment Bank (EIB) is one of the largest limited partners in EuroMena, EuroMena II, and EuroMena III, demonstrating its ongoing confidence in the group.

The International Finance Corporation (IFC), having provided financing to the group and EuroMena’s portfolio companies in the past, has now also committed to EuroMena III. Other institutional investors include the German Investment and Development Corporation (DEG) and Electricité de France (EDF). The group’s historic investor base – families from the GCC and MENA region – continue to be significant investors in EuroMena III. i CFI.co | Capital Finance International

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> Luisa Nenci, CEO of SustainValues:

A Capital Market Union or a Sustainable Financial Market?

In his political guidelines for the next European Commission, President Jean-Claude Juncker pushed for the establishment of a capital market union. Such a union should develop and integrate capital markets in order to cut the cost of raising capital.

This is especially important for small and medium-sized businesses (SMEs). A capital market union should also reduce dependence on bank-sourced funding and increase the attractiveness to invest in the EU. Mr Juncker also suggested to reform the Economic and Monetary Union in an attempt to enhance the convergence of economic, fiscal and labour markets across the Eurozone which would help to preserve the stability of the euro as well. He supported the introduction of additional controls on banks with a single supervisor and resolution mechanisms.

T

o make integration and convergence feasible, a transformative roadmap should be formulated for every country: a new strategy for the post–2015 agenda.

For the successful implementation of such an approach, the financial sector has an essential role to play, steering economic actors towards the adoption of more responsible investment solutions. The proposed strategy should furthermore include a set of legislative tools to facilitate the creation of a transformative framework for the financial sector.

A number of steps have already been taken by the G20 and the European Union to strengthen financial regulation pertaining to capital and liquidity requirements, licensing, and supervision such as the Basel Capital Accords II and III, the core principles for effective banking supervision, etc. In particular, actions covering three basic fields of financial regulation, are ongoing for: 1. Prudential regulation – to ensure improved stability and solidity of financial institutions; 2. Conduct of business regulation – to introduce a fairer and more transparent business management practices; and, 3. Systemic regulation – to increase financial market stability and improve access to finance.

Further steps may be taken if it considered convenient to extend financial regulation to include the current sustainability initiatives and principles such as the Equator Principles, the UNEP Finance Initiative Partnership, the Principles for Responsible Investment, the Global Compact Principles, the IFC/EBRD Performance standards and exclusion lists, National Environmental Standards, Universal Declaration of Human Rights, WBCSD 2050 vision, UNFCCC Climate Finance Principles, and others.

The implementation of a sustainability rationale will lead to the building of an appropriate 60

“The new policy framework will give the financial sector, through political consensus, the possibility to enhance its role from intermediary to proactive.” governance structure that facilitates financial institutions (FIs) attain improved transparency and management policies, in addition to better monitoring for green investments. Being market driven, FIs should be free to consider each financial instrument on its merit. FIs’ choices and market decisions regarding the strengths and weaknesses of any given instrument are to be based on market criteria. However, political institutions should develop policy objectives and formulate rules for the guidance, evaluation, and monitoring of the green investment without trespassing on the flexibility and autonomy of financial institutions.

The current, and highly complex, system of financial regulation was not designed to encourage innovative interventions and approaches to overcome risk barriers and market failures and/ or imperfections. The new policy framework will give the financial sector, through political consensus, the possibility to enhance its role from intermediary to proactive. The selection and financing of companies that are not merely reacting to standards, but effectively pursue green market opportunities, allows FIs an opportunity to actively promote the allocation of financial resources to green and profitable business ventures.

The proposed framework may be created by applying the same methodology of the Basel Committee on Banking Supervision (2012). The assessment should moreover seek full compliance with the 29 Core Principles for Effective Banking CFI.co | Capital Finance International

Supervision published by the Bank for International Settlements. The implementation of sustainability principles will be graded by measuring the level of compliance to defined criteria. To customise the framework at the national level, these criteria could be weighted differently from country to country. At supranational level, adherence to the framework can then be evaluated by defining minimum and maximum levels of achievement on each of the criteria established.

The assessment process will consist of three main steps: 1. An assessment of the current financial core principles in order to evaluate their compliance with the identified sustainability and good governance principles to be included in the framework; establish the framework; identify the main and direct eco-systemic risks facing the financial system; monitor and analyse markets and other financial and economic factors that may lead to the indirect accumulation of ecosystemic risks; systematically proof and review the framework in order to achieve objectivity and comparability between countries.

2. Formulate appropriate policy objectives addressing future emerging risks, as well as opportunities for reform toward a green economy.

Global environmental policy objectives and other long-term shared policy objectives at international level – such as the Kyoto Protocol, the Convention for Biodiversity, and others – should also be included in order to align the framework at European and international levels. The framework should also include mechanisms for effective cooperation and coordination amongst the relevant agencies at both national and international levels.

3. Run a sensitivity analysis on possible future stress-test scenarios to assess how such policies may affect the financial markets – money, capital, and bond markets, and banks and other financial institutions.

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The following limitations should be analysed: • Favouring green investments in financial market regulation could create new risks and/ or a failure to adequately regulate the existing risks; • The construction of a framework could lead to a build-up of dangerous trends, resulting in a compliant / non-compliant structure.

In fact, a transformative sustainability policy framework will cause remarkable changes in the environmental and social fields through harmonisation. It will not create a restrictive regulatory framework erected around pollution / emission punishment. The inclusion of sustainability criteria into policy interventions should transform the actual use of prudential regulation, ethical conduct, and the systemic control of the financial sector’s actors.

Consequentially, the public and private trust will increase, thus facilitating the integration of different national and regional markets.

Moreover, the framework will identify innovative interventions and approaches for overcoming current national barriers to low-carbon and climate-resilient investments. Risks, costs, and liquidity gaps will be reduced because of improved financial stability – itself the result of better regulatory policies. Scaling up green investments will also have a transformational impact on both cost and performances. It is the goal of the shared policy objectives to mobilise as much green capital as possible. Therefore better performance may be achieved with the increased ability of rallying private capital to leverage and multiply public green investments. i

ABOUT THE AUTHOR Luisa Nenci is CEO of SustainValues. She is an environmental economist and green finance strategist. Please visit www.sustainvalues.net for contact and additional information.

Author: Luisa Nenci

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> CFI.co Meets the Executive Chairman of Capital Trust Group:

Bassam Aburdene Capital Trust Group has been working in private equity since it was founded in 1985. To date, the group has raised ten funds across three continents, including the first regionwide Middle East and North Africa (MENA) private equity fund in 1988.

B

assam Aburdene began his career in 1974 as an investment manager with the Industrial Bank of Kuwait and has vast experience in investing and managing companies in the United States, Europe, the Middle East and North Africa.

From 1979 to 1984 he was General Manager of the Aggad Investment Company in Riyadh, where he was responsible for managing the company’s investments, which included mergers and acquisitions, corporate finance and principal investment activities. During this period, Bassam was highly influential in the setting up of Saudi Arabia’s first Investment Bank, Rana Investment Company.

“Mr Aburdene’s vision is to have the firm grow into the dominant private equity manager in the MENA region.”

In 1985 Bassam was a founding shareholder of Capital Trust Group. Mr Aburdene was a promoter and founding member of Arab Palestinian Investment Company (APIC), a leading investment holding company that was founded by a number of Arab and Palestinian businessmen. The company aims to steer investments towards Palestine with a view of building a viable Palestinian economy. Mr Aburdene was also closely involved with the establishment of Lebanon Invest, which soon became a leading financial services group in the region.

Capital Trust raised the first regional private equity fund for the Middle East and Mr Aburdene’s vision is to have the firm grow into the dominant private equity manager in the MENA region.

Currently, Mr Aburdene is a director of Fortuna Holding Company, Preem AB, Société Anonyme Marocaine de l’Industrie du Raffinage (SAMIR) and Phaeton International (BVI) Ltd. Previously, he sat on the board of the Foreign and Colonial Emerging Middle East Fund, the first Middle East fund to be publicly traded on the New York Stock Exchange.

Born in Bethlehem, Mr Aburdene is a noted

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Executive Chairman: Bassam Aburdene

philanthropist and a passionate supporter of many Middle Eastern and international charitable organisations. In addition to sitting on the Board of Trustees of Bethlehem University, he is also a trustee of Action Around Bethlehem Children with Disability (ABCD) and is a member of The Friends of Birzeit University and of Al

CFI.co | Capital Finance International

Quds University in Jerusalem. He is a member of various scholarship funds that assist outstanding students from the Middle East region.

Mr Aburdene holds an MA from Johns Hopkins University and a BA from the University of Connecticut. i

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63

ANNOUNCING

AWARDS 2015 SPRING HIGHLIGHTS Once again CFI.co brings you reports of individuals and organisations that our readers and the judging panel consider worthy of special recognition. We hope you find our short profiles interesting and informative.

All the winners announced below were nominated by CFI.co audiences and then shortlisted for further consideration by the

64

panel. Our research team gathered additional information to help reach a final decision.

In many cases, senior members of nominee management teams provided the judges with a personal view of what sets their companies and institutions apart from the competition.

As world economies converge we are coming across many inspirational individuals and

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organisations from developing as well as developed markets - and everyone can learn something from them. If you have been particularly impressed by an individual or organisation’s performance please visit our award pages at www.cfi.co and nominate.

Spring 2015 Issue

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he universe of business is a particularly exciting one. As it expands, new ways are found to increase efficiencies. Old ones are improved or dusted-off for a makeover. For all the books written and seminars organised on the topic by colourful multitudes of gurus, pundits, sages, and other know-it-alls, there is no single recipe – or magic bullet – that ensures the success of a business venture.

Risk is inherent to the game and, indeed, provides some of the excitement. However, good corporate governance, now essential to business longevity, comes to the rescue imposing sensible values that – together with environmental and social parameters – reassure all stakeholders, thus recognising that business is comprised of more than just the monetary dimension.

In each of its issues, CFI.co carries the findings of the magazine’s judging panel as it investigates businesses nominated for an award. During the course of their work, the judges often come across examples of innovation and models of efficiency. Human ingenuity knows few, if any, bounds and that creativity receives a powerful added boost as soon as there is money to be made.

Excellence in business is often the result of a particularly fortuitous combination of acumen, dedication, imagination, and timing. Hard work, while certainly essential, is not always of paramount importance. Untold millions across the globe put in twelve or more hours of toil each day, yet fail to make much headway. Laws and regulations may conspire against their effort, as they frequently do, or economic conditions are such that work is simply not valued properly.

However, in every corner of the world, governments are now waking up to the fact that entrepreneurs – from sole-trader busybodies to cigar-chomping tycoons – hold the key to sustained development, and to national prosperity. Not only are markets converging, the forces active within those markets are finding common ground as well.

All over Africa, Asia, Latin America, and other pioneer and emerging markets, entrepreneurs are surging ahead, breaking new ground, and finding paths to growth by the way of innovation. In mature markets, shifts are taking place as well as the Information Age spreads into all corners of contemporary, the Internetof-Things becomes a reality, and established businesses adapt operations and processes to adjust and benefit to the sheer endless number of opportunities arising.

Globally, businesses both big and small stand ready to serve the needs of the millions of consumers only recently elevated into the ranks of the middle class, while entrepreneurs and top-echelon managers produce novel ways of easing the burden placed on the environment.

Annual Investment Meeting 2015: Minister of Economy, H.E Sultan bin Saeed Al Mansouri accepting an award from CFI.co for “Best FDI Destination – Middle East 2015”. Photo Copyright © CFI.co.

Sustainability is not the preserve of large corporations. Tens of thousands of smaller businesses are exploring niches and finding answers that address the concerns of customers conscious of their carbon footprint and looking to decrease it.

While researching companies and listening to their owners, managers, or CEOs, the CFI.co judges catalogue the fascinating array of best practices that allow businesses to stay afloat, prosper, and shape the future. Each of the companies featured on the pages that follow found a unique way to adapt to its market, fill its gaps, and explore its opportunities. CFI. co awards aim to highlight companies whose trajectory to success holds lessons others may benefit from.

No two companies are quite alike. Thus, the judges’ reports – containing the findings of the panel – are as varied and diverse as the universe they cover. The CFI.co judges also strive to offer recognition to companies, organisations, and occasionally individuals that have been nominated by the magazine’s readers for their contribution to excellence – and the pushing of its boundaries – in business and other endeavours.

While an opinionated lot, the CFI.co judges approach their work without any preconceived notions or prejudices. They aim to look beyond the bottom-line, root out one-day wonders, and steer clear of entrepreneurs motivated by the lure of a quick buck at the expense of others.

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Considering that CFI.co reports on the convergence of world markets – a process that spreads best practices across the globe and, eventually, will level the playing field for all – the magazine’s judging panel is interested in finding, and reporting on, the fruits of human resourcefulness and ingenuity. Happily, the judges found plenty of both and present their findings in the section that follows.

The judges wish to express their gratitude to CFI. co readers who submitted the nominations that ultimately triggered the panel’s investigations.

The judges emphasise that all readers are free – and indeed encouraged – to submit the name of a company, organisation, entity, or individual that possibly merits inclusion in any of the CFI. co awards programmes.

Nominations received are subjected to a preliminary investigation by the magazine’s shortlisting committee. Approved nominees are forwarded to the judging panel which will use publically available sources and feedback received from senior executives to draw up a comprehensive report that allows the judges to reach an informed and well-balanced decision.

Though the panel’s decisions are final and may not be appealed, the judges welcome comments from the magazine’s readers. Nominations and comment may be emailed to awards@cfi.co.

Additional information regarding the CFI.co awards programmes may be obtained online at www.cfi.co. i 65

> UAE: BEST FDI DESTINATION IN THE MIDDLE EAST 2015

Following the presentation of the Annual Investment Meeting (AIM) 2015 awards for FDIagencies, CFI.co was pleased to provide a special prize in further recognition of the outstanding investment environment offered by the host country.

On behalf of his government, UAE Minister of Economy Sultan Saeed Al Mansouri received the award, offered in recognition of his country’s achievement in becoming the prime destination for Foreign Direct Investment (FDI) in the Middle East. The UAE has created an

impressive global business hub from scratch and has done so in what constitutes but the briefest of moments in its rich history.

The CFI.co award also reflects the country’s success in creating a business environment conducive to attracting solid FDI: one with a supporting infrastructure in a class of its own, superb living conditions for families, an attractive tax regime, a knowledge-based society, plus a dynamic, outward-looking and can-do business culture.

AIM 2015, which took place between March 30 and April 1 at the Dubai International Convention and Exhibition Center, focused on Sustainable Development through FDI-Induced Innovation and Technology Transfer. The meeting brought together some of the world’s leading FDI academics, experts, and protagonists – including knowledge partner CFI.co – under the patronage of HH Sheikh Mohammed Bin Rashid Al Maktoum – UAE vice-president, prime-minister and ruler of Dubai.

> MARKS & SPENCER: BEST RETAIL FRANCHISE GCC 2014

Perhaps the most quintessential of UK retailers, Marks & Spencer has been remarkably successful in exporting its brand – keeping in touch with the times while maintaining true to both its corporate identity and the company’s exceptionally rich heritage. Marks & Spencer is currently paying particular attention to the requirements of its core customer demographic – those in the 40 to 60 age group – while keeping its hard-won appeal to patrons of all ages.

The legendary Marks & Spencer slogan “The customer is always and completely right,” adopted in 1953, has set the tone for much of the company’s 131 year history. Though its first foray overseas, to Canada in 1973, ended in ignominy with the last of 47 loss-making stores closing in 1999, the company has since moved decisively outside its British comfort zone

and is now at home in over fifty jurisdictions, at last count operating 455 stores.

With revenue of its international operations growing about three times as fast as income from the 798 UK stores, Marks & Spencer sees considerable growth opportunities outside Britain. The company has already identified a potential for no less than 250 new stores over the next three years. A significant part of the international expansion is to come from the Middle East. In Saudi Arabia, Marks & Spencer expects to open no less than ten stores over the next twelve months.

The retailer has big – even aggressive – plans for the buoyant GCC (Gulf Cooperation Council) region. The company’s international managers are especially sensitive to the maintenance of strict quality standards, thus

ensuring that the vast overseas store network adheres closely to the policies and guidelines which underlie M&S’ success and enabled its growth from a market stall in Leeds to a worldwide emporium with a revenue exceeding £10 billion.

The CFI.co judging panel is impressed with Marks & Spencer’s persistence in expanding the geographical footprint of its muchlauded brand. The company has found that local knowledge coupled to superior quality in the delivery of retail services constitute a formula for success applicable globally.

The judges are pleased – if not positively honoured – to offer Marks & Spencer, that most British of retailers, the 2014 Best Retail Franchise GCC Award in recognition of a most promising expansion drive.

> ANANDRATHI: BEST WEALTH MANAGER INDIA 2015

Successful investment strategies start at the end: once the investor has defined a clear objective, a path may be traced and followed.

It sounds simple, and it is. Given a proper understanding of the nature of money, thus facilitating a holistic approach, goals may be attained in a straightforward manner.

This unpretentious, yet sophisticated, philosophy has underwritten the remarkable growth of the AnandRathi investment bank. The company, founded in 1994, now comprises a network of over 350 branch offices in India. The bank is also present in Dubai, Hong Kong, and New York. The company employs around 2,500 professionals who serve an ever-expanding universe of clients: corporations, institutions, 66

high-net-worth individuals, and family offices.

Interestingly, AnandRathi does not procure new business with vague promises, hollow-sounding slogans, or rousing multimedia presentations. Instead, the bank prefers understatement and understanding: rather than impress, AnandRathi aims to create an appreciation for its financial management style.

To this day, the company’s founders are dedicated to disseminating an understanding of investment strategies, convinced that clients will follow. The exponential growth AnandRathi experienced has proved the founders right. The investment bank is one of a select few that manage a client retention rate of over 99%.

Another essential component of CFI.co | Capital Finance International

the AnandRathi formula for enduring success is the company’s unwavering dedication to excellence in client relations. AnandRathi keeps 75 relationship managers on its staff who collectively ensure that investors are kept abreast of all relevant developments and transparency is maintained at all times.

The CFI.co judging panel considers the AnandRathi style both unique and refreshing.

The bank’s famously low-key approach belies an investment prowess and agility that are not just above-average, but positively stellar. The judges are therefore exceedingly happy to confer their 2015 Best Wealth Manager India Award on AnandRathi.

Spring 2015 Issue

> SEABURY: BEST AVIATION M&A ADVISORY TEAM GLOBAL 2015

Fuel price volatility, global booms or busts, and other major events regularly force the airline industry to adapt its business model in order to stay aloft. Helping airlines face the many challenges, and the sequential changes they impose, is Seabury – an integrated banking and consulting firm set up to provide a full range of services to airlines seeking to navigate turbulent skies.

Founded in 1995 and headquartered in New York City, Seabury offers comprehensive advice and solutions, carefully tailored to each client’s unique needs by a staff of over 175 professionals – mostly former airlines execs, bankers, and other experts – who know the industry inside out and are not above dispensing tough love when needed. Seabury’s expertise is called upon for corporate restructuring and recovery operations, management consulting, process optimisation, and a host of other jobs that offer support to aviation companies.

Rather than proposing short-haul fixes, Seabury’s approach is designed to enable

airlines to survive, and prosper, over the longterm. The firm finds ways to improve efficiencies by looking at all aspects of an airline, including its network design, fleet composition, catering, and any ancillary businesses. Thus in 2007, the firm was called in by South African Airlines (SAA) to revamp its operations and return the long-ailing company to profitability.

Whereas SAA had previously tried its luck with other consultants, the shortterm patchwork solutions offered did not succeed to implement the lasting turnaround needed. When Seabury was brought in, the firm quickly took hold of SAA’s reins and instituted draconian measures to conserve cash and increase efficiency. As a result of the intervention, SAA did not run out of money and, now properly streamlined, managed to find its way back to profitability. The speed and precision with which the turnaround was executed received wide acclaim.

The CFI.co judging panel noted that Seabury is more than just a trouble shooter: the

firm also helps airlines secure the best possible deals with manufacturers as it did when United was ready to replace its ageing fleet of Boeing 767s and 747s. Hedging the operation, Seabury skilfully managed to coax both Boeing and Airbus on board, thus ensuring United Airlines received the best possible deal.

The judges attach great importance to Seabury’s relentless pursuit of operational excellence by leveraging the expertise of a highly experienced team of aviation professionals.

Considering their all-inclusive approach, the judges wonder why this particular wheel was not invented earlier. Indeed, the firm’s success and global reach seem to have even surpassed the expectations of its founding partner John Luth who first conceived of an integrated aviation advisory firm with both investment banking and consulting capability. The judges are therefore exceptionally pleased to confer on Seabury the Best Aviation M&A Team Global 2015.

> FINE & COUNTRY: BEST REAL ESTATE ADVISORY TEAM NIGERIA 2015

Few real estate markets in the world possess an upside comparable to Nigeria’s.

Now the largest economy in Africa, and wellpoised for accelerated growth, Nigeria boasts a housing market that is the proverbial “hot property” – boasting both excellent value and a strong outlook.

For their part, the realtors of Fine & Country stand out from the crowd offering buyers and sellers alike the multiple benefits that stem from their thorough knowledge and vast experience in navigating the Nigerian real estate market. As representatives of a fastgrowing, up-market, and globally operating brand, Fine & Country Nigeria brings a touch of class to the real estate business: their attention

to detail – part of the company’s unwavering dedication to serving the clients’ best interests – ensures consistently smooth transactions.

Fine & Country Nigeria focuses on the higher end of the real estate sector and diligently monitors the market for the best available deals, offering prospective buyers the certainty that the property selected will enable the lifestyle desired at a convenient price point.

As a brand, Fine & Country originated in the UK. Its remarkable success is based on innovative marketing techniques and a timeless – but never out-of-fashion – dedication to excellence in the delivery of services. These hallmark traits have enabled Fine & Country to rapidly expand the brand’s geographical CFI.co | Capital Finance International

footprint to include close to 400 offices spread across three continents.

The CFI.co judging panel is impressed by the way Fine & Country implements its corporate philosophy: the brand’s unrelenting pursuit of innovation and quality are particularly noteworthy. Fine & Country’s meticulous approach to the property market is a most welcome contribution to Nigeria’s buoyant real estate sector. The firm is now indeed leading that market. The judges feel comfortable in extending Fine & Country the 2015 Best Real Estate Advisory Team Nigeria Award in recognition of the realtor’s stellar track record and its remarkable palette of services.

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> KING ABDULLAH ECONOMIC CITY (KAEC): BEST INFRASTRUCTURE DEVELOPMENT FOR ECONOMIC GROWTH IN THE MIDDLE EAST 2015

A brand-new metropolis is being sculpted and arising out of the sands hugging the shore of the Red Sea. One of five freshly-minted conurbations now nearing completion in Saudi Arabia, King Abdullah Economic City – KAEC for short – is to become the kingdom’s gateway to the world – a signpost of superlatives proclaiming the country’s manifest destiny as a haven for the competitively-inclined.

Saudi Arabia not only aspires to become one of the world’s ten most competitive countries; the kingdom has the wherewithal, and the determination, to turn its national ambition into reality. If the proof is in the pudding, KAEC is that and more: it’s the cherry on the top of a construction spree without equal.

King Abdullah Economic City sits on 173km2 of prime real estate about an hour’s drive north of Jeddah, the kingdom’s current economic hub. In fact, KAEC was conceived with the express intent to relieve the pressure on Jeddah brought about by the country’s

buoyant economy. The new city comprises a sea port, industrial zone, education district, residential areas, and a sprawling business centre that includes a financial island. The scale on which KAEC now takes shape is not for the faint-of-heart: the residential areas will include no less than 260,000 apartments and over 56,000 villas. And that’s just the first phase. Ultimately, KAEC is expected to create over a million new jobs.

The project carries an initial price tag of $86bn for putting in place scalable infrastructure and the basic amenities needed to attract both people and businesses. A number of large corporations have already reserved space in order to step in on the ground floor of what is to surely become one of the hottest new markets in the kingdom, if not the wider region. Both Columbia University and the Thunderbird School of Global Management have secured tickets to become part of KAEC’s vast knowledge park where before long up to 18,000 students will receive an education.

The CFI.co judging panel is awed not just by the sheer size of the undertaking, but also by its quality and the attention to detail that is displayed by both planners and builders. Their vision – bold yet solidly anchored in fact-based research and elegant for its simplicity – is to provide Saudi Arabia with an engine to power the country’s future.

King Abdullah Economic City is being erected

by Emaar Properties, one of the world’s largest real estate developers and builder of the world’s tallest man-made structure – the 829.8 metre-high neo-futuristic Burj Khalifa Tower in Dubai.

The CFI.co judges had it exceptionally easy this time around since no other infrastructure development project comes close to King Abdullah Economic City in scope, scale, and spirit. KAEC merits beyond a shadow of a doubt the 2015 CFI.co award for Best Infrastructure Development for Economic Growth in the Middle East.

> ABSA BANK: BEST SME BANK SOUTH AFRICA 2015

Providing a wide range of carefully designed financial solutions to start-ups and established businesses alike, South Africa’s Absa Bank – a wholly-owned subsidiary of Barclays Africa Group – aims to empower entrepreneurs with more than just credit. The bank maintains a comprehensive business development platform that facilitates market access for small, medium, and micro-sized enterprises (SMMEs).

Amongst other features, the platform offers a procurement portal with up-to-date information on leads and tenders issued by both government entities and corporations.

SMMEs may also register and list their products and services. Thus, the portal brings together suppliers and buyers in an attempt to broaden the market and expand opportunities for smaller businesses that would otherwise face major hurdles in gaining access to existing supply 68

chains.

Absa Bank also maintains a nationwide network of nine enterprise development centres that are exclusively devoted to offering SMMEs a full care package, including expert support in navigating rules and regulations, managing cash flow, laying out business plans, connecting with peers, and a host of other services and facilities. The centres regularly organise workshops, seminars, and other events aimed at skill development, business management, and financial literacy.

One of the Big Four banks in South Africa, Absa Bank successfully leverages its considerable size to offer SMMEs access to a wide range of financial instruments and funds to bolster their working capital or underwrite expansion. The Bank’s Enterprise Development Fund complements the government-sponsored CFI.co | Capital Finance International

Enterprise and Supplier Development (ESD) initiative that encourages corporate and state entities to support SMMEs. Absa Bank also maintains alternative funds for women empowerment and SMME development.

The CFI.co judging panel commends Absa Bank for its exceptionally comprehensive approach to serving the needs of smaller businesses. Recognising that flexible and bespoke solutions are required for SMEs to survive and thrive in a fast-paced and dynamic market, the bank has erected a multidimensional platform that suits the needs all businesses – regardless their field, size, or stage of development. The judges entertain no doubts whatsoever that Absa Bank’s stellar performance in serving the business community fully deserves the 2015 Best SME Bank South Africa Award.

Spring 2015 Issue

> TRANSAVIA: BEST LOW-COST CARRIER EUROPE 2015

Low-cost needs not equate low-quality.

With a sense of understatement more British than Dutch, Transavia goes calmly and efficiently about its business of flying passengers around Europe in relative comfort and style. The company does so without the subjecting its guests to the preposterous complications some other budget airlines are (in) famous for.

A wholly-owned subsidiary of the Air France–KLM airline group, Transavia operates a modern fleet of 35 aircraft – with another 27 Boeing 737-800s on order – and is in the process of expanding its already considerable network.

The airline recently added the Rotterdam – Berlin (Tegel) and Madrid – Nantes routes and is also expected to increase the number of destinations served from its Paris hub.

It is precisely Paris that has been causing the Dutch company some trouble. Pilots of the French branch of the Air France-KLM group last year went on strike and successfully, for now, thwarted the large-scale expansion plans of the Transavia subsidiary that would have seen the airline double the size of both its fleet and network.

Amongst low-cost carriers, Transavia stands out for offering a superior level of service and punctuality. The airline refrains from pestering its passengers with a seemingly neverending stream of overpriced add-on products and maintains an ergonomically optimised website devoid of the usual money traps. Passengers appreciate the courtesy and their numbers have been growing steadily at a rate of about 5%

annually. Load factors consistently hover around the 90% mark.

The members of the CFI.co judging panel feel particularly capable of gauging the quality of service offered by the great many lowcost carriers soaring through European skies.

The judges are decidedly unimpressed by some airlines that insist on treating their passengers as unruly cattle to be prodded and herded into their aeroplanes. However, flying Transavia has been an altogether different, and much more pleasurable, experience. Based on their firsthand knowledge, the judges feel no hesitation in proclaiming the obvious: Transavia is the winner of CFI.co’s award for Best Low-Cost Airline Europe 2015.

> CODELCO: BEST COMMUNITY ENGAGEMENT CHILE 2015

The world’s largest copper mining company is actively looking to put more women on its payroll. Chilean state-owned mining giant CODELCO (Corporación Nacional del Cobre), a long-standing champion of gender equality and community engagement, wants to increase female participation in its 18,000-strong workforce to at least 20% – up from an average of 7.2% now. That goal is all the more ambitious for until quite recently, most miners resisted working alongside women who were thought to bring bad luck.

At some CODELCO mines the stated goal is already within reach. The Gabriela Mistral mine, open since 2008 and located south of the desert town Calama, women now make up 18% of the workforce. The mine is producing around 150,000 tonnes of copper annually – less than 10% of CODELCO’s total annual copper output.

Some of the company’s other mines have launched a drive to accelerate the recruitment of women. All positions – save for

those close to the blast furnaces – are open to female workers. At the El Teniente mine, perched high up the Andes Mountains just south of Santiago, women are now a regular sight in the galleries. El Teniente is CODELCO’s signature mine and home to one of the world’s most advanced underground mining operations.

The fully-automated facility boasts over 2,400 kilometres of shafts and corridors crisscrossing the mountain.

Company management also offers extensive training programmes aimed at propelling women into management positions – including operational ones. Though at first the unions balked at the initiative, miners and machine operators quickly adjusted and now take pride in working on crews and details led by women. At CODELCO’s flagship Chuquicamata mine in the Atacama Desert, one of the largest open-pit mining operation in the world, women now regularly lead shifts at the crushing plants and other hard-core ore processing facilities.

CFI.co | Capital Finance International

The CFI.co judging panel is well aware of CODELCO’s well-earned and well-established reputation for efficiency in both the mining and the processing of ores. Fully state-owned, the company is run as a private corporation and regularly beats other big mining companies across a range of fundamental performance criteria. CODELCO produces around 10% of the world’s supply of copper – mostly in the form of cathodes. CODELCO is also a major supplier of molybdenum and rhenium.

The judges commend the company for its outreach programmes and its proactive approach to social inclusion and corporate governance. CODELCO stands at the pinnacle of big mining in South America and has been frequently cited elsewhere in the world as a model of what a well-run state-owned company may accomplish. The judges are therefore pleased to confer the 2015 Best Community Engagement Award on CODELCO.

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> SEDCO: BEST SHARIAH-COMPLIANT REAL ESTATE FUND MANAGEMENT TEAM SAUDI ARABIA 2014

One of the premier private wealth management companies in the Kingdom of Saudi Arabia, SEDCO Holding can trace its origins to the remarkable life of Sheikh Salem Bin Mahfouz who founded the Saudi Economic and Development Company in 1976 while at the helm of the kingdom’s first domestic bank – the National Commercial Bank – he had helped form in 1953.

The remarkable life story of Sheikh Salem Bin Mahfouz best serves to illustrate SEDCO’s unrelenting dedication to excellence and diligence. By sheer force of will, perseverance, and – for lack of a better expression – street smarts, Sheikh Salem Bin Mahfouz overcame the dire poverty and scant educational opportunities of his childhood to become one the kingdom’s premier bankers.

Arriving penniless in Mecca with his brothers in 1912, the young Salem soon developed a knack for business. Moving to Jeddah and securing access to one of that city’s two only telephones, Salem became a moneychanger to the royal court securing Maria Theresa Thalers to buy army supplies. In 1951,

Salem co-founded a foreign exchange business which, at the suggestion of then-Finance Minister Sheikh Abdullah Sulayman, was turned into the country’s first commercial bank. The rest – as they say – is history.

And that history is precisely why SEDCO – entrusted to four of Sheikh Salem Bin Mahfouz’ sons upon his passing away in 1994 and transformed into a holding two years later– is a most remarkable company: it is not only deeply rooted in history; it derives its strength and agility from it. SEDCO has grown into a large and diversified conglomerate with operations spanning the continents and with interests across a vast range of asset classes.

Pursuing stability rather than risk, SEDCO has concluded a number of large-scale real estate projects such as the Jeddah Al Mahmal Centre, the Metro West master-planned community in Orlando, and the landmark JP Morgan Chase building in Houston – Texas’ tallest skyscraper.

SEDCO Development remains firmly focused on the development, management, and

operation of real estate projects. Investments are structured in full compliance with Shariah Law and deliver yields of 7% to clients. Funds are invested alongside clients, rather than on behalf of them.

SEDCO Capital had successfully executed real estate transactions in excess of $1 billion. The company successfully divested from 21 developments in France, Malaysia, Singapore, UK, and Mexico. SEDCO Capital now has acquired 19 investments in strategic markets such as USA, UK, and Saudi Arabia.

Due to the company’s firm commitment to innovation grounded in history and custom, the CFI.co judging panel considers SEDCO an exemplary real estate fund manager: fads and fashions are shunned, while true innovation – the one that adds value to all stakeholders and respects their preferences – is given ample room to mature. Beyond any shadow of doubt, SEDCO fully merits the CFI.co 2014 Best Shariah-Compliant Real Estate Fund Management Team Saudi Arabia Award.

> SEMPER CONSTANTIA PRIVATBANK: BEST WEALTH MANAGER AUSTRIA 2015

A touch of class, a pinch of creativity, and a hint of tradition: the making of a private banker follows a well-trodden path, albeit along a rather fine line. Too much innovation may cause eyebrows to be raised, while an excessively conformist approach could possibly dampen returns.

Exploring the synergies and correlations between asset classes has allowed Semper Constantia Privatbank of Vienna to reduce portfolio volatility – and risk – without sacrificing performance. This is but one of an impressive number of strategies developed in-house by this Austrian financial services provider.

Semper Constantia Privatbank is both a private bank and an investment bank. As such, its clients – high-net-worth individuals, 70

private foundations, and institutional investors amongst others – may readily access, and benefit from, the wealth of accumulated knowledge and expertise available at this bank.

Primarily focused on long-term investment horizons, Semper Constantia Privatbank is dedicated to providing a carefully balanced mix of continuity, reliability, and – indeed – creativity to its operations. In addition to its array of classic private banking services, the bank also offers a vast range of investment funds besides custodial and real estate services. Semper Constantia Privatbank eyes the long-term development of client portfolios, coupling strong momentum to agility and flexibility.

Considering the individual risk profile of clients, the bank adheres to a bestCFI.co | Capital Finance International

in-class approach in order to ensure that only premier securities are selected for the allocation of assets. Semper Constantia Privatbank uses a non-traditional model to classify investments by risk factors – monitoring the outcome dynamically for possible changes.

The CFI.co judges were quite intrigued by the procedural algorithms Semper Constantia Privatbank has developed in order to reduce volatility and risk. The judges commend the bank on the depth and strength of its commitment to providing customers with both services and products of unmatched quality. Thus, it is with great pleasure that the CFI.co judging panel unanimously declares Semper Constantia Privatbank winner of the 2015 Best Wealth Manager Austria Award.

Spring 2015 Issue

> BANCO NACIONAL ULTRAMARINO: BEST RETAIL BANK MACAU 2014

Present in Macau since 1902, the Banco Nacional Ultramarino (BNU) remains a cornerstone of the former territory’s – now a Chinese Special Administrative Region (SAR) – financial sector and a driver of its development.

To this day, the BNU is one of only two banks authorised by the Macau Monetary Authority (Autoridade Monetária de Macau) to issue Macanese patacas – a sign of the bank’s systemic importance.

In July 2001, the Macau branch of the Banco Nacional Ultramarino – a Portuguese bank with a strong presence throughout the Lusophone world – was incorporated locally as a separate entity while the remainder of the BNU structure was merged into the Caixa Geral de Depósitos (CGD), Portugal’s largest financial group. As part of the CGD network spanning four continents, Macau’s Banco Nacional Ultramarino – now the sole bearer of a venerable

name – maintained its global reach.

BNU’s peerless knowledge of the Macau SAR, and over a century’s worth of accumulated international experience, allow the bank to offer a vast range of financial products and services that seamlessly match – and are likely to exceed – the expectations of even the most demanding customers – both private and corporate. Moreover, the Banco Nacional Ultramarino enjoys a distinct competitive advantage as a well-trodden bridge between the Chinese mainland and the wider world as accessed through the CGD network.

The CFI.co judges noted that the bank’s stated aim of providing the highest levels of customer satisfaction and service quality is met in an apparently effortless manner. Over 220,000 Macau customers seem to agree. The judges, however, recognise that maintaining such outstanding quality in an exceptionally

competitive environment always requires hard work and dedication.

BNU’s relentless pursuit of transparency, integrity, and excellence has earned it an exceptionally solid reputation. The judges remarked that while cognisant of its long history, the bank is consistently found at the leading edge of technological developments and, indeed, pioneered many innovations such as mobile and Internet banking. The bank was also the first to introduce a credit card payable in patacas.

The CFI.co judges are particularly pleased to offer Banco Nacional Ultramarino the 2014 Best Retail Bank Macau Award in recognition of this bank’s long-standing and unwavering commitment to its customers, stakeholders, and the community.

> ALIOS FINANCE GROUP: BEST SME FINANCIAL SOLUTIONS PROVIDER AFRICA 2014

In order to prosper, create jobs, and thus drive Africa’s renaissance, small and mediumsized enterprises (SMEs) across the continent need ready access to bespoke credit solutions. Though this need is recognised almost universally, few financial services companies actually specialise in underwriting Africa’s promising SMEs.

Alios Finance Group is one of only a handful of credit providers that help SMEs attain their full potential with a diverse array of products ranging from finance leases to investment loans via operating lease and hirepurchase arrangements. The company also offers loans directly to consumers.

The group can trace its origins to 1956

and is currently active in ten countries, spanning the continent. Alios Finance Group enjoys a solid reputation and attracts both financial and operational support from the Dutch development bank FMO (Financieringsmaatschappij voor Ontwikkelingslanden), the Pan-African Investment Fund AfricInvest, the Finland development fund Finnfund, and a host of other discerning investors and top-rated banks.

In 2013, Alios Finance Group disbursed over EUR154 million in financing to businesses (84%) and consumers (16%). The CFI.co judges noted that the company actively pursues an expansion of its geographic footprint, opening offices in Kenya and Tanzania, and CFI.co | Capital Finance International

expanding its presence in Zambia. Alios Finance Group is now the largest provider of credit solutions to SMEs in Sub-Saharan Africa with a portfolio exceeding EUR250m.

The judges commented that while the African market for asset finance is still in its infancy, it is a segment likely to grow exponentially over the next decade. Not only that; empowering the growth of Africa’s SMEs is a sure-fire way of tapping into some of the world’s potentially most lucrative pioneer markets. The judges feel entirely justified, and indeed privileged, to grant Alios Finance Group the Best SME Financial Solutions Provider Africa 2014.

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> TONYE COLE: OUTSTANDING CONTRIBUTION TO YOUTH EDUCATION AFRICA 2015

Founder and Chairman Tonye Cole of the Nigeria-based Sahara Foundation received the recognition he is due at the 2015 Annual Investment Meeting in Dubai. Mr Cole received the CFI.co 2015 award for Outstanding Contribution to Youth Education Africa.

The Sahara Foundation was set up with the express intent of furthering and facilitating primary education. The foundation helps build or upgrade school buildings, provides school meals, offers scholarships, and fosters creativity and competition, amongst others. All programmes of the Sahara Foundation are geared towards increasing the enrolment rates of children from disadvantaged families.

The foundation remains focused on

transforming schools into safe and enjoyable places for learning. It also sponsors creativityenhancing competitions aimed at inspiring young children to collaborate, experiment, and innovate.

The Sahara Group where Mr Cole presides was established in 1996 and now comprises twenty companies operating in all segments of the energy value chain. The group is the leading privately-owned power and infrastructure company in Nigeria. Sahara Group operations extend to the Caribbean, Asia, Europe, and other countries in Africa as well.

The group is currently leveraging the knowhow and experience gained in the oil and natural gas sector to move into energy and infrastructure.

Born in Port Harcourt, Mr Cole

studied in Nigeria, Brazil, and the United Kingdom. In Brazil, he obtained a degree in architecture and was involved in the design and construction of Palmas, the newly-built capital of the Tocantins State. Returning to Nigeria in 1993, Mr Cole first found employment in a Brazilian engineering company that had been awarded a World Bank contract to improve the Lagos waterworks.

With Sahara Group, Mr Cole aims to show that a Nigerian company can be as competitive as the best of its peers globally. “We see ourselves as ambassadors to show what can be done as an indigenous Nigerian company, but we want to be seen from a global perspective and not just as a local player.�

> INSTAFOREX: BEST FOREX BROKER ASIA 2015

The universe of forex brokers is both wide and deep with prospective investors facing a bewildering array of choices. In a classic case of the wood being obfuscated for the large number of trees, the forex brokerage market suffers from an over-abundance of players, many of whom offer but limited choices, shaky platforms, and/ or cumbersome trading procedures.

However, and luckily, not all forex brokers are created equal. A select few stand out for both their size and excellence. InstaForex is 72

one of such industry leaders. The firm boasts an impeccable track record, consistently breaking new ground and leading the industry with a multilingual team of seasoned experts who stand ready to help over two million customers worldwide safely navigate forex operations.

From its corporate head office in Moscow, InstaForex operates a network of over 250 representative offices spanning the globe. The company is particularly active in Asia and has gathered numerous accolades CFI.co | Capital Finance International

for the peerless efficiency in the delivery of its trading services. The CFI.co judges commend InstaForex for dedicating considerable efforts to investor education and technological innovation.

The firm is determined to keep and consolidate its already impressive lead over competitors by the continuous improvement of its services and processes. The CFI.co judges feel confident that InstaForex fully merits the coveted Best Forex Broker Asia 2015 Award.

Spring 2015 Issue

> ARAB AFRICAN INTERNATIONAL BANK: BEST GREEN BANK EGYPT 2015

Arab African International Bank (AAIB) has been an early adopter of green banking principles, joining the United Nations Global Compact (UNGC) in 2005 and committing the company fully to the ten guiding principles enshrined in the framework. AAIB not only ensures that its own organisation complies with UNGC, but insists the bank’s subsidiaries, suppliers, and outsourced providers do so as well.

AAIB has also embraced the Equator Principles – a risk management framework that allows financial services providers to properly gauge the environmental and social ramifications of any project submitted. Over the past decade, AAIB developed a number

of initiatives that aim to translate principles to practice. The bank has engaged its employees with an individual social responsibility initiative that actively promotes sustainable living.

AAIB has adopted a number of policies with a view to reducing its corporate carbon footprint. As a first step, the bank commissioned a detailed study to determine the impact of its operations on the environment.

This created a benchmark against which the effectiveness of greening initiatives may be measured.

The CFI.co judging panel noted that AAIB regularly publishes a sustainability report which includes a full disclosure of the company’s ESG performance. In 2010, AAIB was the first

Egyptian financial services company to report on the non-financial impact of its operations.

The bank’s management has been forthright in its assessment that transparency and adherence to sustainability principles facilitates value creation and is thus in the best interest of all stakeholders.

The judges also took note of the periodic stakeholder engagement roundtables organised by the bank. These meetings allow AAIB to gain a clear understanding of the issues at stake and any concerns that may exist. The CFI.co judging panel feels fully justified in extending Arab African International Bank the 2015 Best Green Bank Egypt Award.

> IH GROUP: BEST CORPORATE FINANCE TEAM ZIMBABWE 2015

It is all about independence of thought. Now, there is a novel idea: ditch any preconceived notions and prejudices, in order to concentrate on reality. This is a most profitable proposition: an as-is approach encourages an evaluation of the market, and its trends, derived from fact rather than fiction.

As a portal for companies looking to access finance, Inter-Horizon Advisory – part of the IH Group – offers a range of corporate consultancy services to companies looking to increase their organic growth or expand via mergers or acquisitions. IH Advisory provides ready access to capital and boasts unequalled expertise not only in the execution of transactions, but also in market research and detecting trade opportunities.

Operating out of offices in both Harare and Johannesburg, the IH Group’s advisory services are available to companies throughout Sub-Saharan Africa. The firm attaches great

importance to providing clients with information and ideas not available elsewhere. Thanks to its professional in-house research team, IH Group consistently manages to produce high-quality market data that offers unique insights, spots trends early-on, and finds opportunities that a less diligent approach would most likely fail to detect.

Fiercely independent, highly knowledgeable, and unfailingly adhering to strict principles of uncompromising honesty and integrity, IH Advisory works directly with corporate clients, government institutions, and businesspeople to create value and wealth.

As such, it has gained a solid reputation for delivering excellence. Offering comprehensive one-stop solutions, the firm is dedicated to serve their clients’ needs from the inception of an idea to its execution and beyond.

Staffed by experienced professionals – many of whom boast considerable international CFI.co | Capital Finance International

exposure – the IH Group was founded by two business leaders with a solid track record in market research and consultancy services in both Zimbabwe and overseas. The CFI.co judges are always pleased to find originality rooted in facts and sensibility to drivers of a more pragmatic nature. Rather than bells and whistles, the judges are looking for new angles and approaches to issues commonly shared by many deals and trades. They have found ample evidence of this at IH Group.

In recognition of the firm’s stalwart dedication to offering an independent appraisal of any given task or challenge, the judges wish to extend their 2015 Best Corporate Finance Team Zimbabwe Award to IH Group. In 2013, IH Securities – a securities trading company and part of IH Group – claimed the CFO.co Best Investment Research Team Zimbabwe Award.

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> BANCO POPULAR DOMINICANO: BEST SME BANK DOMINICAN REPUBLIC 2015

The mission statement is deceptively simple: to underwrite the enterprising spirit of an entire people. Just as England is often called a nation of shopkeepers, the Dominican Republic may justifiably be described as a nation of small businesses. Small, but with a difference: big on ambition.

In recognition of the outsized contribution made by small and mediumsized enterprises (SMEs) to the continued development of the nation, the Banco Popular Dominicano – one of the largest banks in the country – has pioneered an array of financial products and services geared towards fulfilling today the needs of tomorrow’s captains of industry.

Since its foundation in 1963, the

Banco Popular Dominicano has supported small-scale industrial businesses, and other enterprises, with facilities aimed at providing not only capital, but financial empowerment and knowhow as well. Now, over half a century later, the bank serves over two million retail and business customers through a network of more than 200 branches, staffed by some 6,500 employees.

Home to a booming economy that grows as an almost dizzying pace, the Dominican Republic has been adding over 6% annually to its GDP since the beginning of 2013. In such a dynamic market, the prompt delivery of financial services becomes essential if growth rates are to be sustained and businesses are to benefit from the upswing. Indeed, when opportunity comes

knocking as demand skyrockets, SMEs in particular are dependent on the agile delivery of adequate financial services in order to prosper and make the most of the times.

The Banco Popular Dominicano, a veritable depository of expertise on the needs of the business community, has redoubled its already considerable efforts to underwrite the growth of SMEs. The CFI.co judging panel noted the bank’s dedication to the well-being of small and medium-sized enterprises and was pleased to see the bank act not just as a financier, but as a partner. Therefore, the judges feel fully justified – and are, indeed, happy – in extending the CFI.co 2015 Best SME Bank Award for the Dominican Republic to Banco Popular Dominicano.

> CONCORD INTERNATIONAL INVESTMENTS GROUP: BEST ASSET MANAGER EGYPT 2015

For Egyptian securities there is but one place of note to go: the asset managers of the Concord International Investments Group who, in 1994, got in on the ground floor and have since reached the market’s apex. The first foreign fund manager to be fully-licensed in Egypt, the Concord Group feels right at home in Cairo.

The Concord International Investments Group is headquartered in New York and registered at the US Securities and Exchange Commission (SEC). The firm’s peerless expertise in navigating Egypt’s capital markets has gained wide recognition. The Concord Group is regularly engaged by both public and private sector banks in Egypt as well as multinational institutions and high-net worth individuals seeking advice on asset management and corporate finance.

The Concord Group was the first firm to establish both close-ended and openend country funds, and is also the only UCITS (Undertaking for Collective Investments in Transferable Securities) fund invested in 74

Egyptian securities. The group also manages four direct investment funds and has successfully exited several of its investments. In addition, the company concluded a number of advisory assignments for corporations focused on tourism, real estate, and development.

The Concord Group is justifiably proud of its exceptionally strong in-house research team which is comprised of experienced professionals dedicated exclusively to the Egyptian market and committed to excellence.

An interesting twist is that the research team in Egypt must wholly convince their colleagues in New York of the soundness of their findings before any investment decisions are made.

This procedure was conceived to weed out any localised sentimentality.

The firm sticks to a simple, yet elegant, investment formula that has proven its worth over many years: picks are based on solid fundamentals, liquidity, and earnings growth.

Founded in 1988, the Concord CFI.co | Capital Finance International

Group is entrusted with the funds of individuals, families, foundations, and institutions. As such, the firm’s primary objective is to hold long and to prosper in tandem with companies in which it acquired a stake. The Concord Group manages a number of investment portfolios, mutual funds, and private equity investments with a combined value of over $1bn of which $0.6bn is invested in Egyptian securities.

The CFI.co judging panel is most impressed by the vast expertise displayed by the Concord International Investments Group in successfully managing large positions in a market both promising and notoriously difficult to gauge. By establishing a decision-making process that is both distinctive and highly failresistant, if not fail-proof, the Concord Group has carved out an expanding niche in a most desirable market. That takes foresight and knowledge. The judges wish to reward these rare traits with the 2015 CFI.co Best Asset Manager Egypt Award.

Spring 2015 Issue

> UNICREDIT GROUP: BEST GREEN BANK ITALY 2015

More than a corporate policy, sustainability is a philosophy – a set of guiding principles and convictions applicable not only in business but to everyday life. Not satisfied with merely changing the light bulbs, recycling waste, or producing lofty statements of corporate intent, Italy’s UniCredit Group has redesigned its business from the ground up to incorporate sustainability principles into the company’s very DNA.

Employing well over 147,000 people in the seventeen countries where it maintains branches, the financial services company underpins its operations with a constant dialogue involving all stakeholders. The bank moreover instituted a culture of sustainability

that cuts across hierarchical layers and provides the company with a clearly-defined sense of purpose.

As a corporate citizen, UniCredit acknowledges that its everyday operations impact society in ways both large and small.

This awareness had led to a heightened sense of social responsibility that enables the group to optimise processes for the best possible outcomes, i.e. benefitting all stakeholders.

Fostering financial inclusion, transparency, responsible entrepreneurship, and the conservation of resources, UniCredit is pioneering banking for the 21st century; shaping a sustainable business model aimed at propelling the group into the future. UniCredit’s

management is convinced that sustainability is central to the success of the business and enhances the bank’s ability to adapt to change.

The CFI.co judging panel expressed admiration for the comprehensive approach to sustainability UniCredit Group has adopted.

The bank, a market leader in Central and Southeastern Europe, has displayed both daring and determination in adjusting its functioning to modern times. The judges took note of the fact that UniCredit consistently remains in close touch with all stakeholders and uses their input to formulate new, or adapt existing, policies.

The judging panel has no doubt that UniCredit Group is a worthy winner of the 2015 Best Green Bank Italy Award.

> SHIEKAN INSURANCE & REINSURANCE: BEST INSURANCE SOLUTIONS TEAM SUDAN 2015

In a largely unexplored market, the upside is practically without limit. Thus it is with insurance and reinsurance in Sudan – home to one of Africa’s most buoyant economies. Not only has the country been lavishly endowed with natural resources, these untold riches remain mostly untapped.

With insurance penetration standing at no more than one percent, the market is up for the taking. That is precisely what Shiekan Insurance & Reinsurance has been doing since 1990: developing and leading the Sudanese insurance industry.

Over the past quarter century, the company has accumulated an impressive number of feats. In 2002, it was the first to introduce full-coverage health insurance.

That same year, Shiekan also launched a comprehensive agricultural insurance scheme.

In keeping with its now well-established reputation for innovation, the company has designed and implemented a micro-insurance framework to offer coverage tailored to meet the needs – and fit the budgets – of low-income families. The scheme, now fully deployed, is backed by the Central Bank of Sudan and marketed through eight banks.

As an insurance pioneer, Shiekan Insurance & Reinsurance fully realises the importance and value of ensuring proper training for its staff and agents. The company’s management considers education key to unlocking the vast potential of the Sudan insurance market and commits considerable effort to implement global best practices through continuous learning.

Shiekan’s corporate social responsibility (CSR) programmes tie into the CFI.co | Capital Finance International

company’s dedication to training by offering university students a straight path leading to “a lifetime of firsts” in the budding Sudanese insurance industry. Other CSR initiatives address healthcare and the provision of safe drinking water.

The CFI.co judges noted that Shiekan Insurance & Reinsurance passed another milestone when the company set up a dedicated risk assessment unit – the first in the country. The judging panel commends Shiekan for its sustained effort at developing Sudan’s insurance market. The company does so with considerable aplomb, moving an entire industry out of its niche and into the mainstream. This makes Shiekan Insurance & Reinsurance beyond any shadow of doubt the winner of the CFI.co Best Insurance Solutions Team Sudan 2015 Award.

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> BANQUE DE COMMERCE ET DE PLACEMENTS: BEST TRADE FINANCE BANK EUROPE 2014

What is a bank if not a bridge between two or more parties? This applies particularly to international trade where banks provide the structure – and financial backbone – of deals. Since 1963, the Swiss Banque de Commerce et de Placements (BCP) has been facilitating trade on a global scale. Present in all corners of the world through a network of over 1,600 correspondent banks, BCP is able to offer bespoke solutions to both exporters and importers.

BCP is – to use an understatement – adverse to risk. Rather than overly conservative, the bank is mindful of the technicalities that may jeopardise any transaction. The proverbial devil dwells in the details. BCP’s Trade Finance Department is, however, highly experienced in locking up any deal in order that all parties may

rest assured of its faultless execution.

BCP is a one-stop bank for all documentary instruments – letters of credit, bonds, etc. – which require a high degree of punctuality, precision, and regulatory knowledge in order to ensure trade deals are properly structured and smoothly executed. It is precisely here that BCP – as a medium-sized bank – is able to offer both the expertise and the agility necessary to adapt to, and profit from, today’s dynamic market characterised by constant, and often fast-paced, change.

Banque de Commerce et de Placements also offers its clients access to a range of commodities financing options.

Different from other banks, BCP keeps its focus on the client and the structure of the transaction, rather than on the goods being

traded. Minimising – and even eliminating – the political and financial risk associated with short and medium-term supplier credit is possible at BCP through the discounting of receivables or the forfaiting (discounting without recourse of payment obligations) of documentary instruments.

The CFI.co judges consider BCP a model bank inasmuch that it offers a vast array of services with the nimbleness of a smaller institution and the professionalism and expertise often associated with the behemoths of the financial services industry. As such, BCP offers the best of both worlds. Banque de Commerce et de Placements is hereby declared winner of the CFI.co 2015 award for Best Trade Finance Bank Europe.

> QUIPPO OIL AND GAS INFRASTRUCTURE: BEST ONSHORE OIL & GAS DRILLING TEAM INDIA 2015

With the second largest proven oil reserves in the Asia-Pacific Region and a new legal framework for exploration now firmly in place, India is gearing up to further reduce its dependency on imported hydrocarbons. Providing state-of-the art hardware for this push, Quippo Oil and Gas Infrastructure Limited (QOGIL) has become one of the fastest growing suppliers of drilling rigs and associated services.

The company offers its clients comprehensive one-stop solutions for onshore drilling. Its highly efficient rigs are skidmounted for enhanced mobility and come 76

equipped with brand-new top drives. In order to optimise operations, QOGIL’s highly-trained and experienced professionals assist clients from the well planning stage onwards to ensure the smooth delivery of a full suite of services.

Responding to increased demand, QOGIL is currently in the process of doubling its fleet of drilling rigs and has solidified strategic partnerships with key players to expand the scope of its operations. The company maintains over 300 qualified engineers, roughnecks, derrickhands, and other personnel on its payroll who collectively strive to maintain QOGIL’s bestCFI.co | Capital Finance International

in-class performance.

Team members are subjected to continuous and rigorous training programmes in order to keep skill levels up to date. The CFI. co judges considered it a pleasure to evaluate QOGIL’s operations, and the complex processes that drive them, finding a company dedicated to achieving excellence across the board and investing in the human resources necessary to maintain peak performance. The judging panel is therefore happy to bestow its Best Onshore Oil & Gas Drilling Team India 2015 Award on Quippo Oil and Gas Infrastructure Limited.

Spring 2015 Issue

> GROWTHGATE CAPITAL CORPORATION: BEST MENA MID-MARKET PRIVATE EQUITY HOUSE GCC 2015

Now for something completely different: ambitious mid-market companies run by their founders, dedicated to provide excellence in services. Interestingly enough, this segment is historically underserved, if not wholly ignored, by equity managers. Not so at Growthgate Capital Corporation where these businesses form the very backbone of a direct investment strategy that consistently produces stellar results.

The approach masterminded by Growthgate Capital is a model of both simplicity and elegance. The firm’s buy-and-build strategy aims to empower mid-market companies to smash the glass ceiling and attain their true potential as regional leaders.

Growthgate Capital not only provides selected companies with the funds necessary for

their breakout, the firm also helps with expertise that ensures optimum operational efficiencies are reached and maintained. Companies are expected to embrace strict standards of corporate governance as well as show financial discipline and prudence.

On average, the buy-and-build strategy requires five to seven years to fully mature at which point accrued benefits are harvested. Growthgate Capital is careful to allocate funds to best-in-class companies and entrepreneurs. Its diligence also seeks to maximise synergies between the chosen recipient-business and the firm’s own core competencies and available in-house expertise.

This approach ensures optimum returns to investors.

Apart from enabling the accelerated organic growth of its companies – typically businesses valued at between $50m to $200m in which a 25-50% stake is taken – Growthgate Capital also looks for opportunities to expand their corporate footprint, and cash flow, via bolton acquisitions.

The CFI.co judging panel is thoroughly impressed by the straightforward and pragmatic approach Growthgate Capital has developed by leveraging its regional knowledge and experience. There is no doubt in the judges’ mind that Growthgate Capital Corporation fully merits the 2015 Best MENA Mid-Market Private Equity House GCC.

> CORPORATE PROPERTIES: BEST INDUSTRIAL PARK TURNKEY SERVICES & SOLUTIONS PROVIDER MEXICO 2015

What seems like a no-brainer, is often rather the exception: quality construction, tailor-made to enable a solid return on both initial investment and corporate social responsibility.

Build to last, and do so in areas in need of – and receptive to – regeneration, with a view to creating a win-win-win for all stakeholders: owners, occupants, and the surrounding community.

Headquartered in Monterrey, Mexico, Corporate Properties (CPA) has been designing, developing, and operating industrial buildings for nearly 20 years. To date, the company has acquired or developed well over three million square metres of warehouses, distribution centres, and light manufacturing facilities across Mexico. Corporate Properties has provided more than two hundred companies

with fitting commercial real estate solutions.

Corporate Properties is funded by a US institutional investor with a long-term view. The capital committed has enabled the company’s accelerated growth. CPA has been one of the most active developers of industrial real estate in the country. Its industrial parks are often located in socially depressed areas and contribute to a marked decrease in both poverty and crime levels. Great care is taken to minimise the estates’ environmental impact through the use of solar power, the recycling of rainwater and wastewater, and the preservation of green areas where feasible. Accessibility is optimised for bicycles and other eco-friendly modes of transportation.

The CFI.co judging panel also noted that Corporate Properties has obtained CFI.co | Capital Finance International

full recognition by the US Green Building Council for developing LEED-certified buildings (Leadership in Energy and Environmental Design). Adherence to well-defined LEED principles lowers operating costs and reduces environmental impact while improving the health of occupants.

Corporate Properties obtained the coveted LEED Gold certification for a 60,000 square metres distribution centre developed for a global client in 2008. The judges consider this to constitute a testament to the company’s exemplary efforts at offering state-of-the-art facilities to its clients and their workers. This is but one of a number of reasons that encouraged the judges to extend the 2015 Best Industrial Park Turnkey Services & Solutions Provider Mexico to Corporate Properties.

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> EMIRATES NBD ASSET MANAGEMENT: BEST MENA FIXED-INCOME FUND MANAGER 2015

A holistic approach with short lines of communication and a strict separation between risk management and day-to-day operations has propelled Emirates NBD Asset Management to very apex of the MENA (Middle East and North Africa) fixed-income market.

Appealing to clients looking to diversify their investment portfolio by reducing volatility, the Emirates NBD Asset Management fixed-income desk proactively scans the region for bonds that best fit the carefully crafted portfolio and contribute to the funds’ alpha – returns over those generated by benchmark indices.

Emirates NBD is the leading bank in the United Arab Emirates. Its shares are listed

on the Dubai Financial Market. The bank was formed in 2007 with the merger of Emirates Bank International (EBI) and the National Bank of Dubai. The resulting Emirates NBD is the region’s largest financial services provider as measured by assets (AED 363bn).

The Emirates NBD Asset Management fixed-income desk aims to stay atop the market by actively managing its portfolio through the continuous analysis of credit spreads, frequent trade switches, and a host other stratagems that allow it to promptly react to asset price movements and keep its edge over the competition. This highenergy approach enables Emirates NBD Asset Management to consistently attain the desired

yield-to-maturity (YTM).

The CFI.co judges are impressed by the agility displayed by the Emirates NBD Asset Management fixed-income desk and its approach to fund management. The judges took particular note of the desk’s openness to external research: the word from the “street” is often incorporated into the findings of the inhouse analytical team to produce a true picture of market conditions and trends.

The judges are exceedingly pleased to offer Emirates NBD Asset Management the recognition it is due and offer the bank their Best MENA Fixed-Income Fund Manager 2015 Award.

> MARAN GROUP: BEST INDUSTRIAL PARK CONSTRUCTION PARTNER MEXICO 2015

Boasting over 38 years of business experience, the Maran Group of Mexicali is the preferred partner of corporations looking for a plant, warehouse, or office site in Baja California – Mexico’s export-geared manufacturing hub that is home to over 900 companies employing close to 300,000 people.

Due to its privileged location on the US border, Baja California offers excellent transport links to all major North American markets for the wares assembled on the state’s large industrial parks.

The Maran Group makes sure that manufacturing and logistics processes run smoothly by offering businesses purposedesigned facilities, conceived from the ground up to enhance productivity and ensure 78

uninterrupted operations.

The company not only designs, builds, and maintains industrial facilities, it also knows the area inside out and offers its vast reservoir of local expertise to clients and operators. The Maran Group keeps a stock of buildings on hand to allow for immediate occupancy and boasts a portfolio of select building plots and land ready for development.

The Maran Group is headquartered at its flagship Maran Industrial Park in Mexicali – a sprawling manufacturing centre with buildings covering over 220,000m2, housing the manufacturing plants of bigname companies such as Mitsubishi, General Dynamics, Honeywell, and SKB. The stateof-the-art, earthquake-resistant, and climateCFI.co | Capital Finance International

controlled facilities each day welcome over 7,500 workers.

The CFI.co judging panel was impressed with the longevity of Maran Group’s business relationships. The company maintains a solid roster of faithful clients who have entrusted the care of their industrial housing needs to Maran Group for 15 years or longer.

The judges recognise that the client loyalty is not easily earned and requires considerable effort to keep. Maran Group has a stellar track record, not just in serving their clients’ needs, but in anticipating them. The company is a particularly worthy winner of the 2015 Best Industrial Park Construction Partner Mexico.

Spring 2015 Issue

> GREEFF PROPERTIES: BEST RESIDENTIAL AGENCY CAPE TOWN 2015

A top destination and excellent value.

As far as real estate is concerned, Cape Town is a no-brainer. One of the world’s most emblematic spots – sitting astride one of the three legendary southern capes – vivacious Cape Town has long been a favourite playground of the happy few.

However, their ranks are swelling thanks to the slow slide of South Africa’s rand which has realigned property values and reignited investor interest.

With both domestic and international demand on the rise, business is discretely booming at Greeff Properties – an exclusive affiliate of Christie’s International Real Estate.

Though a niche market realty, Greeff Properties is a force to reckon with in Cape Town’s highly sought-after Southern Suburbs and Peninsula, City Bowl, and the Atlantic Seaboard districts.

Open for business since 2001, Greeff Properties grew from a kitchen table

outfit to a premier realtor employing over 75 of Cape Town’s top agents and support staff.

The company’s founder, Mike Greeff, brings a life’s worth of realty experience to the table.

Dedicated to customer care and meticulous in the execution of its vast array of services, Greeff Properties has its market cornered.

In 2011, the excellence of the company’s approach was recognised when it managed to secure affiliation with Christie’s International Real Estate after successfully completing the most rigorous vetting procedure known to the industry. Greeff Properties is one of only three realtors in South Africa invited by Christie’s to become partners.

As an affiliate of the world’s premier luxury real estate company, Greeff Properties enjoys unparalleled access to the international market, thereby offering sellers an added layer of service unavailable elsewhere. The

world-renowned Christie’s Magazine regularly features the company’s exclusive listings. The publication is distributed quarterly to over 70,000 people with an average net-worth in excess of $9 million.

The CFI.co judging panel likewise recognises that Greeff Properties is a oneof-a-kind realtor that inspires trust, loyalty, and respect not just in its home market but far beyond as well. The company’s Bespoke Marketing Programme, tailored to fit the unique needs of the high-end market, operates on a truly global scale with the discretion – and efficiency – required to satisfy sellers and buyers alike.

With a level of service unprecedented – or, if you will, sans pareil – in Cape Town and its environs, Greeff Properties breaks new ground and fully merits the CFI.co 2015 Best Residential Agency Cape Town Award.

> OMAN UAE EXCHANGE: BEST FOREIGN CURRENCY SERVICES OMAN 2015

Connecting Oman to the world’s currencies, Oman UAE Exchange is the only Exchange Company in Oman to have SWIFT connectivity that offers individuals and corporates a fast and secure way of transferring funds to the Bank accounts across the globe. As an added service to facilitate transfers, Oman UAE Exchange also maintains its own network of over 75 correspondent banks – operating globally as well.

Securely plugged into the financial world, Oman UAE Exchange also offers its customers the convenience of instantaneous money transfers via the 3 largest Money Transfer

companies in the world – Western Union Money Transfer, MoneyGram and Xpress Money to over 1 million locations around the globe.

Domestically, Oman UAE Exchange maintains a network of over 50 outlets throughout the Sultanate of Oman that ensures close proximity with the clients. Operating as a people-to-people (P2P) enterprise, Oman UAE Exchange has developed a wide range of products, all carefully tailored to match the needs of its customers. The firm – a selfdescribed supermarket of financial services “without the trolleys” – is dedicated to consistently providing superior quality in both CFI.co | Capital Finance International

the delivery and ease-of-use products.

Continuously topping up on the latest technology allows Oman UAE Exchange to stay way ahead of its competition. However, the company is mindful of not losing its human touch which allows it to offer bespoke solutions to customers.

The CFI.co judging panel took note of Oman UAE Exchange’s tag line: Service is our Currency. The judges feel that the company indeed lives up to its slogan and thus fully merits the Best Foreign Currency Services Oman 2015 Award.

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> FEDERAL MORTGAGE BANK OF NIGERIA: OUTSTANDING CONTRIBUTION TO AFFORDABLE HOUSING IN AFRICA 2015

Nasir Abdullahi, chairman of Nigeria’s Co-op Bank, stood in for his colleague Gimba Ya’u Kumo of the Federal Mortgage Bank of Nigeria (FMBN) and received the award trophy for Outstanding Contribution to Affordable Housing Africa 2015 from CFI.co at the Annual Investment Meeting (AIM) recently celebrated in Dubai. The FMBN managing director was unable to attend the proceedings due to other commitments.

Early April, Mr Kumo was confirmed for a second five-year term as FMBN general director.

The award extended to the FMBN was one of three handed out by CFI.co during the AIM. CFI.co partnered with the event’s organisers as knowledge partner. The 2015 edition of the Annual Investment Meeting was centred on the ways in which foreign direct investment (FDI) may help foster sustainable growth through innovation and the transfer of

technology.

As the country battles a housing deficit estimated at about 17 million units, the Federal Mortgage Bank of Nigeria – successor to the Nigerian Building Society – was set up to help close the gap between supply and demand via the provision of funds to commercial banks offering home loans and direct mortgages offered through the National Housing Fund. As such, FMBN has been instrumental in boosting new construction of affordable homes.

Mr Kumo has received wide acclaim for the high standards of transparency and governance he imposed on the FMBN. During his first term in office, Mr Kumo successfully concluded a broad restructuring programme that revitalised the bank and allowed it spearhead a number of government policy initiatives aimed at the accelerated development of the Nigerian

housing sector. Mr Kumo has also streamlined the bank’s internal procedures in an attempt to reduce red tape and speed-up decisionmaking processes. Mortgage applications can now be processed in days, rather than months, enabling homebuyers to do away with the previously requisite mediation of powerbrokers, godfathers, and the ubiquitous man-whoknows-a-man.

Over the past few years, the revamped mortgage bank has helped hundreds of thousands Nigerians become homeowners.

At the same time, default rates have decreased by over 70%. By adopting – and imposing – a customer-centric approach, Mr Kumo managed almost single-handedly to turn the venerable FMBN into an engine for growth and a bank that helps fulfil the aspirations of an entire nation.

> SIMBA GROUP: BEST CUSTOMER SATISFACTION NIGERIA 2015

Integrity, fairness, and meticulous attention to detail have served the Simba Group of companies well during its 27 years as a driver of growth in Nigeria. A conglomerate present in the country’s most dynamic economic sectors, Simba Group is comprised of seven companies that share a simple, yet effective, corporate vision: providing the customer with unparalleled satisfaction.

By placing the customer at the heart of its many operations, Simba Group has managed to attain that rarest of corporate accomplishments: to equate the brand name to a generalised awareness and sense of superior quality. The companies of the Simba Group 80

work closely with their suppliers to ensure the consistent delivery of both products and services that meet – and exceed – the customers’ expectations.

Simba Group has businesses operating in a number of sectors critical to Nigeria’s sustained development: alternative energy, backup power supply systems, smallscale off-grid power generation, software technology solutions, networking and data transmission, ICT infrastructure development, and motor vehicles sales and servicing.

The company operates a network of eight branches, ensuring the availability of its products and services throughout Nigeria, CFI.co | Capital Finance International

including the remotest corners of the country.

The CFI.co judges are impressed by the degree to which Simba Group has been able to permeate its exceptionally high standard of services throughout the expanding organisation. The group’s rapid growth has not resulted in a dilution of its commitment to customer satisfaction: if anything, that growth has encouraged management to not just maintain, but enhance its corporate policy centred on providing – unfailingly – affordable excellence. The judging panel extends its warm congratulations to Simba Group on its win of the 2015 Best Customer Satisfaction Award.

Spring 2015 Issue

> INVERCAIXA GESTIÓN: BEST FIXED-INCOME FUND MANAGEMENT TEAM SPAIN 2015

With close to EUR40bn under management, InverCaixa Gestión has now overtaken its nearest rival for the top spot on Spain’s ranking of largest domestic mutual fund managers. A wholly-owned subsidiary of Grupo la Caixa, InverCaixa Gestión saw its AuM grow significantly in the last two years.

On net, investors added EUR12bn to the growth in total net assets in this period.

Market indexes have also helped but an excellent performance and market decisions of the managers team have been determined to the outstanding growth of InverCaixa’s AuM.

Last year, InverCaixa Gestión registered a particularly strong growth of its fixed-income funds which ballooned by 89%.

InverCaixa’s active Fixed Income team has a unique insight to identify long-term trends

and capture short-term opportunities and the expertise to translate these insight and opportunities efficiently into the funds they manage

The integration of financial groups has also contributed to the growth of net assets but to a lesser extent. The integration of Barclays Wealth Management with EUR2,4bn AuM, is scheduled in the first half of 2015.

The Spanish mutual fund market is not only exceptionally buoyant; it is highly competitive as well with volumes growing at over 25% annually. Being part of a financial services group that includes Europe’s largest savings bank, allows InverCaixa Gestión privileged access to a universe of over 13 million clients. The company is powered by the expertise of close to 140 professionals.

Investment strategies and decisions are reached via a top-down mechanism with specialised committees providing continuous data input and monitoring.

The CFI.co judging panel is particularly impressed by the vast range of investment vehicles InverCaixa Gestión puts at the disposal of its clients. Products are carefully tailored to different levels of risk-tolerance and income expectation. Successfully pursuing transparency in its management of assets while maintaining streamlined operational procedures has allowed InverCaixa Gestión to reach the very top. The judges are unanimous in their decision to present the company with the 2015 Best Fixed-Income Fund Management Team Spain Award.

> AJIL FINANCIAL SERVICES COMPANY: MOST INNOVATIVE FINANCIAL SOLUTIONS TEAM SAUDI ARABIA 2014

Innovation in financial services need not imply a relaxing of quality standards. While an architect of highly original and bespoke financing solutions for the acquisition of capital assets, the AJIL Financial Services Company has resolutely stuck to prudent policies that underwrite a well-established reputation for reliability and sectorial leadership.

The AJIL management team, a collective of exceptionally seasoned professionals, boasts a level of expertise and experience that – in barely fifteen years – propelled the company to the very apex of the market. With a presence in fifteen cities and over 2,500 clients, AJIL provides financial solutions across a diverse range of sectors

from construction and transportation to trade and manufacturing. AJIL is a Saudi closed joint stock company. Amongst its shareholder are well-known corporations such as Riyad Bank, Mitsubishi Corporation, and Zahid Group Holding.

More than just a financial services company, AJIL aims to establish long-term partnerships that enable clients to realise projects, obtain consistent growth, and achieve corporate objectives. The CFI.co judges were pleased to see that AJIL emphasises simplicity and transparency in its interactions with clients.

Without sacrificing due diligence, paperwork is kept to a minimum while operational procedures are straight and clear.

CFI.co | Capital Finance International

The judges also applaud AJIL’s rather unique approach to customer relations. The company’s agents make a concerted and handson effort to gain a thorough understanding of their clients’ businesses and their specific requirements. This way, AJIL professionals are oftentimes able to help identify needs and possibilities that stretch beyond the scope of the initial consult.

As a premier provider of lease finance products, AJIL Financial Services Company has now reached a height that allows it to oversee, and indeed lead, the market. Consequently, the CFI.co judges feel no hesitation in presenting the company with the Most Innovative Financial Solutions Team Saudi Arabia 2014 Award.

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> NAMPRO FUND: BEST SME FINANCIAL SOLUTIONS TEAM SOUTHERN AFRICA 2015

The Namibia Procurement Fund

It remains the bane of companies worldwide: securing financial backing for expansion driven by entrepreneurial genius.

Small and medium-sized enterprises (SMEs) are particularly vulnerable to cash crunches caused by a sudden increase in the demand for products or services.

This is where NamPro Fund comes in to, quite possibly, save the day. This Namibian fund provides financial bridging solutions to companies that are unable to access capital via more conventional channels.

Recognising that SMEs play a huge, and essential, role in the development of Namibia, the NamPro Fund was launched in 2000 with an initial government grant of N$160m (± £9m) and a charter to facilitate the growth of SMEs. NamPro Fund’s capitalisation has since doubled. The fund has provided over N$400m in credit facilities, helping create well over 2,000 new jobs.

Most businesses tap into the fund to obtain the working capital required to

properly service supply contracts with larger corporations or public entities. The fund also offers guarantees for bonds and performance in support of submissions for bids on supply contracts. Additionally, NamPro Fund provides invoice discounting (factoring) and has assetbacked finance options (leasing) for the purchase of the capital goods required to fulfil contracts.

The NamPro Fund team of seasoned professionals works closely with entrepreneurs to help identify challenges and bottlenecks, and find bespoke solutions. The fund enjoys the full support of the Namibian government which considers it to be the vehicle of choice for extending credit facilities to SMEs while keeping risk to the public purse minimised.

Strongly committed to international best practices for governance, last year NamPro Fund tasked the University of Namibia to survey the effectiveness and societal relevance of its operations. The survey, financed by the German development agency GIZ (Gesellschaft für

Internationale Zusammenarbeit), found that the development of SMEs is mostly hampered by a still incomplete legal framework.

Current law can be further improved upon in recognition of the many benefits specific legislation may bring small and medium-sized businesses. With the help of NamPro Fund, SMEs already managed to successfully secure around 40% of the N$780m in tenders issued by the Targeted Intervention Programme for Employment and Economic Growth (Tipeeg) in the financial year 2012/13

The CFI.co judging panel wholeheartedly supports the mission NamPro Fund has bravely embarked upon: consistent, and indeed sustainable, growth may only be obtained via the empowerment of small and medium-sized enterprises. Supporting SMEs thus becomes a priority in any country aspiring to reach its full potential. The CFI.co judges are exceedingly pleased to offer the 2015 Best SME Financial Solutions Team Southern Africa Award to Namibia’s NamPro Fund.

> NBG SECURITIES: BEST SECURITIES & DERIVATIVES BROKERAGE GREECE 2015

While market volatility may describe the short-term outlook for Greece, underlying valuations remain surprisingly solid. Greek investment firm NBG securities – with a presence in London, Bucharest, and Cyprus – has mastered a challenging market to come out on top with an upgraded skillset and an optimised mix of services offered by a reinvigorated team of professionals.

As the investment banking and brokerage arm of the National Bank of Greece Group, the country’s oldest and most venerable financial institution, NBG Securities possesses an impeccable pedigree that has allowed the firm to attract, and keep, the most coveted financial experts – the ones who stand out for their deep knowledge of the domestic market and its many drivers.

Adhering to a classic researchcentred model, and following a holistic approach, enabled NBG Securities to outclass 82

its competitors, claiming the top spot in the retail market with over 66,000 clients on its books. The firm is careful to maintain close contact with investors – both retail and institutional – and offers a wide array of product and services, including derivatives, equities, exchange traded funds, and fixed income amongst others, to best suit individual needs and aspirations. As a closely-observed corporate strategic priority, the focus is on establishing strong and long-term relationships based on client satisfaction.

NBG Securities is well equipped to serve its growing international client base as well, constantly evolving its service platform and embracing innovative technologies that further satisfy customer’s changing needs. Due to its strong capital base and consistent growth, the firm maintains its position as a leading regional player. Moreover, NBG Securities is a leading participant and major liquidity provider on the CFI.co | Capital Finance International

Athens Stock Exchange and is persistently rated as AAA2 market maker, offering a wide range of products & services in spot and derivatives.

NBG Securities is currently in the process of upgrading its trading software to a state-of-the-art platform which is expected to be operational later this year. NBG Securities is also actively engaged in trading on the promising markets of Southeast Europe with an emphasis on Romania.

The CFI.co judges commend NBG Securities’ solid commitment to the implementation of international best practices and the company’s strict adherence to the highest ethical standards in the business. The judges can see why the firm is happy with the progress made over the past few years and wish to recognise NBG Securities’ accomplishments granting the firm their 2015 Best Securities & Derivatives Brokerage Greece 2015.

Spring 2015 Issue

> CAPITAL TRUST GROUP: BEST MENA PRIVATE EQUITY FUND MANAGER UK 2015

Local presence and knowledge are, of course, essential to many industries. At Capital Trust Group, however, their pursuit and application seem hardwired into the firm’s DNA. Its vast reservoir of local knowledge allowed the company to successfully break new ground in 1998 by raising the first-ever regional private equity fund for the Middle East and North Africa (MENA).

Capital Trust Group has now assembled its fourth fund focused on MENA, excluding the Gulf Region. The fund is being managed by the same team of professionals that made previous incarnations into lucrative propositions. The funds are growing in volume as well: satisfied investors have few, if any,

reservations in committing additional capital to these exquisitely crafted investment vehicles.

With a firmly established reputation for excellence in the allocation of the monies entrusted, Capital Trust Group now counts the International Finance Corporation (IFC), part of the World Bank Group, amongst its partners.

The company adheres to a relatively simple, yet tried-and-true, formula that limits exposure to any single sector to 30% of the fund’s raised capital. Investment in a single company is restricted to 15% of the total available.

While Capital Trust Group does not invest in start-ups or greenfield projects, the firm is not adverse to take positions in markets deemed slightly risky. In Palestine, Capital Trust

Group succeeded in exiting successfully – and profitably – from a number of deals.

The CFI.co judging panel applauds the rigorous processes that lay the foundation upon which Capital Trust Group erects its funds.

Strict though this decision-making framework may be, it still allows the firm to offer partners the full benefits of one of the most dynamic and promising regions in the world while minimising the associated risks.

By leveraging its local knowledge and presence, and administering both with exceptional diligence, Capital Trust Group is a perfect fit for the CFI.co 2015 Best MENA Private Equity Fund Manager UK Award.

> HORIZON GROUP: MOST SUSTAINABLE INVESTMENTS RWANDA 2015

Incubating Resources for Rwanda

Set up in 2006 to provide products and services that positively impact the socio-economic development of Rwanda, the Horizon Group comprises three operating companies dedicated to logistics, construction, and processing. The group aims to identify promising economic areas where initial investments may provide the impetus necessary to generate private sector interest.

The Horizon Group’s corporate mission also includes the development of both the infrastructure and expertise needed to boost economic growth. As such, the group and its operations are of paramount importance to the enduring success of the already fast-growing Rwandese economy. The country has seen its GDP multiply over the past twenty years with per capita income doubling to nearly $1,500 annually (PPP), notwithstanding a significant increase of Rwanda’s population.

More than just greening its diverse operations, Horizon Group has fully embraced the entire range of sustainable business

principles. The company introduced asphalt recycling in Rwanda which not only conserves resources, but also contributes to a drop in the number of traffic accidents since fewer heavy roadwork vehicles are employed and disruptions are kept to a minimum.

The company’s management displays a profound awareness of environmental issues and takes the interests of all stakeholders into account when setting and implementing corporate policies – a particularly important consideration in a country such as Rwanda with one of the highest population densities in the world (450 per sq. km.).

Turning sustainability concepts into projects, the Horizon Group was instrumental in the launch of the Kigali Green City Project, and an initiative to help build a more efficient water drainage system that uses concrete-lined ditches instead of canals lined with rocks.

Another project supports potato farmers in adopting more efficient techniques that reduce the usage of fertilizers and herbicides while CFI.co | Capital Finance International

maintaining, and even increasing, yields.

The Horizon Group Sopyrwa subsidiary, acquired in 2007, has been recognised as a world leader in the supply of high-purity pyrethrum pale extract. The CFI.co judging panel is aware that the most qualityconscious industrial users of the extract have turned to Horizon Sopyrwa for their supplies.

Pyrethrum pale extract – obtained from chrysanthemum flowers – is mostly used in the manufacture of organic insecticides. The company works with 24 farming cooperatives in the northern volcanic belt of the country and has approximately 5,600 hectares under cultivation.

The CFI.co judges consider that the Horizon Group has displayed great dexterity in the allocation of investment funds, consistently maximising societal benefits without sacrificing sound business principles. The judges are therefore keen to extend the 2015 Most Sustainable Investments Award to Horizon Group.

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> TAWUNIYA: BEST CORPORATE INSURANCE SOLUTIONS PROVIDER KSA 2015

A pioneer of the insurance industry in the Kingdom of Saudi Arabia, Tawuniya was established in 1986 with the express intention of shaping and developing a domestic market for both private and corporate insurance products and services. Breaking new ground, the company has invested heavily in the training of insurance professionals and in creating public awareness of the convenience of enjoying solid protection against risk as an essential component of sound financial planning.

In order to ensure that its products are complaint with Islamic Law, the company maintains a Sharia Committee of distinguished scholars and legal experts to review services

and transactions, and help determine the legal cadres of both insurance and investment policies. Additionally, Tawuniya works with an external legal review office to provide its compliance with Sharia Law with an added layer of assurance.

Diligence far above and beyond the usually accepted level has been a hallmark of Tawuniya since its foundation. The company fosters an internal culture based on two pillars: the “soft side” aims to ensure a proactive environment is maintained that not only allows for excellence in customer relations, but also facilitates teamwork, personal development, and empowerment. The complementary “hard side”

of Tawuniya’s corporate identity ensures strict adherence to the highest standards of corporate government, transparency, accountability, and service, amongst others.

The CFI.co judging panel wishes to commend Tawuniya on the quality of both the company’s products and services. Not only does Tawuniya boast a vast range of insurance products – each carefully tailored to a specific market or requirement – the company also consistently ensures their optimal quality. The integrity of both intent and delivery is peerless.

The judges are therefore pleased indeed to bestow the 2015 Best Corporate Insurance Solutions Provider KSA Award on Tawuniya.

> CEEZALI: BEST INFRASTRUCTURE EPC PARTNER NIGERIA 2015

The CFI.co judges have discovered an engineering marvel. Uncovering entrepreneurial excellence seldom fails to elicit a smile from the judges. Such it is with Ceezali, a civil engineering company with a ground-breaking attitude in Abuja – Nigeria’s still shiny new capital.

Not only is Ceezali actively helping address the country’s infrastructure deficit, it does so with considerable panache: the highest standards of quality are strictly adhered to as a matter of course – unfailingly following global best practices – while prudent corporate management allows the company to flourish in a highly competitive environment.

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Considering that quality is ultimately the key to enduring success, Ceezali is rightfully proud of its impeccable track record which includes a number of highly-visible publicprivate partnerships (PPPs). After a three year bidding process, the company was selected to provide an integrated engineering infrastructure to Abuja’s up-and-coming Mabushi District.

Ceezali also built carriageways, high-rises, stadiums, and a vast number of other projects.

A corporate member of the British Safety Council, Ceezali has been in business for over two decades. From its very beginning, the company has taken the lead in corporate social responsibility – even before the concept CFI.co | Capital Finance International

became fashionable. The interests of all stakeholders are carefully taken into account while the environmental impact of projects to be undertaken is meticulously evaluated.

The CFI.co judges took note of Ceezali’s pioneering efforts in furthering PPP contracting arrangements as an alternative for procurement and a promising way of bridging Nigeria’s infrastructure gap. As a company that wholeheartedly embraces competition and can outperform most on both price and quality, Ceezali is a winner indeed. The CFI.co judges are therefore delighted to present Ceezali the 2015 Best Infrastructure EPC Partner Nigeria Award.

Spring 2015 Issue

> AFGHANISTAN INTERNATIONAL BANK: BEST CORPORATE GOVERNANCE AFGHANISTAN AWARD 2015

Set up in 2004 as an engine for boosting economic development, Afghanistan International Bank (AIB) has become the country’s leading financial services provider. In little over a decade, AIB has earned the trust of the nation: the bank is consistently named as the most reliable and trustworthy partner by both private and corporate clients.

AIB reached the pinnacle of the young, albeit buoyant, Afghan financial services industry by adhering to the highest standards of corporate governance. This has been a policy set in stone from day one. Indeed, the strict observance of international best practices is part of the bank’s DNA.

In keeping with its now wellestablished tradition for excellence in governance, AIB has put a state-of-the-art antimoney laundering (AML) monitoring system in place that fully complies with the requirements

as stipulated by the Wolfsberg Group of eleven international banks for enhanced due diligence as it pertains to the identification and reporting of suspicious transactions.

AIB management has also been careful to maintain the highest CAMEL rating of any bank in Afghanistan. Its capital adequacy, asset quality, management, earnings, and liquidity indicators are second to none in the country.

Coupling its considerable international expertise to a peerless knowledge of local market conditions and a deep understanding of its customers’ needs, Afghanistan International Bank had built a solid corporate identity that allow it to be the bank of choice for countless international agencies operating in the country.

The CFI.co judges noted that the efficiency of AIB’s operational processes

gained international recognition. In 2013, the bank received the coveted Straight-Through Processing Award from Commerzbank Frankfurt – one of the bank’s two main correspondents.

The CFI.co judges continue to be impressed by the consistency with which AIB maintains its high standards of quality. The bank’s management is quite fearless in raising the bar to ever greater heights, giving no sign of resting on well-deserved laurels.

Indeed, the judges are sure that AIB will be unwavering in the pursuit of excellence in the delivery of financial services. It is for this reason that the judges are likewise unwavering in their determination to recognise Afghanistan International Bank – for the second consecutive year – as winner of the Best Corporate Governance Afghanistan Award 2015.

> UNITED CAPITAL BANK: BEST PROJECT FINANCE TEAM SUDAN 2015

Leveraging its enviable position at the crossroads between Africa and the Middle East, the Sharia-compliant United Capital Bank (UCB) of Sudan has been exceptionally successful in finding – and underwriting – investment opportunities in one of the world’s most promising frontier markets.

Abundantly provided with resource riches, Sudan is, arguably, an economic miracle waiting to happen.

United Capital Bank was founded in 2005 by corporate investors from Kuwait, Lebanon, and Egypt, and has since evolved into a full-service financial company. UCB fully adheres to Islamic principles. Compliance with Sharia Law has provided the bank with a distinct leading edge in procuring and expanding

business.

UCB manages a growing number of specialised investment funds. These vehicles not only offer solid returns to investors, they also provide the wherewithal that finances an impressive number of projects in different sectors of the buoyant Sudanese economy. The bank has set up carefully tailored funds to direct investments into real estate, infrastructure, industrial, and agricultural projects.

The United Capital Bank is also actively engaged in the placement of shares of capital venture companies established to empower and facilitate Sudan’s accelerated economic development. UCB aims to mobilise domestic and international resources to CFI.co | Capital Finance International

transform the country’s vast potential into tangible realities.

The CFI.co judges are particularly impressed by UCB’s dedication to provide dependable flows of capital to both corporate and government entities to help these attain the objectives set. The judges furthermore noted that UCB has made significant investments in technological platforms that enable the bank to offer its vast array of products and services in a streamlined manner. The judges are therefore most pleased to present United Capital Bank with the 2015 award for Best Project Finance Team Sudan.

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> BANCO ATLÂNTICO: BEST WEALTH MANAGEMENT TEAM ANGOLA 2015 & BEST INVESTMENT BANK ANGOLA 2015

Catering with personalised services to the individual needs of clients has enabled Banco Atlântico to prevail in the highly competitive private banking sector. The bank offers a full suite of professional financial services optimised for high-net-worth individuals.

Recognising that private banking requires a no-nonsense approach to wealth management, Banco Atlântico emphasises efficiency in the delivery of its services. Clients are assigned highly professional account executives to help manage their portfolios.

The bank deploys an integrated approach to wealth management that ensures ready access to a broad range of investment venues and opportunities.

Through its global network of

branches and correspondents, Banco Atlântico is present in most major markets with the expertise required for the swift and precise execution of trading of any class. Clients benefit from finely crafted financial solutions that attain the objectives set and abide any particular level of risk tolerance.

Founded in 2006, Banco Atlântico has become a driving force of the buoyant Angolan economy, claiming a top position in high-value segments such as corporate, investment, and private banking. The bank leverages its corporate growth by investing in the expansion of its geographic footprint and further enhancements to services. Targeting the country’s growing number of affluent businesspeople and entrepreneurs, Banco

Atlântico also aims to be the first port of call for outside investors wanting to partake in Angola’s promising future.

The CFI.co judging panel again commends Banco Atlântico for setting the bar ever higher, thereby elevating key concerns – excellence in services, thoroughness in execution, and prudence in management – to hallmarks of its day-to-day operations. In an exceptional move, the judges decided to extend Banco Atlântico a double award: Best Wealth Management Team Angola 2015 and Best Investment Bank Angola 2015. For the second year running, Banco Atlântico is the recipient of the Best Wealth Management Team Angola Award.

> MASHREQ CAPITAL (DIFC): BEST SHARIA-COMPLIANT MENA FUND MANAGER 2015

Leveraging its regional expertise and research excellence, Mashreq Capital (DIFC) of Dubai time and again succeeds in staying well ahead of the market, consistently obtaining returns that leave benchmarks far behind. The company manages four mutual funds in addition to discretionary portfolios for family offices, institutional investors, and ultra-high-net-worth individuals. Investment vehicles are offered as both conventional and Sharia-compliant products.

Mashreq Capital is focused on finding opportunity across the Middle East and North Africa (MENA). Its flagship Mashreq Al Islami Arab Tigers Fund is invested in Saudi Arabia, the United Arab Emirates (UAE), Qatar, and Egypt with a subscribed capital in excess of $26 million. Since its inception in July 2008, 86

the fund has gained almost 90% in value while its benchmark – the S&P Pan Arab Composite Sharia Index – retreated almost 28%. This is but one example of Mashreq investment expertise leading to exceptional results.

The Sukuk Fund managed by the team has been a top performer with an overall return of 56% since its inception in June 2009 and returned 6.17% in 2014. The Sukuk Fund has one of the longest track records and has consistently been outperforming the broad Sukuk market and its peer universe.

Rather than reinvent the wheel, Mashreq Capital adheres to proven asset allocation strategies and management techniques, implementing a solid procedural structure that allows for both consistency and agility.

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The firm’s professionals remain cautiously bullish on the region and note that MENA markets seem particularly resilient in the face of falling oil prices. Overall, regional markets bounced back nicely. Egypt in particular holds out great promise with its economy on the mend and ready for take-off.

The CFI.co judges noted that Mashreq Capital was one of the first to identify Sharia-compliant investment products as a growth market. The judges commend the firm on its foresight. The company’s considerable insight into the dynamics of MENA capital markets was also noted. Without further ado the panel proceeded to declare Mashreq Capital winner of the 2015 Best Sharia-Compliant MENA Fund Manager Award.

Spring 2015 Issue

> Quantitative Easing:

Another Shot for the Caffeine Junkie

By Christoph Greil, PhD student of public international law at the University of Vienna

Early in March, the European Central Bank (ECB) announced its intention to flood the market with about €1.1 trillion in quantitative easing (QE) monies over the course of 18 months by buying debt instruments – mostly government bonds – on the secondary market.

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Critics emphasise that quantitative easing is a short-term measure only.

They often refer to Japan where QE has been used since 2001 on a serial basis to little effect, but with huge implications for the country’s public debt.

Optimists, such as US economist Jeffrey Sachs, celebrate the ECB’s current “macroeconomic realism,” since fresh liquidity will increase the availability of credit to the real economy. This is expected to boost investment and consumption.

When accompanied by a longlasting policy of low interest rates, expanding the money supply will fuel inflation, stimulate demand,

and strengthen investor confidence.

The export sector also stands to gain on the back of a weakened euro.

There is indeed reason to hope that what has worked out pretty well in the US and the UK, will also do the job in Europe. In conjunction with low oil prices, the ongoing revolution in information technology, and the €315 billion investment package assembled by the European Commission, the new course of action followed by the ECB could conceivably end Europe’s economic lethargy and allow the continent to catch up with its transatlantic counterpart, currently busy gloating over its 3.2% economic growth.

While everybody – including the proverbial dog – is focused on getting GDP to grow by leveraging of the ballooning and largely fictitious balances of likewise improbable bank accounts, very real and tangible problems are waiting for a solution: the soaring wealth gap between rich and poor and the systematic destruction of the environment remain largely unaddressed.

Good Luck with That

By Wim Romeijn, Editor, CFI.co

Rather than a complot against the planet and its inhabitants, capitalism in its present form – much maligned but little understood – developed as haphazardly as mankind did.

There was no master plan, nor a blueprint for the takeover of the world. Economics, the “dismal science,” is not unlike sociology: both study human collectives as they go about the business of living. Economists and sociologists have embarked on a quest to predict human behaviour and both have found their job to constitute a quixotic endeavour – interesting but ultimately destined to fail.

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ordes of highly intelligent people make a good living as oracles predicting the moves of stock markets. Others willingly pay top dollar for the advice, though they might as well throw a few peanuts at a monkey. As Burton Malkiel – an economist and a traitor of sorts to his profession – pointed out in A Random Walk down Wall Street: “A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

The premise was promptly tried out by the Wall Street Journal (… no animals were harmed…) and proven correct with a minimum of caveats. Which goes to

CFI.co | Capital Finance International

show: human behaviour is not necessarily based on reason.

Supporting proof is offered – in copious amounts – by game theory.

Australian mathematician Peter John Wood in 2013 released a research report entitled Climate Change and Game Theory in which he concluded that attempts at cooperation between nation states in order to reduce the emission of greenhouse gases are doomed to fail. Nations so engaged will face the prisoner’s dilemma – originally framed by the RAND Corporation in the 1950s – which holds that betraying a partner offers greater rewards than cooperating. It also shows that reason oftentimes does not prevail, even between reasonable people.

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At Loggerheads - Contrasting Views

his way of hovering up bonds essentially equips commercial banks with significant volumes of new liquidity. Pessimists fear that the fresh money will be leveraged and used to invest in dubious financial products. This may cause bubbles to reappear in the financial market which, in turn, could trigger a situation similar to the one at the starting point of the 2008 crisis.

> Climate Change:

“Quantitative Easing: Another Shot for the Caffeine Junkie” Continued: With shocking empirical clarity, scientists like Johan Rockström of the Stockholm Resilience Centre show that since the end of the 1980s mankind has drastically overstepped planetary ecological boundaries. Climate change is just one of the irreversible phenomena mankind has put in motion over a period of just a few centuries.

Moreover, socio-economic studies have conclusively proved that in both emerging and developed nations social disparities are on the increase. A large number of people are simply barred from sharing in economic benefits.

The rationality of economic growth and profit maximisation – the driving doctrine of the capitalist system which we are so eager to boost – is responsible for the global imbalances of social and ecological nature.

In his revolutionary book Capital in the TwentyFirst Century, French economist Thomas Piketty expressed the issues at hand from a mathematical perspective. His conclusion is summarised simply as R > G - Rent is larger than Growth. This means that the return on invested capital is higher than the return on labour. Those who depend on labour cannot accumulate wealth at the same pace those possessing capital can.

At Loggerheads - Contrasting Views

The current economic model is defined by rules and mechanisms that counteract distributive justice. Also, the economic growth paradigm – the impetus to expand activities in order to prevail in the marketplace and generate an excess cash flow that allows for the payment of credits bearing high compound interest rates – results in an ever-increasing consumption of resources and environmental degradation. This is incompatible with the earth’s finite capacity for sustaining environmental damage.

At present, mankind already consumes more than 1.5 times the resources planet earth can replenish. With emerging economies now rising, the burden on our planet is likely to become heavier yet. Scientists know that mankind must drastically reduce its global footprint in order to be sustainable. This reduction cannot be achieved by technological progress only or by a switch to green energy; mankind will also have to significantly modify its ways of production and consumption.

Therefore, the motto for most resource- and pollution-intensive branches of the economy must emphasise de-growth – at least in the industrialised world. Here, the overheated economies need to relax and corporate behaviour must be more in tune with social and environmental concerns. This cannot be achieved by just boosting our economy while blindly accepting all the harmful tendencies – inherent to capitalism – that create social and ecological imbalances.

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The solution is to change the values and the rules of economic life. The following analogy may illustrate the point: Imagine you are a doctor and workaholic comes to see you complaining about physical and mental exhaustion. What would you advise him to do? Have a double espresso with sugar whenever performance levels taper off? Or, relax a bit, have more sleep, enjoy some fresh air, and spend more time with family and friends?

This metaphor, in principle, reflects quite well the present state of global economic affairs and the options available. Quantitative easing is fuel for a machine that works the wrong way. By producing poverty and destroying nature, this machine does not serve us, rather it ruins us.

The entire global economic model – i.e. the economic and financial systems, including their institutions (WTO, IMF, OECD, etc.) and legal framework (international trade and investment law) – is arranged in such a way that it serves a small, but powerful, financial, industrial, and political elite. The model institutionalises capitalism, de-regulation and trade- and investment liberalisation in its raptorial globalised shape.

The model imposes rules, institutions, and dependencies which jointly ensure that the right of the stronger prevails. This legalises exploitation not just in North-South relations but also along the dividing line between the rich and poor within individual states.

These social and ecological imbalances should be in the public’s focus instead of the boosting of an economic system which is responsible for creating them. It is not by chance that in 2015 three international conferences – on the sustainable development goals (SDGs), on their financing, and on climate change – will take place that are of utmost importance to mankind’s future.

Of course, the keywords are “sustainable development.” This requires us to strike a completely new balance between economic, ecological, and social issues. That balance will not be attained, unless a fundamental change takes places in economic values and the rules that ensure compliance by all actors.

In my view, it is indispensable that an international authority is established to oversee global and regional resource consumption as well as any resulting damage to the environment. Such an authority would be guided by the absolute limits imposed by planetary boundaries. At the same time, it is necessary to change the framework of incentives for economic actors.

That means that we should put those companies at an advantage which behave in a socially and ecologically responsible manner. Companies should get legal and fiscal advantages for their ecological and social contributions to a degree that compensates them for their loss of CFI.co | Capital Finance International

Spring 2015 Issue

“Climate Change: Good Luck with That” Continued: As grave as climate change is perceived to be, it will not be tackled through international cooperation, lofty though that goal may be.

Denying humankind its human traits is a surefire way of guaranteeing the utter and complete failure of whatever endeavour undertaken. If climate change is to be addressed at all, the only salvation is to be found in an appeal to humankind’s ingenuity.

Collectively, the world’s seven billion or so inhabitants possess an almost immeasurably large reservoir of intellectual power. Instead of doggedly pursuing international cooperation, global entities such as the United Nations could devise better ways of harnessing and expanding the world’s cerebral prowess. Here’s an idea: invest the untold billions now earmarked for fighting climate change in education and research. This may require a leap of faith, but policymakers would be betting on human resourcefulness rather than on the fallacy of global cooperation.

The misguided idealists who clamour for global action on climate change – the likes of Al Gore and Naomi Klein – recognise the shortcomings of their approach and propose the creation of international bodies with broad remits and ample powers to impose limits on the use of resources and cap the emission of pollutants.

Given the experience with current global entities and their often crippling lack of effectiveness in solving even the most mundane of issues, such a supranational entity would either be a paper tiger or need be equipped with policing powers that stretch far beyond present notions of sovereignty. The unmarked black helicopters conspiracy theorists believe will herald the coming of a world government, may yet become reality.

The solution posited by the luddites is degrowth: the West should shift its attention away from quantity to embrace quality – and keep smiling. Do more with less and shrink your carbon footprint accordingly. The entire economic model needs to be dumped and replaced with something vaguely top-down that assigns production permits and quotas to businesses. Private enterprise would be CFI.co | Capital Finance International

While merrily de-growing and ridding itself of excess wealth, the self-deprecating West should still help eliminate poverty and social inequality around the globe. This is perhaps the most vexing of briefs dispensed by the luddites: as the engines of economic growth are slammed into reverse – and now subtract from, rather than add to, wealth – the developed world is to share its vastly reduced resources with those countries less fortunate still, in an all-out effort to do away with want.

This proposal – and others like it – contains such an overwhelming collection of fallacies, it is quite a challenge to pick one in order to start addressing the delusion. Any model that negates the most basic of human traits – the accumulation of wealth, be that berries, livestock, SUVs, or real estate – depends for its success on bringing about a profound change in behavioural patterns. In other words, a change in the course of psychological evolution would be called for.

In order to save the world, greenhouse gas emissions need to be limited which requires international cooperation and the adoption of a new economic model that can only succeed if man is transformed from an avid gatherer to a selfless giver, lovingly cared for by a global police state. Good luck with that.

No matter how urgent the need to check climate change, all this is not likely to happen – not even if all of humanity was destined to fry by tomorrow 10.15 am and could miraculously escape its fate and demise by agreeing to all of the above by 10.14 am.

Crackpot ideas and wishful thinking aside, this leaves us with only two options: do nothing and hope for the best, or encourage technological innovation and trust human ingenuity to provide a lasting – and effective – solution. Since international bodies excel in doing little to nothing – apart from producing vast quantities of reports written by experts highly qualified in claiming cushy jobs – it is probably best to steer clear of them and go with option number two.

Rather than entrust the acquisition of knowledge to globe-trotting universalists, a simple system could be devised that encourages sovereign nation states to invest heavily in education and research. According to statistics compiled by the Organisation of Economic Cooperation and Development (OECD), the 29 member countries of its Development Assistance Committee (DAC) in 2013 disbursed over $470bn in aid. This number excludes donations from non-member states such as China, Turkey, and the newly rich countries of the Gulf Cooperation Council.

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All talk about planetary boundaries ignores the inconvenient truth that human beings cannot be treated as a commodity, lest the goal is to unleash the wrath of billions. People want more and better: the latest model iPhone, a bigger home, a larger or faster car, a new fridge, or – indeed – an improved spinning wheel.

As new markets emerge in Africa, Asia, and Latin America, billions are lifted out of dire poverty and will want to claim their slice of the consumer society. Ecologists may deplore this base lusting after materialism; their laments do not change reality.

subjected to draconian regulation that aims to ensure no goods deemed superfluous would be produced. Ladies, kiss you Gucci bags and Hermès silk scarves goodbye. Hungry for a steak? Not so fast, buster: have a tofu burger instead.

“Climate Change: Good Luck with That” Continued: There is plenty of cash sloshing about the world with which to finance a global education and research drive aimed at finding the generation of geniuses now forced to lurk in ignorance – blissfully or otherwise. The force of numbers dictates that offering educational opportunities to the hundreds of millions now deprived of advanced schooling will, over time, result in a further acceleration of the already dizzying rate at which sciences advances.

At Loggerheads - Contrasting Views

“Quantitative Easing: Another Shot for the Caffeine Junkie” Continued: competitive advantage vis-à-vis companies that act in a classically profit-oriented way.

ECB’s quantitative easing initiative, is structurally promising but should have a more pronounced eco-social focus. The most important issue in this context would be channelling huge investments into green energy.

It is also necessary to shrink the financial sector down to its original purpose: the granting of loans at affordable rates for ecologically and socially sound projects and connecting investors to responsible investments. Complex derivatives and high-frequency trading should be banned completely.

There is, however, a form of quantitative easing which is justifiable from time to time, at least from a social perspective: instead of throwing €60 billion monthly at the insatiable financial sector, the ECB should consider releasing the money directly to the states or, even better, to the people.

As for the North-South gap, I would recommend developing countries adopt a far more protectionist behaviour. A strong self-sufficient union of developing countries that carefully selects incoming investments and trade flows.

There are many other supplementing ideas on how to rearrange the global economic and financial systems. Although it is impossible to present these ideas here in detail, the above outline makes quite obvious that I do not believe the current monetary policy of the ECB will address the basic economic problems.

This idea is not new. It was Milton Friedman who first made the suggestion of throwing money out of a helicopter. He is not the only one with that vision. US economist Mark Blyth, former BCG (Boston Consulting Group) consultant Daniel Stelter, as well as the magazine Foreign Affairs have only recently suggested the ECB should give four-digit euro sums to each European citizen.

A first realistic starting point on the way to improve the economic architecture of the European Union could be the implementation of an EU-wide property tax as well as a financial transaction tax. Additionally, a more careful approach to ecologically and socially responsible investment could make a difference.

China is already successfully using five-year plans for public investment. These plans are managed by its National Development and Reform Commission. The Juncker Plan, which was launched nearly simultaneously with the 90

The concept is not unattractive. First, it could be used as a social welfare measure by supporting low-income people (distributive justice). Second, it would immediately strengthen spending power and demand (boosting the economy). Third, the inflation rate would jump which would increase consumption even more.

I bet this would be more effective than feeding commercial banks and insurance companies.

They will definitely not pass all that fresh money on to the real economy. However, the ECB has made its decision and fixed its course. So, I will end my comment by stressing, once more, the metaphor of the tired workaholic unwilling to follow the doctor’s advice: Go on, have your next shot of caffeine, but don’t expect to be cured. i CFI.co | Capital Finance International

“In fact, it would not be unreasonable to argue that a global education drive is superfluous as knowledge is already now illuminating the darkest corners of the world. Dictators and faithbased authorities find it increasingly difficult to control the restless masses.”

Since knowledge equates power, it is only to be expected that such an education drive may not be welcomed everywhere. All too often, the powers that be prefer their charges remain uninformed lest they get “funny” ideas. As it is, the all-pervasive nature of the Internet – and the multitude of technologies the worldwide web carries – offers a unique and lasting opportunity to disseminate knowledge on a grand scale. Great Walls and other traffic blocking technologies are easily circumvented and constitute but the outward signs of desperate rearguard battles fought by the promoters of collective ignorance.

In fact, it would not be unreasonable to argue that a global education drive is superfluous as knowledge is already now illuminating the darkest corners of the world. Dictators and faithbased authorities find it increasingly difficult to control the restless masses. As communication technologies extend their reach, more people will discover the power and possibilities offered by knowledge. A second renaissance is in the making, its contours already visible.

Instead of allowing climate change to immerse the world into a dark and uncertain age of de-growth, the existentialist questions facing humankind could easily herald the coming of an exciting new world that can accommodate the quirks and peculiarities of individual people out to improve their quality of life. Solutions will follow not from the defeatist and alarmist attitude of luddites and doomsayers, but from the curiosity inherent to man. Just ensure that curiosity is awarded the free rein it requires in order to produce the answers needed. i

Spring 2015 Issue

Distinguished year for AIB Five awards and five new credit cards

2014 AIB wins Banker magazine’s Bank of the Year Afghanistan award for the third consecutive year

2015 AIB wins Best Corporate Governance, Afghanistan at the CFI.co award for the second consecutive year

2014 AIB wins League of American Communications Professionals’ Gold Award for Best Letter to Shareholders and Silver Award for the overall 2013 annual report

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Headquarters Shahr-e-Naw, Haji Yaqoob Square Shahabudin Watt, Kabul, Afghanistan Phone: +93 (0) 20 255 0255 Fax: +93 (0) 20 255 0256 www.aib.af CFI.co | Capital Finance International

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> Africa:

Mauritius - On the Move It may be small and remote, but Mauritius offers an economic success story that few other countries can better. As the world descended into the crisis caused by the meltdown of US banks in 2008, Mauritius was one of only a handful of countries to take the global downturn in stride and keep on adding to its GDP at a sustained annual rate of around 3%.

Mauritius: Ile aux Benitiers with a view of “Le Morne Brabant�

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Spring 2015 Issue

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ccording to the African Development Bank (ADB), Mauritius now boasts the best business environment in Sub-Saharan Africa. The island nation claimed the top spot from South Africa in 2013 as the continent’s most competitive economy. In its latest annual report on Africa’s economic development, the ADB heaped lavish praise on Mauritius for persevering since 2006 with the implementation of the “wide-ranging structural reforms” that now bear fruit. The bank also noted that “sound macroeconomic management” allowed the country to escape the fallout from the global slowdown.

Dependent for its prosperity on the notoriously jittery world market for sugar – possibly the most price-distorted of all commodities – Mauritius successfully diversified its economy. Though the drive had been in place since the country’s independence from Great Britain in 1968, the diversification campaign took flight only in the mid-1980s. While still exporting over 400,000 metric tonnes of sugar annually, the cash crop to which about 90% of the island’s arable land is dedicated now accounts for barely 13% of Mauritius’ foreign exchange earnings.

Interestingly enough, and perhaps contrary to conventional wisdom, the state has been actively involved in the retooling of the national economy. Within the gradual but sustained liberalisation programme, the state assumed a facilitating role by encouraging the expansion of the private sector while occasionally stepping in as a trailblazing operator. The state was also mindful to put in place adequate regulation and conflict resolution mechanisms in order to protect vulnerable sectors, in both the economy and the society it serves, from market upheavals.

With the introduction of export processing zones (EPZs) in the early 1980s, Mauritius managed to leverage its comparative advantages and attract manufacturers to the island. Premier clothing labels such as Calvin Klein, Tommy Hilfiger, and other name brands set up shop to benefit from the island’s proximity to the cotton-producing countries along the East African seaboard and its ready access to the European and American consumer markets.

With rising prosperity and the associated increase in labour costs, the EPZs have now largely played out their role. While still of importance to the island’s economic wellbeing, the businesses in the zones are now mostly locally-owned with some production outsourced to neighbouring Madagascar in order to keep competitive in the fiercely contested global textile market.

Continuing its diversification drive, Mauritius turned to financial services and tourism, 94

soon becoming a favourite destination for both sunbathers and capital. The Mauritius Financial Centre, the country’s banking hub, now account for slightly over 10% of GDP. Almost half of the centre’s turnover derives from global business and cross border transactions.

Recently, Mauritius has been battling misconceptions – mostly expressed in India – regarding the island’s allegedly loose regulatory framework that allows its banks to be used for money laundering and other illicit purposes. However, the government in Port Louis has vigorously defended the country’s reputation and pointed to the excellent international reputation enjoyed by the Mauritius Financial Services Commission, the regulatory body for the financial services industry, which was created in 2001 and maintains an exceptionally strict oversight regime. The government also points to Mauritius’s long-standing cooperation with Indian tax authorities to avoid offshore companies from engaging in illicit money transfers.

Mauritius places a special emphasis on its historically close relationship with India and has accepted the challenge, put down

by Prime-Minister Narendra Modi during a recent tour of the island nations of the Indian Ocean, to cooperate in developing a blue economy that entails the joint exploitation of marine resources such as hydrocarbons and deep-sea fishing while ensuring the preservation of the ocean’s ecology.

Advanced in science and technology, India is well-poised to provide the expertise required for the blue economy to take off and prosper.

The country is also able to ensure the security of the region thanks to its modernised and expanded navy that already now helps combat piracy and protect against terrorist attack. Earlier this year, India secured a lease on Assumption Island, an 11km2 barren rock and former guano station belonging to the Seychelles just northwest of Madagascar, ostensibly for tourism purposes but in reality a future listening and staging post.

In all this, Mauritius plays a key role. The island nation maintains close ties to both India and the countries along Africa’s eastern seaboard. It is the only Indian Ocean island nation with the wherewithal, expertise, and size to provide a bridge between India and Africa via the Indian Ocean. Moreover, Mauritius is regularly hailed as one of Africa’s star performers: home to the continent’s most competitive economy – beating South Africa to the punch – and boasting a stable political climate and a regulatory system that owes little, if anything, to that of still more advanced economies. In a word: Mauritius is on the move with every intent to keep moving. i CFI.co | Capital Finance International

Spring 2015 Issue

> CFI.co Meets the CEO of Alios Finance Group:

Jan Albert Valk

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hunned by banks, an increasing number of smaller businesses have discovered leasing as an alternative way to underwrite their growth. In Africa, the “missing middle” business segment – established companies with an annual turnover ranging from about $500k to $1m – has long struggled with a dearth of credit. Hemmed in between the largely unregulated micro sole trader sector – ignored by all but a few ideologically motivated financiers – and big business, the staple of commercial banks, Africa’s small and medium-sized enterprises (SMEs) stand in dire need of innovative financing to both power their growth and create the jobs needed to reap the rewards of the continent’s much-touted demographic dividend.

SMEs. In Africa, leasing companies such as the Alios Finance Group are working hard to create awareness of leasing as an alternative to bank loans. The World Bank and other multilateral organisations are also busy spreading the word and encouraging the adoption of legal frameworks that allow leasing companies to expand their operations.”

As awareness of leasing operations increases, local entrepreneurs more likely than not will find their way to the Alios Finance Group, Africa’s largest provider of leasing solutions, present in ten countries, and boasting almost sixty years of experience in asset-backed financing operations.

Founded in 1956 to serve the Francophone countries of West Africa, Alios Finance has morphed into a truly Pan-African company – the only one of its kind – with headquarters in Tunis for the French-speaking part of the continent, and in Nairobi for Anglophone Africa.

Mr Valk is excited – if not passionate – about Africa, its economic potential, and the improving business environment: “While we do have our ups and downs, this continent is exceptionally diverse and resilient. I am very much an Africa Optimist.

The sentiment is rooted in hard data that clearly show a bright outlook.”

The Alios Finance Group CEO notes that suppliers also need to become aware of leasing as a source of financing: “All too often, vehicle and equipment dealerships fail to suggest their clients take a look at leasing as an option. Deals get lost because of this. It is an important part of my job to help put leasing firmly on the map.”

Since taking over as CEO of the Alios Finance Group in 2006, Mr Valk has seen his company’s size increase by over 150%. “Business is positively booming. Our group’s performance is boosted not only by buoyant economies, but also by leasing’s increased popularity. This makes for an exciting business climate. Compare that, if you will, to the average leasing company in Europe which, if lucky, will have seen its business remain stagnant over the past decade or so.”

“The Alios Finance Group is dedicated to serving the needs of small and medium-sized businesses.

This is currently the fastest-growing business sector – and one mostly unable to obtain bank credit,” explains group CEO Jan Albert Valk from his Nairobi office. Mr Valk is not just passionate about doing business in Africa, he wields the numbers and statistics that prove the continent is on the move: “Things are changing fast. In a few years’ time, a middle class of avid consumers has emerged in countries such as Nigeria and Kenya which simply did not exist before.”

Alios Finance is doing brisk business financing the hardware that powers Africa’s remarkable surge. The company attaches great importance to maintaining a local presence: “That is crucial to the success of our operations. In Africa, data on SMEs is virtually non-existent. Only by employing knowledgeable local professionals can we gauge the creditworthiness of business or entrepreneurs. Most smaller and medium-sized enterprises simply lack the records, business plans, and other documents normally required by banks. By financing the asset while retaining ownership, instead of the business directly, the leasing products provided by the Alios Finance Group require less paperwork, and thus increase the agility of the process.

CEO: Jan Albert Valk

“With leasing, smaller businesses can easily obtain the vehicles, machinery, equipment, or other capital goods needed to service contracts.

We look at the cash flow an asset will produce in order to determine if the lease can be paid. This streamlined procedure is much less cumbersome than that used by most traditional banks. An added advantage is that we can also help businesses that have, as yet, no track record.”

Mr Valk emphasises that leasing is widely considered an enabler of economic growth and entrepreneurship: “It does so not just in Africa, but across the world. It is the perfect product for CFI.co | Capital Finance International

Mr Valk’s career in Africa was the product of love at first sight. While working for the Netherlands Development Finance Company (FMO) in The Hague, he made his first trip to Africa, flying to Lusaka in Zambia: “At the time, the airport was more akin to a rural train station and I absolutely loved it. I also instantly knew what to do with the rest of my life, as I could see the enormous potential. Since that day, Lusaka has developed beyond recognition, proof of the success story of Africa” At Alios Finance Group, Mr Valk feels that empowering SMEs makes a real difference: “As elsewhere in the world, small and mediumsized businesses are the engines of growth and job creation. Enabling those companies to forge ahead is both a joy and a privilege. And while the Alios Finance Group is very much a forprofit business, with fiduciary obligations to its shareholders, it is very satisfying to know that through our business we help others grow and lift up an entire continent.” i 95

> Schlumberger Nigeria:

Inspiring Future Scientists

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xcitement rippled through the room as students and teachers made sure that everything was in place on their prototypes and their presentations were ready to go for the grand finale of the 2014 Schlumberger Excellence in Education Development (SEED) Science Challenge. The event began with a welcome from host Eke U Eke, vice-president and group managing director 96

West Africa, followed by an introduction of honoured guests from government, oil industry executives, academia, Schlumberger scientists and representatives from the Nigerian Academy of Science (NAS).

The 2014 edition of the SEED Schools Science Project Challenge and Exposition, a collaboration with the Nigerian Academy of Science, took place CFI.co | Capital Finance International

in the Lantana Hall of the Eko Hotel in Victoria Island, Lagos on November 21.

In third place was State Senior High School, with their flood warning system. The group programmed a system that communicates with mobile phones to give alerts when a flood is occurring. This way, people in the flood zone can be reached no matter where they are – at home, school, or work.

Spring 2015 Issue

“Since its launch in 2004, 405 women from 69 emerging countries have received Faculty for the Future Fellowships to pursue advanced graduate studies at top universities abroad.”

Second place went to Calvary Arrows College, with their Rapid Response and Accident Prevention Device for Automobiles (RRAPD). By linking a GPS unit, an accelerometer, and touch sensors in one device for vehicles, the group created a system to help prevent road accidents due to collisions or poor-quality roads. If a collision does occur, the system sends a message to the nearest response centre. If a vehicle is on a bad road, the issue is reported to a road quality monitoring station.

The top award went to Tai-Solarin University of Education Secondary School. This group created a water-powered automobile by building a device to split H2O via electrolysis. The resulting oxyhydrogen gas can then be used to power a car.

SEED SCHOOLS SCIENCE PROJECT CHALLENGE The SEED Schools Science Project Challenge is a collaborative process designed to give educators, mentors, volunteer facilitators, teachers, students, and other stakeholders opportunities to engage, collaborate, and explore science, technology, engineering, and mathematics (STEM) subjects through practical problem-solving activities throughout the year.

They participate in a broad range of activities.

Each school is assigned a mentor by the Nigerian Academy of Science to help apply the knowledge of engineering principles as participants use critical thinking and imagination to solve problems. The schools compete at the annual exposition where the best projects in terms of innovation and sustainability are recognised.

The top ten schools from each year are invited to a STEM Teacher Training Programme with a trainer from the Ignatius Ajuru University of Education.

“To spur the teams along the pathway of invention and future patents their journey begins with a workshop on systems thinking and solving complex problems through scientific enquiry in learning while doing environment” Valerie Edozien Nwogbe

CFI.co | Capital Finance International

FACULTY FOR THE FUTURE It is not just young children Schlumberger aims to help attain a better prospect in life through education. Women, underrepresented in sciences and engineering at the tertiary education level, are also benefitting from the company’s dedication to furthering education. The Schlumberger Foundation Faculty for the Future Programme supports outstanding women from developing countries in their pursuit of advanced graduate studies in engineering, science, and technology at leading universities worldwide.

The programme also has an extended mission to encourage community-building, organising forums with the objective to create an international community of women leaders who will support 97

Winners with judges from Schlumberger, the Nigerian Academy of Science, Industry and Academia

VP & Group Managing Director West Africa: Eke U Eke

Classroom

scientific development and act as agents for change in their home countries. Fellowships are awarded to women from developing and emerging economies to pursue PhDs or postdoctorate degrees at top universities abroad.

Applicants are chosen via a rigorous selection process based on academic performance, outstanding references, research relevance, and commitment to teaching, as well as on the ability to be an agent for change and inspire other young women into science, technology, engineering, and math (STEM) pursuits.

RETURNING HOME A key objective of the Faculty for the Future Programme is that fellows return to their home countries to continue their research and teaching, in turn becoming advocates for public policy in their scientific domain of expertise and laying the groundwork for change in regard to women in science. The Schlumberger 98

Foundation’s 12th Faculty for the Future Forum, which took place November 3-5 in Cambridge, MA (USA), brought together women scientists from across the globe.

In attendance were 60 women scientists, representing 31 developing countries, who are currently studying at one of 40 prestigious North American universities. During the event, the participants shared their research and life experiences as women in STEM. Throughout the three-day session, the Faculty for the Future Fellows had the opportunity to collaborate, share their research, and learn from each other, and to network with prominent scientists and other accomplished invited speakers who might act as career mentors.

Since its launch in 2004, 405 women from 69 developing and emerging countries have received Schlumberger Foundation Faculty for the Future Fellowships to pursue advanced graduate CFI.co | Capital Finance International

studies in science, technology, engineering and mathematics (STEM) at top universities abroad.

To date 69 fellows are from countries along the West African Coast, 52 of them are from Nigeria.

The programme’s long-term goal is to generate conditions that result in more women pursuing academic careers in scientific disciplines. Grant recipients are expected to return to their home countries to continue their academic careers and inspire other young women to choose careers in engineering, science, and technology. i ABOUT SCHLUMBERGER Schlumberger is the world’s largest oil services company employing approximately 120,000 people, representing over 140 nationalities, and working in more than 85 countries. Knowledge, technical innovation, and teamwork are at the centre of the Schlumberger corporate identity.

Find out more: www.slb.com & www.planetseed.com

Spring 2015 Issue

> CFI.co Meets the CEO of Schlumberger:

Eke U Eke Eke U Eke joined Schlumberger in 1993. He gained a vast array of technical and management experience from working in a variety of positions and regions across the globe. His career includes more than thirteen years with the wireline business segment of Schlumberger, where he began as a field engineer and worked through a number of field and management positions in various countries in the Middle East.

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r Eke then moved away from operations and held a position in personnel and human resources where he was the oilfield services training manager for the Middle East and Asia between April 2001 and March 2003.

Subsequently, Mr Eke held other management positions including general manager of Schlumberger Wireline India between April 2003 and November 2006 where he was responsible for business growth that saw the revenue multiply manifold. After his stay in India, Mr Eke moved to France to become marketing manager for Europe, Africa, and Caspian. In this capacity he was responsible for driving business development strategy in that geographical area between December 2006 and May 2009.

Mr Eke then moved into an entirely new business arena and worked at the Schlumberger Completions Segment headquarters in Rosharon in the United States as the global business manager for completions reservoir monitoring and control from June 2009 to March 2010.

As such, he bore the responsibility for the technological development and deployment strategies for the permanent monitoring and intelligent flow control completions systems.

In April 2010, Mr Eke was appointed vicepresident and managing director for the Schlumberger Oilfield Service group of businesses in West Africa with a geographical footprint covering sixteen countries and the same number of Schlumberger business segments. Mr Eke was responsible for

CEO: Eke U Eke

restructuring the business in the region and for deploying a strategy that resulted in resurgence in business growth. He accomplished this in little over a year after assuming the position.

has enabled Mr Eke to turn around business in different continents. Over the course of his career, Mr Eke has also demonstrated outstanding crisis management skills.

Eke U Eke is a turnaround specialist who has managed challenging businesses and successfully guided them back to profitable growth. Creative and visionary leadership

Mr Eke sits on the board of directors of several organisations and institutions. He is married to Stella Eke. The couple has three children – Andrew, Christabel, and Michael. i

“Eke U Eke is a turnaround specialist who has managed challenging businesses and successfully guided them back to profitable growth. Creative and visionary leadership has enabled Mr Eke to turn around business in different continents.�

CFI.co | Capital Finance International

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> CFI.co Meets the Chief Executive of Business Banking at Absa Bank:

Roy Ross

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or banks, shuffling deposits around is so last century. While taking deposits and extending credit – both in a plethora of often highly complex and innovative ways – remain at the heart of the banking industry, this stripped-down business model no longer suffices. In a sense, the modern bank – properly geared for future growth – is rediscovering its earlier function as an enabler of business and a driver of overall economic growth and, indeed, prosperity. Though still very much a provider of financial services, such a bank also operates in a social space – empowering local entrepreneurs and facilitating the growth of small and mediumsized businesses.

twenty percent actively seek help to expand their business.”

That help is available at the nine Enterprise Development Centres maintained by Absa Bank throughout South Africa. Mr Ross: “It is here that emerging business can find the tools and knowhow needed for success. At the centres, our professionals are able to help smaller businesses plug into the value chains of our larger clients.

Providing such linkages is an essential part of our business as a bank.”

Absa Bank also maintains an online portal where SMEs may display their products and services and find a wealth of business-related information. So far, over 20,000 small and medium-sized South African companies have registered at the portal which, crucially, also provides up-to-date specifics on contracts open to bidding and other business opportunities.

The story of Lethabo Milling, a black-owned company in South Africa, illustrates what a bank can accomplish once it decides to lend a helping hand to budding businesses. Through its Enterprise Development Fund, Absa Bank – one of South Africa’s Big Four banks and part of Barclays Africa Group – managed to forge a deal between Lethabo Milling and local Walmart subsidiary Massmart.

Throwing its not inconsiderable corporate weight behind a broader push to support and empower SMEs, Absa Bank has developed a framework of enterprise development policies that may come to serve as a blueprint for similar initiatives by the Barclay Africa Group elsewhere on the continent.

Mr Ross explains: “Our model of business segmentation has proved quite successful and the idea is to extend it to other markets such as Kenya, Ghana, Botswana, and Zambia.”

The miller is to supply the retail giant with 10,000 tonnes of maize meal. With this order in place, Lethabo Milling received a R8.2m (GBP467,000 / USD685,000 / EUR646,000) loan that enabled the company to buy a new mill, upgrade its plant, and acquire new packaging machinery.

Meanwhile, Massmart contributed with a grant of R1.6m and is a guarantor for half of the loan amount.

According to Lethabo Milling CEO Xolani Ndzaba, the company’s growth has been hampered not so much by slack demand, but by a lack of financing.

A relatively new company, Lethabo Milling was founded in 2010 on the premise of delivering quality products at convenient prices. However, breaking into the market and the various supply chains proved an uphill battle for the newcomer.

“SMEs are close to our heart,” says Roy Ross, Chief Executive of Business Banking at Absa Bank: “We do not just lend money to people; we can help them with almost any aspect of their business, from financial management to human resources and marketing.” Mr Ross is quite passionate in maintaining – and expanding – Absa Bank’s long-standing leadership role as the go-to and can-do bank for start-ups and micro, small, and medium-sized business in South Africa.

Mr Ross explains that the market may be divided into four distinct segments, each facing both unique needs and challenges. The lion’s share 100

Chief Executive of Business Banking: Roy Ross

of that market is taken up by medium-sized businesses that are firmly established: “Since decades, these have been the companies we focus on: businesses with an annual turnover anywhere from R10m to R500m. They often need assistance to break out and embark on a trajectory of sustainable growth.”

Smaller businesses, likewise boasting a solid track record, may also count on Absa Bank to provide the wherewithal and expertise necessary for growth: “These businesses are often run out of domestic premises and attain an annual turnover of between R1m and R10m. Not all of them are keen to pursue growth. In fact, only about CFI.co | Capital Finance International

The Absa Bank head of Business Banking is also leveraging the bank’s network of over 800 branches to keep in close proximity to clients and to roll out other initiatives. In the Tshwane Metropolitan Municipality (Pretoria and environs), Absa Bank is working with local authorities to develop and support micro businesses. With French development agency AFD (Agence Française de Développement) the bank has an agreement in place to install green energy supply systems for small businesses and farms.

“Recognised as key drivers of the economy, SMEs and agriculture sit high on the government agenda.

In fact, a special Department of Small Business Development has now been created to coordinate efforts aimed at furthering entrepreneurship in the country. This shows the strong support the sector is awarded by the government. For a long time, Absa Bank has been one of the lead advocates of SMEs and agriculture. We already have a number of programmes in place to support small and emerging farmers. Partnering with the government, to help it attain the goals set, fits really well with Absa Bank’s own priorities and business model.” i

> Pison Housing Company:

Expertise through Research

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ison Housing Company is a commercial real estate and housing finance advisory firm with considerable dealmaking muscle providing customised services to individuals, corporate, and multinational companies. As a specialised professional real estate financial advisory firm, Pison’s deal structuring services provide real estate developers, corporate organisations, lending institutions, and government and institutional investors the expertise to maximise economic benefits and minimise risks associated with their projects. The company has extensive

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experience in an advisory capacity on real estate development projects. Pison Housing Company was set up in 2005.

The firm provides strategic advice and investment management consultancy services to business clients. Pison has excelled in its growth strategy by identifying new and emerging opportunities, overseeing considerable portfolios of real estate and housing finance activities, facilitating partnerships with offshore capital providers, and creating structures and models that have transformed the company into an expert strategic CFI.co | Capital Finance International

real estate development advisory partner in Nigeria and Sub-Saharan Africa.

Pison Housing Company received Overseas Private Investment Corporation (OPIC) approval as both a loan and political risk insurance (PRI) originator under the Enterprise Development Network (EDN) programme. This facility is able to loan up to $250m for eligible and qualified transactions.

The Enterprise Development Network (EDN) is a strategic alliance between the Overseas Private Investment Corporation (OPIC) and the private sector. Pison Housing Company serves as a local

Spring 2015 Issue

service provider to micro, small, and medium-sized enterprises (MSMEs) to help develop the OPIC application package, refine marketing strategies, and draft or enhance business plans.

The company’s suite of services also includes housing policy and market research, feasibility studies, market analysis, policy development, and capacity building. Pison’s capacity-building arm conducts real estate, mortgage, and housing finance training through conferences, workshops, and study visit programmes. The company also designs and evaluates mortgage business strategies and helps prospective investors and housing/mortgage businesses capitalise and build new housing and mortgage institutions.

Pison can assist in carrying out studies for institutions to access potential customers’ reactions to proposed housing products. The company is wellpositioned to provide advice on the liquidity facilities that will refinance primary market transactions and loans originated. Its partnership and collaboration with international institutions can advise, enhance, and secure secondary mortgage facilities if the conditions for such transactions exist.

Pison Housing Company has been working with the Mortgage Banking Association of Nigeria (MBAN) to conduct the market research, business evaluation, and feasibility study for a liquidity facility institution that will serve as a secondary mortgage market refinancing vehicle for the Nigerian market. The project was effectively completed. The institution has now been successfully set up and currently operates as the Nigerian Mortgage Refinance Company (NMRC).

Proactive in innovation and in the launch of financial products that will have positive effects on real estate economies, Pison Housing Company was recently mandated by a South African institution to carry out a comprehensive market study with the objective of innovating the technical and financial means by which the housing needs of the low income population can be met. The objective is to make housing both more affordable and accessible.

“Pison’s advisory services are performed by a dedicated team of professional consultants and financial analysts who possess the requisite background and experience in analysing the terms of complex real estate business transactions.”

CFI.co | Capital Finance International

Also skilled in the provision of infrastructural services, Pison was asked by the Nigerian Federal Ministry of Works to undertake a comprehensive study on road infrastructure and the development of related economic sectors. The resulting report showcases challenges and investment opportunities. The report was widely welcomed as a valuable contribution to further the development, construction, maintenance, and management of road infrastructure projects across the nation.

Pison’s advisory services are delivered by a dedicated team of professional consultants and financial analysts who possess the requisite background and experience in analysing the terms of complicated real estate business transactions. This broad knowledge base has created a well-structured and multi-disciplinary team that is capable of providing essential expertise on any real estate deal. i 103

> Horizon Group:

Venturing into Sectors where other Private Investors Dare Not - Leading the way

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orizon Group Ltd was established in 2007 by the Rwandan goverment. The creation of the company was prompted by the need to contribute to accelerated socio-economic development of Rwanda. The group would focus on those critical sectors of the Rwandan economy where local private players are less willing or unable to venture. The initial focus was on the launch of the Horizon Construction Company. Currently, Horizon Group consists of three established subsidiary companies: Horizon Construction Ltd, Horizon Sopyrwa Ltd, and Horizon Logistics Ltd. The company is also involved in several joint ventures, including Agropharm Africa for value addition to pyrethrum and S&H Industries Ltd for manufacturing of construction materials.

Horizon Construction is the first subsidiary of the group. The company was born out of the engineering regiment of the Ministry of Defence and has focused primarily on roads and large infrastructure projects.

Horizon Sopyrwa is a pyrethrum processing business. Prior to being acquired by the Horizon Group in 2008 the company was privately run. Horizon Sopyrwa has an estimated 3,000 hectares under cultivation. This acreage is worked by seven farming cooperatives that produce a combined annual output of some 600 metric tons of dry flowers.

Horizon Sopyrwa employs 213 employees of whom 75 are employed on a permanent basis.

The company employs 138 casual labourers.

Horizon Sopyrwa contributes an estimated 10% of the world’s supply of pyrethrum.

Horizon Logistics is the successor company to both Horizon Clearing and General Services and the Sudan Maintenance Project which have been in existence since 2009. The services of Horizon Logistics include import/export trade, clearing services, and equipment maintenance. The company is primarily concerned with providing logistic services to units of the Rwandan armed forces in mission areas.

REASONS FOR BEING Horizon Group was created with the sole objective of supporting Rwanda’s national economic development through the creation of companies in areas where the local private sector still lacks initiative. From its launch, the group’s focus has remained on investments of national importance that the private sector is not attracted to or is unable to undertake.

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“Horizon Group was created with the sole objective of supporting Rwanda’s national economic development through the creation of companies in areas where the local private sector still lacks initiative.”

HORIZON’S VISION & MISSION The Horizon group of companies aims to build a strong future for Rwanda through investments that deliver value, social impact, and prosperity.

The group is furthermore committed to building sustainable and profitable business organisations that significantly contribute to the country’s national development.

INCUBATOR Horizon Group maintains a number of independent and efficient subsidiaries. There are, however, structural ties between the working companies and the holding. The core responsibility of the holding company is the formulation of a clear strategy in addition to serving as an incubator of businesses. The holding is also responsible for taking investment decisions, enhancing capacity, policy formulation, and monitoring and control of operations.

More specifically, Horizon Group is responsible for the following: • Investment planning and incubation services • Policy formulation • Group capacity enhancement including skills development, ensuring the use of modern technologies, systems development, financing, and ensuring the availability and effectiveness of machines and equipment • Monitoring and supervision / control • Financing, financial policy and risk management services • Strategic partnerships • Group shareholding structure Horizon Group is wholly-owned by the government of Rwanda but is registered as a private company.

The government is not in charge of the day-to-day oversight of the company but acts through the board of directors.

Horizon Group is aware that in the emerging global economy – where the Internet, the news media, and the information revolution shine light on business practices around the world – companies are more frequently judged on the CFI.co | Capital Finance International

Incubating Resources for Rwanda

basis of their environmental stewardship. Partners in business and consumers want to know what is inside a company. They want to do business with companies in which they can trust and believe.

This transparency of business practices means that for many companies, corporate social responsibility including environmental conservation and protection is no longer a luxury but a requirement. Rwanda’s Economic Development and Poverty Reduction Strategy (EDPRS), to which Horizon Group is a major contributor, acknowledges that sustainable poverty reduction and environmental conservation and protection are inextricably inter-linked.

ROAD CONSTRUCTION The country’s reconstruction process of the 2000s prompted the establishment of Horizon Construction Company to take advantage of the opportunities offered by the emerging market. In 2007, Horizon was awarded its first construction contract for an asphalt concrete road in Kigali.

The successful completion was followed by many other construction projects both road and infrastructure development like the Kigali public library landmark. By adhering to a rigorous working schedule, this large-scale development was completed in a short time.

Horizon has consistently demonstrated its fasttrack capabilities with the completion of 35 projects amongst which are ten roads and the first dyke in Rwanda built in Bugesera District.

Horizon Construction maintains a large workforce and the company’s heavy equipment inventory and fleet is the largest in the country. Horizon’s hardware is maintained by highly professional teams of engineers and mechanics.

ROAD RECYCLING Horizon Construction is particularly pleased with its 2013 acquisition of a state-of-the-art road recycler made by BOMAG in Germany – the only one presently at work in the country.

“This machine will cut road construction project costs in Rwanda by 30%. That’s an enormous saving, using a highly environmentally-friendly method,” said Rwandan Minister of Transport, Dr Alexis Nzahabwanimana: “For a number of years, Rwanda has been pursuing a strategic development programme that includes measures specifically designed to encourage economic growth by improving infrastructure. With the aid of this machine, poor roads can be reconstructed by recycling and re-using the existing road material.”

Spring 2015 Issue

Horizon Group Managing Director Eugene M Haguma explained that his company aims to introduce the latest technologies to Rwanda: “This will enable our clients to deliver the best results and at the same time work efficiently, whilst at the same time protecting the environment. The new BOMAG recycler will allow us to meet all of these criteria.” A second road recycler has already been ordered from Germany.

SUSTAINABILITY IN ACTION An example of the Horizon Group’s dedication to sustainable business practices may be found at Horizon Sopyrwa, one of the world’s leading producers of pyrethrum – the main ingredient of eco-friendly pest control products.

Compared to many other pesticides, most notably the synthetic pyrethroids, pyrethrins have a favourable profile.

While all pesticides can be toxic to aquatic and other organisms, pyrethrins are ten to over hundred times less toxic than some of the synthetic pyrethroids.

PIONEERING THE GREEN CITY CONCEPT In 2014, Horizon Group partnered with Rwanda’s Fund for the Environment and Climate Change (FONERWA) to Incubating Resources fo undertake a number of technical studies. The research conducted will be incorporated into the design and construction of green homes at the 13-hectare Cactus Green Park in Kigali – a part of the country’s Green Cities programme.

Outcomes of the studies will inform the construction of green homes that will serve as a pilot for reference by other private developers. The focus will initially be on: • Centralised biological wastewater treatment plant • Decentralised water harvesting system for households • Off-grid street lighting • Solar energy for all households • Green spaces • Green home construction The properties and environmental fate characteristics discussed above – along with the ready metabolism of pyrethrins in various species in the food chain from microbes through fish – indicate that pyrethrins are shortlived in the environment and will not bio accumulate.

In both production and processing of pyrethrum, Horizon Sopyrwa has consciously adopted a number of environmentally friendly approaches, including: • Sun-drying pyrethrum flowers as opposed to the traditional use of firewood that negatively affects environment; • The use of py-mac as fertiliser has greatly contributed to soil conservation as opposed to the use of synthetic fertilisers; • The rotation of pyrethrum with food crops has acted to keep soil depletion to a minimum and has boosted productivity in the volcanic areas of the North-western part of Rwanda; • The plant itself (Pyrethrum), with its pest-repellent characteristics, keeps farmers from using synthetic pesticides; • The company has invested in a bio-mass boiler which will significantly reduce reliance on heavy fuel oil. This is another great milestone in the company’s quest to conserve and protect the environment. i Other initiatives include pioneering the Road Recycling Technology in the Rwandan Construction Industry, pioneering the Green City Concept (Green Homes) and Precast Concrete drainage channels.

Blue Star House Avenue de l’Umuganda • Postal Address: P.O Box 6129, Kigali Rwanda • Tel:+250 252 581221 • Fax:+250 252 581220 • Email: info@horizon group.rw • www.hor

CFI.co | Capital Finance International

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> CFI.co Meets the Chairman and Managing Director of Simba Group in Nigeria:

Vinay Grover SIMBA GROUP HAS BEEN GROWING RAPIDLY, ATTAINING LEADERSHIP POSITIONS IN SOME OF NIGERIA’S MOST DYNAMIC ECONOMIC SECTORS. TO WHAT DO YOU ATTRIBUTE THIS SUCCESS? The group’s portfolio comprises seven companies operating in a number of sectors that are critical to Nigeria’s sustained development: agriculture, power generation, transportation, software development, communication, ICT infrastructure, and renewable energy. I’m often asked where the synergy derives from. In truth, for us the conglomerate form is less about synergy and more about a centrally binding philosophy: a relentless pursuit of excellence in customer service. We are agents, or as I like to believe ambassadors, of multinational companies who we represent in Nigeria. We are custodians of their brands and, as such, representatives of their image in our market. I have always believed that a good quality product means very little unless it is supported by a high level of service – before, during, and after the sales process. That’s what we assure our customers and that’s what we offer our international partners.

SIMBA GROUP HAS WON NUMEROUS AWARDS FOR CUSTOMER SATISFACTION AND AFTER SALES SERVICE. WHAT SETS YOU APART FROM OTHER COMPANIES? For us, service is not so much a department or a buzzword; it’s an ethos that runs through the entire organisation. The philosophy serves as a guide to every member of our team and determines how we react and respond to, and interact with, our customers – not only when a issue crops up, but in every transaction and interaction taking place. Ultimately, it means very little to have a perspective on service, unless every touch point with the customer, and every person in the organisation, subscribes to it and practises it. I suppose what sets us apart, is that we recognise that good service costs money – it doesn’t come cheap – and we are not afraid to spend it. Believe me, this investment has a much higher return than any advertisement.

CAN YOU GIVE US AN EXAMPLE OF A BUSINESS LINE WHERE YOU’VE OUTPERFORMED THE COMPETITION, AND WHERE EXCELLENCE IN SERVICE DELIVERY HAS MADE THE DIFFERENCE? We are leaders in the inverter business in Nigeria.

We sell a solution that allows customers to store energy when it is available, and deploy that energy when it is required – whether at home or in the workplace. When there is an external incident, such as massive power surge, and the inverter trips as a safety mechanism, our customers – who have become used to always-on power – call upon us for immediate resolution.

So we respond instantaneously – providing 106

Chairman and Managing Director: Vinay Grover

onsite support when requested, a standby unit if required and advice on how to troubleshoot in the future. We don’t absolve ourselves from the responsibility of ensuring our customers get the desired results from a product they’ve bought from us, just because the triggering issue was exogenous. Our customers recognise and appreciate this – and that’s what leads them to recommend our products to others. After all, if we don’t take care of our customers – we know someone else will!

WHAT’S NEXT? HOW DO YOU INNOVATE TO STAY IN FRONT OF COMPETITION WHEN IT COMES TO SERVICE DELIVERY? We represent companies that are champions of excellence in customer service – in the case of inverters that is Luminous; for business communication solutions, Avaya; for vehicles, Tata Motors and TVS Motors; for power solutions, Genus – to name a few. They challenge us to conform to their globally accepted norms, and to continuously innovate our local offerings. We CFI.co | Capital Finance International

employ technology to assist us in this endeavour, including a state-of-the-art call centre. We also empower our teams by regularly training them both in Nigeria and at the manufacturing headquarters of our partners.

Our training programmes are central to this strategy. We not only ensure that our employees undergo regular and rigorous training, but also provide free training to engineers and mechanics who service our products on an independent basis. We have trained thousands of people across Nigeria, providing them with opportunities for gainful employment either with our extensive dealer network or as part of our approved, independently-managed, service centres. For us, it’s not necessarily about delivering the service ourselves – it’s about ensuring that any customer, no matter where located, can identify someone who is able to fix their vehicle, replace their inverter battery, or install their solar system. We simply create the ecosystem where this takes place. i

Spring 2015 Issue

> CFI.co Meets the Founder of Pison Housing Company:

Roland Igbinoba

T

o properly house its growing population, Nigeria needs to address a housing deficit currently estimated to hover around 16 million units. A construction boom is in the offing as increased prosperity releases millions from the clutches of poverty and into the potentially home-owning class. If demand for affordable housing is surging across Africa, it is reaching the boiling point in Nigeria.

There could be worse times for housing developers. In fact, the market seems plagued by a shortage of knowledgeable and experienced professionals to steer the urbanisation process in the desired direction and to conceive and execute developments. “There is also a serious assets / liabilities mismatch,” says Roland Igbinoba – the founder of Pison Housing Company headquartered in Lagos.

More than only a real estate developer, Pison is also a unique depository of information on the Nigerian property market. With ample experience in both investment and commercial banking, Mr Igbinoba in 2003 started to conduct research into, and accumulate data on, Nigeria’s housing sector: “Back then, I was actually astonished to find that virtually nothing was known about our country’s housing market, its trends, issues, and pitfalls. No data had been tabulated, much less analysed.”

Mr Igbinoba decided to try and fill the blanks and provide stakeholders, such as mortgage lenders, with the facts they need in order to set policy.

Though his data proved of exceptional value, changes to the legal framework, and a consolidation rocking the financial services industry, meant that Mr Igbinoba was unable to launch the financial products homebuyers craved. He left the banking world to dedicate his work to providing real estate advisory services to both government entities and private enterprise.

“To attain consistent growth, the property market stands in need of clear regulation, infrastructure development, smoothly functioning supply chains, skilled labour, and adequate financial instruments.” Recently put in charge of a restructuring process at the Federal Housing Authority Mortgage Bank, Mr Igbinoba paid particular attention to the creation of a mortgage market using government existing real estate assets which offered the public the much needed availability of long-term financing options for qualified customers.

Mr Igbinoba was instrumental in the setting up of the Nigerian Mortgage Refinance Company (NMRC) – a public private partnership. Working with the

Founder: Roland Igbinoba

Mortgage Banking Association of Nigeria (MBAN), he led a team of experts that drove the conception, research work, and ultimately set the tone for the establishment of the institution.

Mr Igbinoba remains focused on capacity-building and helping overseas investors navigate the Nigerian property market and locate opportunities.

Mr Igbinoba boasts over fifteen years’ experience in the financial services industry. He worked at the United Bank of Africa, Oceanic Bank of Nigeria, and National Bank of Nigeria. Mr Igbinoba is also a consultant of the International Finance Corporation (IFC), part of the World Bank Group.

Mr Igbinoba was also an advisor to the Mortgage Pilot Project in Lagos State.

As vice-chairman of the Roland Igbinoba Real CFI.co | Capital Finance International

Foundation for Housing and Urban Development – an entity set up to disseminate analytical data on the Nigerian property market and facilitate policy initiatives aimed at the provision of affordable housing – Mr Igbinoba continues his involvement with the setting of housing policies and the development of the real estate market in Nigeria.

Mr Igbinoba studied real estate development and finance at the Harvard University Graduate School of Design, USA and is currently pursuing a doctorate of Business Administration in Finance and Economics at Cranfield University in the UK. Mr Igbinoba is currently the MD/CEO of the Federal Housing Authority Mortgage Bank Limited where he recently turned around the fortune of the government’s 16-year old bank to profitability. i 107

> Lafarge Africa:

Leveraging Experience in Building Better Cities Lafarge Africa Plc is a leading Sub-Saharan Africa building solutions company and a subsidiary of France-based Lafarge Group. The vision of Lafarge Africa is to be the most trusted and preferred partner of African construction professionals and homebuilders by delivering cement, concrete, aggregates, and other building solutions that are best in quality, environmentally sustainable, and widely available at an affordable cost.

M

aking urbanisation a success is one of the challenges being faced in this century. Lafarge aims to make a significant contribution towards building better cities. As a world leader in construction materials, Lafarge supports the metamorphosis of urban areas with innovative solutions that provide cities with more housing making them more compact, more durable, and more beautiful in addition to improving access.

For many years, Lafarge has been committed to a deliberate strategy of sustainable development that combines industrial knowhow with performance, value creation, respect for employees and local culture, environmental protection, and the conservation of natural resources and energy.

“For its concrete operations, Lafarge Africa leverages the group’s fifty years of experience in innovative concrete solutions.”

Lafarge puts certain values at the forefront of the way it conducts business: health and safety, environmental protection, corporate governance (ethics), and social responsibility in the areas of education, health, youth empowerment, and shelter. Through intensive training and exchange programmes, the company has developed a highly competent workforce to operate its plants and businesses.

Lafarge is committed to development and is attentive to the ever-changing needs of local communities, contributing to improving the quality of life by setting up local development programmes in the key areas of healthcare, housing, education, and youth empowerment.

More importantly, Lafarge Africa endeavours to create added value for its customers, providing innovative and high quality products and solutions. The company’s well-known brands – Agilia, Artevia, Ashaka Portland Limestone Cement, Atlas Classic Cement, Buildcrete, Durabuild, Elephant Cement, Fastcast, Hydromedia, Powercrete Plus, Powermax Cement, Readymix, Roadcem, and Supaset Cement – all stand for quality, consistency, and durability.

The brand name Lafarge Africa Plc came into existence by means of a resolution of the Board and shareholders of Lafarge Cement WAPCO Nigeria on July 9, 2014. To begin with, Lafarge SA – the holding company – transferred its indirect equity interests in Lafarge South Africa Holdings (Pty) Limited, United Cement Company of Nigeria Limited, AshakaCem Plc, and Atlas Cement Company Limited to Lafarge Cement WAPCO. Subsequently and simultaneously, Lafarge Cement WAPCO Nigeria Plc changed its name to Lafarge Africa Plc in recognition of the enlarged operations. The consolidated company is listed on the Nigerian Stock Exchange with strong

South Africa: Cleveland Readymix Plant

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Spring 2015 Issue

Nigeria: Ewekoro Cement Plant

“Lafarge puts certain values at the forefront of the way it conducts business: health and safety, environmental protection, corporate governance (ethics), and social responsibility in the areas of education, health, youth empowerment, and shelter.”

Presentation: UN Habitat Report at Caleb University, Nigeria with support from Lafarge.

CFI.co | Capital Finance International

presence in Africa’s two largest economies – Nigeria and South Africa. Lafarge Africa Plc remains an active participant in the urbanisation and economic development of Africa.

Lafarge’s presence in Africa started with construction of Benue Cement Plant in 1972, followed by the acquisition of Blue Circle in South Africa in 1998 and in Nigeria in 2001.

Today, combining the operations in Nigeria – 4.5MMT in WAPCO (with two plants in Ogun State), 1MMT in Ashaka Cement Plc (Gombe State), 2.5MMT in United Cement Company of Nigeria Limited (Cross Rivers State), and 0.5MMT in Atlas Cement Company Limited (Rivers State) – with operations in South Africa – 3.6MMT – Lafarge Africa has a current installed cement capacity of 12MMT which is expected to grow to 17.5MMT by 2017. This is in addition to strong market leading positions in aggregates, ready mix concrete, and fly ash.

For its concrete operations, Lafarge Africa leverages the group’s fifty years of experience in innovative concrete solutions. This puts the company in a position to provide quality concrete solutions designed to meet the specific needs of builders. Today, Lafarge Readymix operations have a production capacity of 9MMT in South Africa and 3.5MMT in Nigeria. Aggregate operations is currently in the pipeline and will commence in Nigeria shortly. i 109

> United Capital Bank:

Partners in Progress The positive investment climate, the economic boom, and the huge natural and human resources encouraged a number of investors from Sudan, Kuwait, Egypt, Lebanon, and Bahrain to establish United Capital Bank (UCB) in 2005. The underwriters believe that Sudan is a most promising country.

The bank’s objective is to enable and help contribute to the development of Sudan.

T

he bank’s capital amounts to 240 million Sudanese pounds (approximately $111m). The shares of the Bank are divided amongst Aref (a Kuwaiti Group with 25 %), Boubian Bank (a Kuwaiti bank with 21.66%), Fransabank (a Lebanese bank with 20 %), Athman (a Kuwaiti joint trading company with 15.2 %), Financial Investment and Development Company (an Egyptian company with 6.25%), and Imtiaz Investment Company (a Kuwaiti company with 5.83%). The remaining shares are held by Sudanese investors.

The Bank aims to provide added value that enhanaces the economic development of Sudan via the polarisation of financial resources available in the region and by the use of portfolios and specialised investment funds in sectors like agriculture, industry, infrastructure (water, electricity, roads, and bridges), services (healthcare and education), and financial services (shares, sukuk, and other financial instruments). Additionally, the Bank wishes to help locally-registered companies reach investors through the issuance of shares.

What most distinguishes United Capital Bank from its competitors is the quality and expertise of its management comprised of an elite group of economists and bankers who were the architects of the success achieved over the last few years.

The Bank is headed by CEO and General Manager Kamal Ahmed Elzubeir – a Sudanese professional well-known for his patriotism and broad economic horizon. Mr Elzubeir acquired his vast experience and expertise in banking and economic management.

“The bank aims to provide added value that enhances the economic development of Sudan via the polarisation of financial resources available in the region and by the use of portfolios and specialised investment funds.”

At the Bank, Mr Elzubeir is assisted in the execution of his management duties by a group of likewise experienced high-calibre economists and banking professionals.

THE ESTABLISHMENT United Capital Bank (UCB) was established in August 2005 to offer a full range of banking products and services. The establishment of the Bank was driven by the shareholders’ belief that Sudan is a country with significant potential wealth, experiencing at the time an unprecedented era of growth and development.

Total assets Net profit (after tax and Zakat) Return on equity

The country enjoys a number of advantages: • Huge natural, economic, and human resources, and; • Economic openness and favourable investment regulations.

MISSION STATEMENT UCB aims to identify excellent opportunities, known to be plentiful in Sudan, and endeavours to explore these prospects for the benefit of the Sudanese economy, on one hand, and local, regional, and international investors on the other.

This is best accomplished via the promotion of the share venture capital companies and the establishment and management of specialised investment funds.

United Capital Bank also aims to provide quality investment and financing services to prime corporate and government entities in order to help these attain their growth and profitability objectives. This endeavour ultimately aims to achieve the furtherance of the country’s economic and social development.

The Bank realizes its objectives by adhering to a robust strategy for the mobilisation of the local, regional, and international capital resources necessary for the exploitation of Sudan’s vast natural and human resources.

2013 1,685 61 18.8%

2014 1,984 69 16.8%

Change 18% 13% n/a

Table 1: Millions of Sudanese pounds (SDG)

“What most distinguishes the United Capital Bank from its competitors is the quality and expertise of its management comprised of an elite group of economists and bankers who were the architects of the success achieved over the last few years.”

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Spring 2015 Issue

“The bank encourages its customers to invest their excess capital with UCB in safe and low-risk Shariacompliant deposits that offer competitive returns.”

UCB SERVICES Financing Operations The Bank focuses on providing financing to major projects in the country in addition to fulfilling the general working capital requirements of prime corporate and government entities. For this purpose, the Bank employs various Shariacompliant modes of finance such as Murabaha, Musharaka, Mudaraba, Salam, Ijarah, Istisnaa, amongst others.

Acceptance of Deposits The Bank encourages its customers to invest their excess capital with UCB in safe and low-risk Sharia-compliant deposits that offer competitive returns.

Banking Services United Capital Bank also provides a number of different banking services such as current accounts for prime corporate companies and their senior employees, local and foreign transfers through a network of correspondents worldwide, and letters of guarantee and trade finance.

Investor Services The Bank allocates qualified and competent staff to provide dedicated services to meet the requirements of prospective investors from outside Sudan. These include: • The provision of general economic advice • The preparation of economic feasibility studies for proposed projects • The registration of companies and associated legal matters.

United Capital Bank achieved significant growth rates and excellent financial results in 2014 as indicated in the above Table 1.

Over the past nine years, total assets increased form SDG 194 million (2006) to about SDG 1,984 million in 2014 – an increase of 923%.

The Bank achieved a return on nominal share value of 16.8 % in 2014, compared with 5% in 2007.

It is worth mentioning that in 2014 United Capital Bank continued to fulfil its role as an engine of Sudanese economic development and offered financing arrangement to companies engaged in mining, agriculture, and industry.

The Bank also facilitated financing for a number of large infrastructure projects such as the construction of electricity distribution networks, dams and projects of a social nature. i

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> CFI.co Meets the CEO and General Manager of United Capital Bank:

Kamal Ahmed Elzubeir An above average tolerance of adversity – and plenty of perseverance – is required from any banker conducting business in Sudan. With inflation rampant and a shaky currency, the country is perhaps not in the best of shapes. “Regrettably, we have to deal with setbacks on an almost daily basis,” says Kamal Ahmed Elzubeir, CEO and General Manager of United Capital Bank in Khartoum.

W

hile most of his peers elsewhere in the world have it fairly easy, Mr Elzubeir has that most challenging of jobs: to ensure his bank continues to prosper regardless of any economic turbulence.

That is working out surprisingly well. United Capital Bank (UCB) is co-financier of a number of large-scale mining and agricultural projects and helps larger businesses and government entities in Sudan with a full suite of Sharia-compliant financial products.

“While the overall outlook remains sombre, things are slowly improving a tiny bit. Impressions depend mostly on the observer’s vantage point, but when compared to 2011 and the immediate aftermath of South Sudan’s independence, the country is in better shape. At the time, Sudan lost up to 75% of its oil revenues which led to inflation, a shrinking GDP, and currency devaluation.”

However, Mr Elzubeir emphasises that, while on the mend, Sudan could conceivably benefit from a little more ambition: “The current environment lacks a clear vision with attainable development goals. There are no big plans to rally the nation.

It is mostly business as usual with nothing new under the sun.”

CEO and General Manager: Kamal Ahmed Elzubeir

This was not always so. Mr Elzubeir remembers the excitement of the 2000s when optimism not only prevailed but was pervasive in nature. “Back then, the entire country was a beehive of activity.

It was a time when most people still cherished great hopes for a more prosperous future. Also, solidarity investments reached an all-time high.”

In 2005, Mr Elzubeir was charged with setting up United Capital Bank – from scratch. Though Sudanese, Mr Elzubeir developed his skills as a banker mostly outside the country. He worked in Saudi Arabia, Qatar, Cyprus, and Bahrain as a commercial banker before returning home with a mandate from Kuwaiti, Lebanese, and Egyptian investors to set up a bank. “A licence was in place and the required capital had been deposited at the Central Bank of Sudan. On those two 112

accomplishments, we erected a bank now known and respected for its solidity and agility.”

Even under the current adverse conditions, United Capital Bank has deftly managed to keep its portfolio balanced on both the asset and liabilities sides. “We are getting by, which is the best anyone can hope given the present environment. On the economic side there is, for now, not much good news to report on while – and I am speaking my mind here – the sanctions are making life more difficult. Having said all that, we are able to limit the impact of both negatives and I’m sure we will manage to do so in the future as well.”

An added difficulty is that Mr Elzubeir is not CFI.co | Capital Finance International

allowed to hedge his positions and must therefore find other ways to minimise risk. Sharia Law does not permit hedging. “This can pose somewhat of a challenge. We were caught long on the euro and did not contemplate its sharp depreciation.

Nor could we hedge against this possibility, and if you ask me why Euro, the answer is that we are not allowed to hold US Dollars because of the American sanctions on Sudan.”

However difficult Sudan’s predicament, the resilience of its bankers in general – and the UCB CEO in particular – is nothing short of admirable.

When the going gets tough, the tough get going – and that’s perhaps the most befitting, if not elegant, description of a banker just doing his thing: committing to the long-term. i

Spring 2015 Issue

> CFI.co Meets the CEO of Horizon Group:

Eugene M Haguma

R

wanda is up and running – and very much open for business. The standard bearer of Africa’s resilience – and one of the continent’s most remarkable success stories – Rwanda has now embarked on an economic development drive that will shortly propel it into the ranks of middleincome countries.

“The outlook is positive indeed. GDP is growing robustly and income disparities are down. The government is fully committed to entrusting the private sector with providing the impetus for our nation’s development,” says Eugene Haguma, CEO of Horizon Group – a company set up by the state in 2007 to act as a facilitator and trailblazer for Rwanda’s economic and social development.

Mr Haguma emphasises that the companies of the group are managed and run, not as state entities but private corporations. Operational efficiency is key. “Horizon Group was established to support the national recovery effort and fill any gaps not yet bridged by private business. We also aim to explore opportunities that private parties may be unable to pursue. That is perhaps the trailblazing aspect of our mission.”

Horizon Sopyrwa – one of three companies that together comprise the group – is such a pioneering initiative. The business processes flowers grown in the fertile foothills of the Virunga Mountain Range to extract top-quality pyrethrum – an essential ingredient of environmentally-friendly insect repellents that leave no toxic traces in the soil and degrade quickly once exposed to sunlight. Horizon Sopyrwa already satisfies about ten percent of the world’s demand for pyrethrum.

“Sustainability considerations permeate through all our companies’ operations and processes.

The Horizon Group is about much more than money alone. Our businesses take a long-term view across multiple dimensions. Any project Horizon Group undertakes is first evaluated for its positive social impact.”

Mr Haguma explains that Horizon Group also takes on larger-scale infrastructure projects through its Horizon Construction subsidiary. The company recently acquired new heavy machinery to speed-up road and highway construction around Kigali and elsewhere in the country.

Horizon Group also coordinated the building of a novel small hydropower plant to provide electricity to tea processing facilities. The project provided the company with a feasible blueprint for use elsewhere in the country.

CEO: Eugene M Haguma

While extremely satisfied with the fastpaced growth of the economy and the newlyestablished dynamic economic climate in the country, the Horizon Group CEO is concerned that the limited availability of long-term financing may yet cause the expansion to slow down. “Our banks are still relatively small and Rwanda depends on outside help for its CFI.co | Capital Finance International

accelerated development. The government is working diligently at encouraging the formation of a domestic capital market of sufficient breadth and depth to support long-term growth.

Skills development is another area that receives much attention. Rwanda needs the right people with the right skills at the right places if it is to fully exploit its potential.” i 113

> Shiekan Insurance & Reinsurance Co:

Leading Takaful Operator in Sudan Shiekan Insurance & Reinsurance Co. Ltd. is a Sudanese company established in 1983. Shiekan is the largest and leading Takaful operator in Sudan with a market share of almost 50%.

S

hiekan offers cooperative insurance.

This modality mandates the distribution of the surplus generated by insurance operations to the policyholders. This aspect is one of a number that sets this type of insurance apart from other, more conventional, modes employed by the insurance industry.

Shiekan Insurance & Reinsurance aims to be the world’s foremost provider of Takaful products and services. The company’s mission is to provide first class innovative Takaful products and services to all stakeholders.

SHIEKAN VALUES The company is committed to: • Build a strong, disciplined, and consistent relationship with policyholders, striving to deliver ever-improving Islamic financial solutions • Further the personal and professional development of employees, encouraging them to attain their true potential • Promote teamwork in order to achieve preeminence and ever-improving delivery in all areas of business • Maintain solid financial strength as represented in its huge wealth of both fixed and current assets • Implement a five years strategic plan (20132017) that includes smart objects based on SWOT (strengths, weaknesses, opportunities, and threats) analysis • Grow rapidly in premium income contributions with an average of 15% annual increase.

CORPORATE GOVERNANCE Shiekan’s compliance to Sharia rules and principles is monitored by a Sharia Supervisory Board comprised of Sudanese Sharia scholars supported by law and Islamic economic experts.

The company’s strategic role and plans, along with its performance, are monitored by a board of directors made up of shareholders, policyholders and experts professionals.

The board’s committees are: • Policies and Audit Committee • Investment Committee • Human Resources & Corporate Responsibility Committee • Risk Committee.

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Social

“The Corporate Compliance and Sharia Audit departments established by Shiekan are the first – and to date only ones – of their kind in the Sudanese insurance sector.”

The adherence to, and compliance with, Takaful principles requires Shiekan Insurance and Reinsurance to organise an annual assembly for policyholders as well as a general annual meeting for shareholders.

The Corporate Compliance and Sharia Audit departments established by Shiekan are the first – and to date only ones – of their kind in the Sudanese insurance sector.

SHIEKAN AS A MULTI-LINES TAKAFUL OPERATOR As a composite insurer, Shiekan provides general Takaful, family Takaful, medical Takaful, and agricultural Takaful insurance products.

Shiekan’s line-up of insurance products includes: • Property insurance: fire, burglary, business interruption, industrial all-risk • Engineering insurance: machinery breakdown, construction, electronic equipment, boilers, bonds • Energy insurance: upstream, downstream, refineries, pipelines, power stations, transmission lines • Marine and aviation insurance: cargo, hull, liabilities, and loss of license • Miscellaneous accidents insurance: glass, cash, personal accidents, professional indemnity, theft, banker’s blanket bond, liabilities • Motor vehicle insurance: comprehensive, third party liability, motor trade • Agriculture insurance: irrigated & rain-fed crops, horticulture, forests, livestock, poultry • Medical insurance: group & family, travel insurance • Credit insurance: export credit, micro insurance • Group, family, and individual Takaful (life), saving & investment schemes, pensions • Expatriate security Takaful.

SHIEKAN NETWORK Shiekan Insurance & Reinsurance serves commercial, institutional, and individual clients through an extensive and countrywide network of CFI.co | Capital Finance International

more than 75 branches and offices located in all the fifteen federal states of Sudan, thus ensuring easy access to the company’s services.

Shiekan strives to provide its policyholders with a high quality and responsive service experience.

The company also develops and offers competitive insurance solutions that contribute to the overall financial security of Sudan’s fastgrowing economy.

Shiekan achieves its corporate goals with the help of over 1,300 well-trained, experienced, and dedicated staff. Shiekan employees are consistently focused on their customers’ current and future needs and expectations.

Shiekan’s local and regional accomplishments include: • Largest Takaful operator in Sudan • Amongst the best 150 out of 366 MENA insurance companies in 2013 • 46 ranked by premium written • 29 ranked by profit • 91 ranked by balance sheets (assets) • 139 ranked by shareholders equity.

CORPORATE SOCIAL RESPONSIBILITY Shiekan Insurance & Reinsurance plays a leading role in bringing corporate social responsibility to Sudan. Each year, the company allocates considerable funds to help different sectors such as education and healthcare. Shiekan also dedicates funds to initiatives that aim to alleviate poverty and provide safe drinking water.

SHIEKAN’S PROFESSIONALISM The company has acquired an exceptionally high degree of professionalism in tailoring insurance packages to perfectly suit any project’s specific requirements. Shiekan counts on the services of academic experts and staff who have been engaged in drawing up a set of highly technical underwriting and claim manuals containing the company’s technical guidelines, policies, and rules.

Shiekan Insurance & Reinsurance is a member of the following organisations: • General Council for Islamic Banks and Financial Institutions (CIBAFI) • Islamic Financial Services Board (IFSB) • International Federation of Takaful and Islamic Insurance (IFTI)

Spring 2015 Issue

• General Arab Insurance Federation (GAIF) • African Insurance Organisation (AIO) • Global Takaful Group (GTG) • Federation of Afro-Asian Insurance & Reinsurance (FAIR) • International Cooperative and Mutual Insurance Federation (ICMIF) WHAT IS UNIQUE IN SHIEKAN? Shiekan Insurance & Reinsurance is the only company to offer loss prevention, training, and internal Sharia audit services in Sudanese Takaful market.

LOSS PREVENTION DEPARTMENT Shiekan has gone one step further than others dared go by putting in place a Loss Prevention Department – the first service of its kind in both the local and regional insurance market. In essence, this service turns the company into a veritable partner of its clients when it comes to the safeguarding of insured property. The department is staffed with qualified engineers and technicians.

Shiekan loss prevention teams visit the properties to be insured, carry out onsite risk surveys, and draft both safety requirements and risk improvement recommendations.

Follow-up visits are conducted regularly during the insurance period. The ultimate outcome of this innovative service has expressed itself in enhanced safety and security levels, low loss ratios, premium reductions, and increased customer satisfaction.

Shiekan’s loss prevention efforts to control agricultural risk have also yielded excellent results which, in turn, encourage farmers to take out insurance policies.

SHIEKAN TRAINING CENTRE Through the first – and only – insurance training centre in Sudan, Shiekan provides professional training to its own staff – and that of its customers – agents and producers, university students, and staff of both local and regional Takaful companies - specially startups. Besides offering local training opportunities, Shiekan occasionally dispatches Takaful experts and staff to assist with the establishment of new Takaful companies.

INTERNAL SHARIA AUDIT DEPARTMENT Shiekan boasts an in-house Sharia Audit Department – the only one of its kind in Sudan – to ensure that day-to-day transactions and operations are fully compliant with all relevant Sharia rules.

AWARDS AND CERTIFICATIONS Shiekan Insurance & Reinsurance has received the following awards: • The Quality Management System Certificate – ISO9001 2008 for the provision of insurance services since 2007 up to date • The 2014 International Award for Business Excellence in recognition of the company’s commitment to quality and excellence in the provision of services by the Global Trade Leaders Club, Madrid, Spain • The 2015 International Takaful Award for best Takaful company in Sudan. i CFI.co | Capital Finance International

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> CFI.co Meets the MD of Shiekan Insurance & Reinsurance Co:

Salah El Din Musa Mohamed Sulieman Salah El Din Musa Mohamed Sulieman is managing-director of Shiekan Insurance & Reinsurance Company of Sudan. He is a professional qualified insurer with a Bachelor of Science degree from the Faculty of Economic and Social Studies of the University of Khartoum. Mr Sulieman also obtained a diploma in insurance studies and insurance management from the University of Nottingham and the City University in the United Kingdom.

U

pon graduation, Mr Sulieman took a position as a teaching assistant at the Faculty of Economics and Rural Development of the University of Gazeera in Sudan. He subsequently started his career in the Sudanese insurance industry and occupied a number of senior managerial posts at reputable insurance and reinsurance companies in Sudan, Yemen, Oman, and Qatar.

Mr Sulieman’s professionalism was recognised at the 2015 International Takaful Summit when he received the leadership award for most outstanding Takaful CEO for his numerous contributions to the Takaful industry. He gained a wealth of experience in insurance and reinsurance and is devoted to the promotion of Takaful industry. Mr Sulieman also helped establish a number of Takaful companies in various countries and currently is a local and regional trainer of Takaful principles.

Mr Sulieman is an active participant, as both speaker and panellist, in a number of international, regional, and local conferences, workshops, and seminars on different aspects of Takaful. He is a writer of scholarly articles which are regularly published in magazines, journals, and other periodicals dedicated to Takaful and the insurance industry. Mr Sulieman has designed and launched almost a dozen new Takaful products over the past seven years.

At present, Mr Sulieman holds the following offices: • Member of the Central Board of Directors of the National Economic Corp. (Sudan) • Director of the National Reinsurance Co. (Sudan)

• Chairperson of the ICMIF Takaful Network (UK) • Director of the Seminar Engineering Co. Ltd. (Sudan) • Member of Islamic Financial Services Board (IFSB) working group for setting the guiding principles for Retakaful undertakings.

Mr Sulieman also served as: • Member of the Technical Committee of the Arab War Risk Insurance Syndicate – AWRIS, Bahrain (2008-2011) • Director and chairman of the Gulf Insurance Institute – GII, Bahrain (2011 -2014) • Member of the Board of Trustees of the International University of Africa – Sudan (2011 – 2013)

MD: Salah El Din Musa Mohamed Sulieman

• Director of the Sudanese Free Zones & Markets Co. Ltd. • Member of the Management Committee of Zep-Re Retakaful Window (Sudan) • Member of the Steering Group of Microtakaful of the International Cooperative and Mutual Insurance Federation (ICMIF, UK) • Director of the Omdurman National Bank (Sudan) • Director of Africa Retakaful (Cairo, Egypt) • Director of the International Cooperative and Mutual Insurance Federation (ICMIF, UK) • Vice-chairman of the International Federation of Takaful & Islamic Insurance Companies (IFTI) • Member of the Executive Committee of the Association of Sudanese Insurance & Reinsurance Companies (ASIRC)

ACHIEVEMENTS & SUCCESS Mr Sulieman reengineered the corporate governance structure of Shiekan Insurance & Reinsurance by setting up four new board-level committees: • Policies & Audit Committee • Investment Committee • Human Resources & Corporate Social Responsibility Committee • Risk Committee.

He also established a new Corporate Compliance Department and the Internal Sharia Audit Department. Both are the first – and only ones – of their kind in the Sudanese insurance market.

He also: • Set up a professional and transparent working system at Shiekan; • Expanded the company’s network of branches and offices; and, • Led the company to gain a strong financial position. i

“Mr Sulieman is an active participant, as both speaker and panellist, in a number of international, regional, and local conferences, workshops, and seminars on different aspects of Takaful.”

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> CFI.co Meets the President and CEO of Medallion Communications:

Ikechukwu F Nnamani Engineer Ikechukwu F Nnamani is the president and CEO of Medallion Communications Limited. Medallion has successfully carved out a niche in the Nigerian telecom industry as an authority in interconnect exchange clearinghouse services.

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he company currently provides services to seventy telecom operators in Nigeria, including all the major GSM, CDMA, fixed line, Internet services, and valueadded service providers. Medallion is presently the hosting site for the Nigerian Internet Registration Agency domain servers as well as the Nigerian Internet Exchange Point.

Several crucial infrastructure providers such as Google, International Gateway Providers, etc. are also hosted at Medallion.

Mr Nnamani is active in promoting forwardlooking industry policies to encourage the growth of the telecom industry across Africa, working with both regulators and operators to achieve this goal. He currently acts as an executive of the premier telecom body in Nigeria – the Association of Telecommunications Companies of Nigeria (ATCON) – where he is responsible for coordinating the activities of licensed telecom operators in the country.

Mr Nnamani has also worked towards the establishment of interconnect clearinghouses elsewhere in Africa. He recently collaborated with Ghanaian telecom regulator NCA in the creation of an interconnect clearinghouse license in that country. He is currently helping to ensure the successful implementation of that licensing framework.

Engineer Nnamani is also chairman of Demadiur Systems, a system integrator responsible for the successful deployment of fixed wireless networks in several Nigerian cities such as Enugu, Aba, Owerri, Onitsha, Abakaliki, Kano, and Abuja.

Engineer Nnamani worked as an optical systems engineer at Luxcore Networks Inc., in Atlanta, Georgia, USA. While at Luxcore, he helped design and manufacture the company’s celebrated Semiconductor Waveguide Optical Regenerative Device – the world’s first integrated photonic wavelength converter chip.

This revolutionary device guarantees a nonblocking flow of traffic in telecommunication networks. Mr Nnamani equally played a key role in the design and manufacture of Luxcore’s LambdaXchange. This is the world’s first photonic wavelength switch – an all-optical

President and CEO: Ikechukwu F Nnamani

router. The LambdaXchange won the best system award at the 2001 Optical Fibre Conference at Anaheim, California.

submarine umbilical retract mechanism which is now used by the United States Navy’s Strategic Ballistic Missiles Defence Programme.

As a researcher at the Design Methodologies Laboratory of Tennessee State University, Mr Nnamani was involved in the conceptual design of the now patented Expanded Accommodation Tool used in the Joint Strike Force project by the United States military. The project was executed on behalf of Boeing Aerospace in St Louis, Missouri.

Mr Nnamani was awarded a United States Navy plaque in recognition of his outstanding work on the project. His work has been published in numerous international publications including the Boeing Aerospace Newsletter, and the 2002 Region XI technical journal of American Society of Mechanical Engineers (ASME) International.

Mr Nnamani received numerous awards from Boeing Aerospace for his contributions to the success of the project. He also designed and successfully tested a prototype Trident II CFI.co | Capital Finance International

Engineer Ikechukwu Nnamani holds a Master’s degree in Mechanical Engineering degree from Tennessee State University in Nashville as well as a Bachelor’s degree in Mechanical Engineering degree from the University of Nigeria in Nsukka. i 117

> NamPro:

Helping and Empowering SMEs in Namibia

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ver the past five years, The Namibia Procurement Fund (NamPro Fund) has established itself as a true partner to small and medium-sized business (SMEs) that possess the right opportunities to realise exponential growth, but in most cases that lack either capital or the balance sheet often necessary to access conventional funding sources.

Through its growth-phase-friending funding NamPro Fund has been able to respond to the

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diverse working capital needs of enterprises.

These may range from letters of credit that facilitate the supply of goods and asset finance to acquire the tools, machines, and/or plants required for the execution of contracts.

NamPro Fund was established to provide predelivery working capital in the form of purchase order or working capital finance and post-delivery finance in the form of invoice discounting.

Access-enabling products, such as bid bonds or performance guarantees, are equally offered CFI.co | Capital Finance International

The Namibia Procurement Fund

to SMEs as part of the fund’s product range. As NamPro Fund gains a deeper understanding of its clients, the Fund continues to roll out new products and services. Examples include the Warehouse Finance Facility, which is a product tailored-made for businesses that move large volumes of goods into the retail supply chain.

The NamPro Fund recognises the various growth stages of business formation and development, and has positioned itself to play a crucial role in the early stages of an enterprise’s lifecycle.

Spring 2015 Issue

The Fund co-operates with other financial players and stakeholders, such as commercial banks and the various off-takers, to improve access to finance medium sized enterprises.

This joint approach has enabled such businesses to execute contracts in excess of N$100 million.

Over the last five years, the Fund has financed over N$300 million in facilities and enabled Namibian SMEs to become capable suppliers. The market confidence this has generated is evident and NamPro Fund clients have been able to land significantly larger contracts to deliver goods and services comparing to their peers. They have also been successful in executing assigned contracts.

This encapsulates the mission of the NamPro Fund.

Now firmly established as a local brand associated with SME financing, NamPro Fund is particularly well positioned to make an even greater impact by supporting an enlarged pool of Namibian enterprises. The success the Fund has experienced thus far attracted other financiers and investors to avail capital to the Fund, ensuring that NamPro has adequate funding available for the continued support of SMEs. Credit lines were secured with the help of Norsad Finance Limited, the Development Bank of Namibia, and Bidvest Holdings.

The NamPro Fund’s managing entity, BFS NamPro Fund Manager, is well equipped to service the market, increase its staff capacity, and meet client expectations. The NamPro Fund team comprises of a combination of experienced, market knowledge and passion driven individuals. As the eagle that nurtures the growth of small and medium enterprises, the Fund affirms its strong commitment to allow SME businesses to soar to new heights – going where no one has gone before.

THE NAMPRO FUND VALUE SYSTEM: • Integrity • Accountability • Transparency • Client-centred THE FUND’S ACHIEVEMENTS TO DATE: • Established good networks / partnerships for deal flow origination • Excellent market reputation / brand image • The Government Institutions Pension Fund (GIPF) allocated N$160 million and is fully committed to raise its capital stake • Positive socio-economic impacts such as job creation, black economic empowerment (BEE), etc.

“NamPro was established to provide predelivery working capital in the form of purchase order or working capital finance and post-delivery finance in the form of invoice discounting.”

CFI.co | Capital Finance International

The NamPro Fund would like to emphasise its appreciation to the Namibian Government of the recent gazetting of the revised Regulation 28 and 29 of the Pension Funds Act. This revision will be a catalyst for expanding SME growth.

NamPro Fund is determined to remain a driving force for the creation and prospering of sustainable small and medium-sized enterprises. Likewise, the fund is unwavering in its commitment to consistently meet and exceed the expectations of its stakeholders. i 119

> CFI.co Meets the CEO of NamPro Fund:

Kauna Ndilula

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Kauna Ndilula is the Managing Director of BFS NamPro Fund Manager, the management company of the Namibia Procurement Fund (NamPro Fund). Kauna founded Business Financial Solution (BFS) in 2008 as an SME focused advisory and asset management firm, which subsequently led to the establishment of BFS NamPro Fund Manager and the NamPro Fund.

Her background has largely been in the development of the small and mediumsized enterprise (SME), such as the Bank Windhoek SME finance model, the Erongo Development finance scheme and the National Youth Council finance schemes in conjunction with Bank Windhoek.

Furthermore, she pioneered financing schemes for renewable energy (a partnership between the Government of the Republic of Namibia and a commercial bank), as well as the Roads Contractor Company (RCC) small contractors outsource program. Her initiatives extend into the development of enterprise capacity building programme.

“Furthermore, she pioneered financing schemes for renewable energy, as well as the Roads Contractor Company (RCC) small contractors outsource program.”

Prior to setting up BFS, Kauna served as the SME National Manager at Bank Windhoek Ltd. Before that, she was an Executive Director at the Namibian Development Foundation which actively supports exportoriented SMEs. The foundation was founded by the African Development Fund (ADF).

Kauna serves on various boards of reputable companies and entities such as the Namibia Stock Exchange (NSX), the Business and Intellectual Property Authority (BIPA), Namdeb Holdings & Corporation, BFS and the NamPro Fund.

Mrs Ndilula holds a Master’s degree in Development Finance from the University of Massachusetts and obtained her MBA at the University of Stellenbosch. i

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CEO: Kauna Ndilula

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> Medallion:

Connecting Nigeria to the World in One Stop

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edallion Communications Limited is a system integrator and telecommunications infrastructure servicing company focused on providing innovative telecommunication and engineering services to the African continent, with a special emphasis on Nigeria.

Medallion’s customers comprise a universe of over seventy service providers, including all GSM, CDMA, fixed wireless, and fixed line operators in Nigeria. The client list also includes all longdistance international fibre network operators and

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metro fibre transmission providers in the country.

Medallion is the hosting company of choice for the major value-added service providers and premium rated operators in Nigeria. It also serves large international companies doing business in Nigeria.

• The design, deployment, and management of network operating centres.

• The design, deployment, and management of carrier-neutral interconnect exchange networks.

• The design, deployment, and management of carrier-neutral collocation centres.

Medallion’s range of services includes: • System Integration services involving the design, installation, and maintenance of telecommunications networks covering GSM, CDMA, fixed line, and Internet services platforms.

MEDALLION’S INTERCONNECT EXCHANGE CLEARINGHOUSE SERVICES Medallion offers interconnect and clearinghouse services to MNOs (mobile network operators), fixed line / fixed wireless operators, VAS (valueadded services) clients, and virtual operators.

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Spring 2015 Issue

Medallion is presently connected to all operators in Nigeria.

Medallion has built technologically advanced and secure interconnect switching centres that enable the exchange of telecom traffic amongst different operators. Medallion’s platform can handle varied traffic types including voice, data (SMS and fax), and video. The company’s infrastructure is robust and protocol-independent as it enables all classes of operators to interconnect seamlessly. Medallion handles both TDM (time division multiplexing) and IP (Internet protocol) based telecom operators.

It also interfaces with major internet exchange points to ensure that local content providers are adequately catered to.

While most interconnect operators focus only on the transiting of calls, Medallion’s model offers full financial settlement and reconciliation of interconnected traffic. This greatly reduces interconnect indebtedness and facilitates the accurate and timely processing of interconnect charges. Medallion deploys a robust and efficient billing and settlement infrastructure that is transparent in the resolution of interconnect related billing issues.

“Medallion’s customers comprise a universe of over seventy service providers, including all GSM, CDMA, fixed wireless, international gateway, long distance providers, metro fiber providers, ISPs, Vas content providers and fixed line operators in Nigeria.”

THE MEDALLION INTERCONNECT EXCHANGE FOR CONVERGED NETWORK SERVICES Medallion’s interconnect exchange and clearinghouse service offers to operators tremendous benefit in the following areas: • Traffic: There will be a higher capacity for operators to move their traffic, as there will be many additional E1s available. Moreover, operators will be able to carry their internal traffic easily and dispense with regular and costly upgrades.

• Rates: Since operators need not build additional links, operating costs will decrease drastically; this, in turn, will substantially reduce tariffs for subscribers and, thus, lead to increased usage.

• Increased Revenue: Since the volume of traffic will increase as a result of the increased number of calls, reduced dropped calls and operating efficiency, revenues will increase in response.

• Settlement Process and Payments: The network infrastructure includes switches, and accurate billing and mediation systems for interconnecting charges; it serves as an independent source of traffic data as call data records will be promptly handed to operators. It also guarantees timely and efficient payments.

• Network Availability: Medallion offers a next-generation switching network which is fault tolerant, reliable, and has multiprotocol capabilities.

• Ease of Interconnect: For new operators, the interconnect exchange point will offer the fastest way to interconnect with existing operators, thereby facilitating a faster times to interconnect and become operational. Value and premium service operators will also be able to interconnect faster using a single platform.

• Reduced Legal and Regulatory Restrictions: Medallion’s network enhances successful call CFI.co | Capital Finance International

termination, increases the accuracy of billing, and makes available call data records for verification.

The incidences of conflicts and mediation cases will greatly reduce using Medallion’s interconnect network.

Medallion Interconnect services to telecom service providers offers the following benefits • One-stop establishment of interconnection to multiple operators.

• Network simplicity.

• Optimisation of the number of interconnect links • Operational simplicity.

• Improved service quality with reduced operating tariffs / rates.

• Efficient billing, payment, and settlement processes with verifiable call detail records.

• Reliable, efficient, and scalable network.

• Redundant links / routes.

• Simple, cost-effective, and reliable points of interconnect.

• Neutral / independent call records for interconnect settlement.

• Reduced legal disputes amongst operators, minimizing mediation by the regulator.

• Expansion of telecom services to the rural and under-served areas as regional and local operators are encouraged to deploy networks in rural areas.

• Full interoperability of technologies and classes of service by various operators.

MEDALLION’S CO-LOCATION AND DATA CENTRE SERVICES Medallion currently operates some of the most advanced data hosting centres in Nigeria. The company’s switch centre is home to most of the major telecommunications infrastructure in the country. Infrastructure hosted at Medallion include the Nigerian Internet Exchange, the Nigeria .ng domain servers, all international fibres, all long-distance service providers in Nigeria, all GSM, CDMA, fixed line and fixed wireless service providers, value-added service providers, and premium-rated service providers.

Medallion has enabled these stakeholders in the Nigerian telecom industry to seamlessly interconnect amongst themselves under a carrierneutral environment.

Facilities available include: • Access to local, national, and global networks.

• Dedicated room spaces.

• Rack space in shared rooms.

• Fully backed-up AC/DC power feeds.

• Automatic power changeover with no downtime.

• Optimum cooling.

• Temperature control system.

• Comprehensive fire prevention system.

• Smoke detector / alarm system.

• Electronic security access control.

• 24/7 electronic circuit monitoring.

• Internet connection to Tier 1 carriers.

• Access to connect to all global networks present in Medallion via cross connects and dark fibre lease.

• Mast for radio installation. i 123

> BCI:

Tenfold Increase in Customer Base as Bank Moves into Retail

É daqui.

Banco Comercial e de Investimentos (BCI) dates back to January 1996 when a group of mainly Mozambican investors decided to form AJM – Banco de Investimentos. With a start-up capital of 30 million meticais, the bank changed its name in June of the same year to Banco Comercial e de Investimentos SARL, while continuing to gear its operations to the investment banking area.

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CI’s equity structure was strengthened in the following year with an equity investment by Portugal’s largest bank, Caixa Geral de Depósitos (CGD), following a capital increase to 75 million meticais. CGD took an equity stake of 60%, with SCI – Sociedade de Controlo e Gestão de Participações (a company comprising the majority of the initial investors) – having a 38.63% stake, with the remaining 1.37% held by small investors. BCI began to operate as a commercial bank on 24 April through its Pigalle branch.

BCI merged with Banco de Fomento (BF) in December 2003, with all BF assets having been assimilated by BCI. The bank adopted the commercial name of BCI Fomento. The merger resulted in an equity stake being taken by a new major shareholder in the form of the Portuguese BPI (Banco Português de Investimento) Group which subscribed for 30% of the shares.

Four years later, in November 2007, BCI’s equity structure was changed with the exit of the SCI Group and the arrival of Mozambique’s INSITEC Group, which took 18% of the shares.

At the said time CGD’s investment was reduced to 51% with 29% of the shares being held

by BPI Group, which shareholdings remain unchanged to date.

BCI readjusted its market approach in 2008.

Although continuing to concentrate on investment banking, it has committed strongly

“Growth in the number of customers has also been highly impressive. Whereas in 2007, BCI had just over 90,000 customers, seven years later, in December 2014, it had already surpassed the one million customers mark.” to retail operations in an endeavour to reach out to all Mozambican citizens. Following very strong growth, it currently operates across the country with more than 165 branch offices.

In 2011, BCI launched a range of innovative products – targeted in particular to the younger market segment – such as Tako Móvel, Chip EMV and Tá-se cards. That same year also marked the appearance of the first Integrated Business Centre. This brought an entirely innovative concept to banking Mozambique with the provision of banking services to all of the main market segments – in perfect alignment with each individual customer’s needs and expectations – providing higher levels of comfort and security while guaranteeing a high level of operational efficiency.

Growth in the number of customers has also been highly impressive. Whereas in 2007, BCI had just over 90,000 customers, seven years later, in December 2014, it had already

surpassed the one million customers mark.

Since its foundation, social responsibility has been one of BCI’s more marked characteristics.

The opening of its first “mediatheque” eighteen years ago in Maputo, similar facilities have been opened in Beira and Nampula, allowing thousands of students access to a vast range of bibliographical references, exhibitions by Mozambican artists, and book launches.

BCI’s sense of corporate responsibility also shines through in educational programmes designed to familiarise the wider public with the country’s rich heritage, its national values, and philanthropic initiatives aimed at offering support to charitable institutions. BCI’s main responsibility, however, lies in the promotion of Mozambique’s soul and pride.

MISSION BCI’s mission is to actively contribute to Mozambique’s economic and social development, creating value and satisfying customers, shareholders, employees, partners and the community in general, in a socially responsible and sustainable manner.

VISION BCI aims to be a bank of Mozambican culture and a financial system benchmark in SubSaharan Africa as regards the application of best practices, competitiveness, innovation, and quality of service – aiming to achieve a position of leadership in the domestic market. i

“Although continuing to concentrate on investment banking, it has committed strongly to retail operations in an endeavour to reach out to all Mozambican citizens. Following very strong growth, it currently operates across the country with more than 165 branch offices.”

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> CFI.co Meets the CEO of Banco Comercial e de Investimentos:

Paulo Alexandre Duarte de Sousa

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he CEO of Banco Comercial e de Investimentos (BCI) Paulo Alexandre Duarte de Sousa obtained a degree in management from the renowned Instituto Superior de Economia e Gestão (Lisbon Technical University). Here, Mr De Sousa also received postgraduate qualifications in export strategies (International Marketing).

At the Universidade Católica (Instituto Superior de Gestão Bancária) Mr De Sousa successfully completed the higher banking management course.

Currently, Mr De Sousa is a staff member of the Caixa Geral de Depósitos (CGD) Group acting as Central Director of Financing and Real Estate Business Division. Over the course of his professional career, he has worked in a number of both technical and commercial functions such as regional director of the Lisbon Individual Customers and Branch Management Division, Marketing Director, and director of CGD’s Real Estate Financing Division.

Mr De Sousa has held the following positions at companies forming part of the Caixa Geral de Depósitos Group: Chairman of board of directors • Wolfpart SGPS • Cibergradual SA Deputy-chairman of board of directors • Fundger – SGFII SA • Caixa Imobiliário SA • IMOCAIXA SA • SOGRUPO IV – Gestão de Imóveis SA Director • Fidelidade-Mundial – Sociedade de Gestão e Investimento Imobiliário SA Mr De Sousa has taught/lectured for many years at several schools, higher institutes of learning, and universities where he offered courses in mathematics, financial marketing, management and real estate.

CEO: Paulo Alexandre Duarte de Sousa

Mr de Sousa has accumulated a vast experience in real estate and was responsible for the implementation of the Real Estate Financing Division and the Financing and Real Estate Financing and Business Division of Caixa Geral de Depósitos. He has been an active participant in the management and decision-making processes of Caixa Geral de Depósitos Group’s real estate business, notably as director of various CGD Group companies.

of the Organising Committee of the Salão Imobiliário de Portugal (SIL) – the premier real estate exhibition in Portugal – which he presides since 2010. He has been a guest speaker at various national and international conferences on real-estate matters and is a regular contributor to a number of newspapers and other publications.

Mr De Sousa has also participated in a number of real estate studies.

Since 2005, Mr De Sousa has been a member

Mr De Sousa is the Portuguese representative CFI.co | Capital Finance International

to the Economic Affairs Committee, sponsored by the European Mortgage Federation (EMF).

He is responsible for the implementation and management of the Urban Development Fund under the European Union’s JESSICA (Joint European Support Sustainable Investment in City Areas) Initiative which was awarded to Caixa Geral de Depósitos on a tender basis.

Since May 2013, Mr De Sousa is the chief executive officer of BCI Bank in Mozambique. i 125

> Middle East:

Pakistan and Egypt - Bouncing Back from the Brink

In a world beset by instability, volatility, and other disconcerting developments, a few jewels thankfully remain to boost overall confidence in a more prosperous future. While almost no-one was looking, two countries turned their fortunes around: Egypt and Pakistan. Both now seem on the cusp of breaking out. Tried and disproved development policies are being replaced by more dynamic growth models.

Pakistan in particular has bounced back impressively: its rupee gained ground against most of the world’s major currencies, share prices are up by more than 20% over the past twelve months (the KSE100 is up 56% since the Sharif Administration took power in May 2013), and consumer spending has increased significantly on the back of cheap oil prices and higher remittances from abroad. Economic growth is now touching a seven-year high. In 2015, the country’s GDP is expected to expand by 4.2%.

Next year, the Pakistan economy is forecasted to register 4.5% growth.

According to the Asian Development Bank (ADB), the implementation of a “robust” reform programme has allowed Pakistan to attract additional foreign investment, including lending by multilateral financiers. The bank noted that Pakistan is also making “modest” headway in the deepening and diversification of its manufacturing base. This has long posed a serious challenge as the country moved from a largely agricultural society to one providing low-productivity services – bypassing industrialisation in the process.

The economic reforms are underpinned by a $6.7bn extended fund facility made available by the International Monetary Fund (IMF). The fund has just concluded its sixth review and is now ready to release the seventh tranche of the package. The IMF’s stamp of approval also allows Pakistan to regain access to the International Bank for Reconstruction and Development (IBRD – part of the World Bank Group) where the country may apply for up to $2bn in project loans over the next four years.

Pakistan: Badshahi Mosque

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FORWARD PUSH “We expect Pakistan’s economy to continue its push forward on a modest growth trajectory. The country needs to attract investments to create jobs, reduce poverty, and boost economic growth. Its ability to do so depends to a great extent on continued stability, an improved investment climate, and enabling policy reforms,” says ADB Country Director Werner Liepach.

Mr Liepach emphasised that Pakistan still has a long way to go in ensuring a fiscal balance with the country’s energy sector still representing a major drain on government finances. The high expense of maintaining an outsized security apparatus also conspires against fiscal equilibrium. The ADB country director also notes that tax revenue collection remains low and said the financial services industry could benefit from measures that encourage its accelerated development.

Prime-Minister Nawaz Sharif can, however, point to a growing number of accomplishments: inflationary pressures are easing, the country’s foreign reserves have doubled to $16bn, and the budget deficit is shrinking. “With the help of the IMF, PrimeMinister Sharif’s government has indeed improved things,” says Chief Investment Strategist Sayem Ali of Standard Chartered Bank in Karachi: “PrimeMinister Sharif has put Pakistan back on the radar of international investors.”

At the end of March, Moody’s Investor Services – a ratings agency – upped Pakistan’s economic outlook from stable to positive. According to the agency, the reassessment is based on a “stronger external liquidity position, continued efforts towards fiscal consolidation, and the government’s steady progress in achieving structural reforms under the IMF programme.” It is the first time in nine years that Moody’s issues an upbeat outlook on the Pakistan economy. That said, the agency maintained its speculative Caa1 rating on the country, implying a “very high credit risk.”

EGYPT STARTS DIGGING According to Moody’s, Egypt is likewise doing well.

Last October, that country saw its economic outlook upgraded from negative to stable. Citing a muchimproved security situation and increased political stability, the ratings agency seemed particularly impressed with confidence levels amongst domestic investors who last year disbursed $8.5bn in under a week to acquire Suez Canal Investment Certificates.

Rather than appeal to foreign investors for the funding of its Suez Canal project, the administration of President Abdel Fattah el-Sisi instead decided to issue 5-year non-transferable certificates to retail investors. Certificates could be bought for as little as ten Egyptian pounds (GBP0.88 / EUR1.20 / USD1.31), allowing everybody to acquire a vested interest in the project.

The funds raised are financing the dry digging of a 35km-long parallel canal and the deep digging of a 32km-long stretch of the existing waterway. Together, this will double the canal’s daily ship handling capacity to 96 vessels and allow for two-way traffic, cutting average waiting times at both ends from eleven to three hours. Revenue from transit fees is 128

expected to rise from $5bn annually now to over $12bn once the project is completed by 2023.

Ignoring nay-sayers who argue that the Suez Canal is already now underused, President El-Sisi forges ahead in an attempt - one so far remarkably successful – to rally the country behind a nationbuilding project on truly pharaonic scale. The widening and deepening of the Suez Canal is just a starter. Work has started on a total of six tunnels that aim to end the relative isolation of the Sinai Peninsula and thus unlock its economic potential.

Even a new capital city is to rise from the desert floor to replace overcrowded Cairo as the seat of power.

TOWARDS A GREAT LEAP A total area of 76,000km2 stretching alongside both banks has been set aside to allow for the development of large-scale logistics, industrial, and trading hubs.

As Egypt tries to leverage its geographic position at one of the world’s most important crossroads, the El-Sisi Administration now squarely aims for a great leap.

Though home to megalomaniac construction projects since its times as the cradle of civilisation, recent large-scale attempts at harnessing Egypt’s development potential have mostly failed to yield discernible results. However, this time may be different. Mohamed Younes, chairman of the Concord International Investment Group and an expert on the Egyptian market, feels a change in the air: “I have the impression that the current government is not just going through the motions. It displays real determination to get the job done.”

While admitting that previous administrations all too often got stuck in the planning phase, Mr Younes notes that the pace of change is picking up as well: “Things are actually moving and real progress is being made with the government paying attention to fiscal consolidation and laying out a clearly marked roadmap for national development.”

Mr Younes points to the recent Egyptian Economic Development Conference, celebrated in Sharm El Sheikh, where over $36bn was raised in pledges to underwrite projects in the country. With 22 heads of state and over 3,500 investors and government delegates from around the world in attendance, the three-day event is widely seen as heralding the longawaited Egyptian renaissance. The conference was organised by Richard Attias, founder of the New York Forum on economic leadership and long-time producer of the annual World Economic Forum in Davos, Switzerland.

The current optimism on Egypt is grounded on the country’s current solid economic performance.

Multinational corporations are done shunning Egypt: Coca-Cola, Chrysler, Ford, BP, and a host of other big names are either setting up shop or expanding activities. In 2014, foreign direct investment amounted to $4.1bn, a 7% jump over 2013.

Also last year, Morgan Stanley Capital International rated Egypt’s stock market as the best performing worldwide with average returns hovering slightly north of 30%. Economic growth, while still not as robust as in the years leading up to the Arab Spring, CFI.co | Capital Finance International

is solid nonetheless with the IMF forecasting 4.3% this year and slightly more for 2016 and 2017. i

SHORTCUT TO THE GULF AND EUROPE

Pakistan and China are set to become partners in an economic corridor spanning over 3,000 kilometres, connecting Western China’s Xinjiang Region to the Arabian Sea. The artery’s southern terminus is the Gwadar deepsea port in Balochistan Province – a $248m binational project completed in 2007. The port’s management and operation has now been turned over to China which has pledged $750m in additional investments to expand and upgrade the facility.

Meanwhile, Iran has earmarked $4bn to build a 400,000 bpd refinery in Gwadar to process oil destined for China. Once Gwadar is fully developed, China hopes to slash by up to 70% the distance its oil imports must travel by sea.

Currently, tankers take between six to eight weeks to travel the about 16,000 kilometres that separate the Arabian Gulf from Shanghai – the only Chinese port equipped to handle largescale oil imports.

Though the Pakistan government has signalled that is not opposed to the establishment of a Chinese naval base in Gwadar, China has so far not picked up on the offer for fear of becoming too embroiled in the country’s volatile political scene. China also does not, for now, wish to annoy or provoke either the United States or India.

Plans for the development of an economic corridor extending from Gwadar to China were unveiled in July 2013 and include the construction of a highway and railway link, in addition to oil and natural gas pipelines. China has agreed to install in excess of 3,000MW of electrical power generation in Pakistan as an expression of gratitude. This will help the country address its crippling power deficit which results in frequent blackouts – at times lasting up to 18 hours or more – that cripple the economy and scare off investors.

However, building the corridor will not be without a few challenges. The route cuts through some of the world’s most hotly disputed real estate in a region inhabited by notoriously unruly tribes.

The proposed artery also runs through GilgitBaltistan in Kashmir, a region claimed by India and the scene of three border wars since 1947 and countless clashes of only slightly lesser intensity.

To ensure the safety of, and provide security to, the thousands of Chinese workers who will build the corridor, Pakistan has promised to create, train, and equip a dedicated 12,000-strong military unit. The country has also announced plans to buy eight Chinese submarines, though it remains unclear how these vessels fit into the overall scheme of things.

Spring 2015 Issue

> CFI.co Meets the Senior Executive Officer of Emirates NBD:

David Marshall

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etting the bar high, and then adjusting it upwards a bit more, David Marshall has set out to build a truly world class asset management business. The plan has come to fruition: Emirates NBD Asset Management Limited, the autonomous asset management arm of the largest bank in the Middle East, has multiplied its asset base to $3.1bn over the last few years and just inaugurated a now fully-operational offshore fund platform in Luxemburg (Emirates NBD SICAV) which launched eight new funds in 2014.

The array of Luxemburg funds complements the investment vehicles established earlier in Jersey and actively managed by Emirates NBD AM to ensure strong performance on both an absolute and relative basis.

At the helm of Emirates NBD AM since late October 2012, Mr Marshall emphasises his firm’s “highly unusual” – and privileged – position: though part of Emirates NBD banking group, the asset management company operates as an autonomous entity which allows it to pursue and build successful, and profitable, relationships with all trading platforms.

“The agility that results from this set up enables Emirates NBD Asset Management to quickly respond to market signals and thus satisfy the demand of clients for superior portfolio performance in a low-yield world.”

Mr Marshall is adamant that great value still abounds across the GCC (Gulf Cooperation Council) markets: “With solid credit ratings and consistent surpluses, these economies offer a good, and quite possibly splendid, upside to investors looking for undervaluation.

Moreover, the markets here are quite receptive to international investors. This is particularly so in the UAE and Qatar.”

Though foreign investors already enjoy access to the Saudi market via a number of proxy and other strategies, the formal opening of the kingdom’s Tadawul stock exchange to outside capital – quite possibly already later this year – is expected to significantly raise trading volumes.

“The Kingdom of Saudi Arabia is most certainly one of the more promising of markets, growing at an average of six percent for the past couple of years. We can reasonably expect the Tadawul, once open to non-GCC investors, to be formally classified as an emerging market by MSCI,

Senior Executive Officer: David Marshall

which could direct significant capital flows to that exchange.” MSCI is a global provider of stock market indices.

Mr Marshall expects the opening of the Saudi stock market to result in further improvements to corporate governance standards and disclosure procedures. The Tadawul is the largest stock exchange in the GCC with a market capitalisation in excess of $510bn.

The Emirates NBD SEO foresees an extended period of sustained growth across all sectors.

For Emirates NBD AM, however, Mr Marshall explains that growth, while crucial, doesn’t tell CFI.co | Capital Finance International

the whole story: “It is also important to note how this growth comes about. I wish to offer our clients a range of diverse products from real estate to fixed-income liquid equities and everything in between.”

“The platform in Luxemburg is yet another step in the direction of tapping the international market, which is certainly our goal. We are now gearing up for additional expansion in Europe, using Luxemburg as a stepping stone. Beyond that, Asia and other markets even further afield come into view. Emirates NBD AM looks to source its growth globally, rather than just regionally.” i 129

> Grant Thornton UAE:

United Arab Emirates Economic Overview 2015

By Hisham Farouk

T

he United Arab Emirates (UAE) continues to drive regional change with an economy that has remained exceptionally buoyant throughout 2014.

The country boasts one of the most agile economies in the world and has witnessed strong growth. As a result, the UAE consistently scores high across all global competitiveness indices compiled by both regional and international organisations.

Due to a demand-driven increase in oil production, the UAE economy was expected to expand by 4.5% this year. Recent market volatility has now 130

reduced the anticipated pace of growth to 3.5%.

Dubai’s GDP is, however, forecast to increase by 4.5% in 2015 and 4.6% next year.

The sharp drop in all prices caused – unsurprisingly – some hesitation in the marketplace. However, the low price of oil is generally considered to constitute merely a challenge rather than a crisis.

In 2008, oil prices shot up even further than they did in 2014, only to drop to a level lower than the current one. In spite of that, the UAE kept moving forward, consolidating numerous achievements.

CFI.co | Capital Finance International

The share of oil revenues in the composition of the UAE’s GDP is set to decrease from approximately 30% to 5% by 2021. The non-oil sector currently accounts for 69% of the country’s GDP. The UAE government is determined to continue its economic diversification policies in an effort to reduce the country’s dependency on oil.

According to the Institute of International Finance (IIF), the UAE economy is expected to reach $435 billion in 2016 – up from $419 billion in 2014 and $405 billion in 2015. These numbers are based on an average baseline oil price of $78 and $85 per barrel, respectively, in 2015 and 2016.

Spring 2015 Issue

Weak oil price should help to contain inflationary pressures. Official inflation is expected to hover at around 2.5% this year as the fall in the oil price helps lower the price of imports.

ENSURING LONG-TERM PROSPERITY Sheikh Mohammed bin Rashid Al Maktoum, vicepresident and prime-minister of the UAE and ruler of Dubai, said that under the leadership of President Khalifa bin Zayed Al Nahyan the country’s economy has become quite resilient and now offers a strong foundation upon which the UAE may build its leading international position. President Al Nahyan called the Emirates’ economic model both sustainable and responsible and expressed confidence that, as such, current policy will ensure the long-term prosperity of the nation.

Almost half of the UAE’s 49.1 billion dirham ($13.37bn) federal budget for 2015 is slated for social spending on healthcare, education, and other welfare services squarely aimed at promoting further growth within the public sector. The Council of Ministers approved the 2015 budget with a 6.3% increase (2.9 billion dirham / $790m) in expenditure over 2014. It is expected that the UAE’s fiscal accounts will continue solidly in the black with annual surpluses ranging from 6.9% to 10.5% of GDP. The strong performance of the country’s banking sector is a reflection of the UAE economy: credit growth projected at around 10% for 2015. The UAE’s foreign direct investment (FDI) industry is also performing well thanks to consistent policies that attract outside investors. Many of the key factors contributing to FDI growth are already in place. Even so, a new FDI legal framework is in the works that will help to boost investment in the country. FDI increased by 25% in 2015 to $13 billion. Minister of Economy Sultan Al Mansouri, stated that: “this law is expected to allow for a remarkable growth in FDI flows and will help accelerate the diversification of the economy.”

Dubai

“The changing dynamics of the economy and the global market crash further reinforced the need for risk management.”

ABOUT THE AUTHOR Hisham Farouk was appointed as managing partner of Grant Thornton UAE in 2010. As a dynamic leader who has a professional and academic footprint in the United States, the United Kingdom, and across the Middle East, he gained a reputation and name as the driving force behind the growth strategies of many private and public organisations that today continue to mature under his mentorship and strategic input.

With over fifteen years of professional and commercial experience, Mr Farouk has led high profile advisory engagements for some of the largest groups in the region. He sits on various boards, including that of a renowned regional investment firm and is a patron of, and avid mentor to, dynamic small and medium-sized enterprises (SMEs). Mr Farouk also mentors a number of start-ups that continue to grow – moving from the concept stage to multi-million dollar businesses.

Mr Farouk actively supports the young leaders of tomorrow through various initiatives. He works with the public sector to support “emiratisation” and develop the potential of UAE nationals as a way of giving back to the broader community.

Mr Farouk has been a speaker at a number of international and regional conferences discussing the UAE/ME market. He has been a keynote speaker at a large business conference, given his specialism and credibility in the market. Mr Farouk regularly publishes essays and articles in a number of established global and regional magazines including Arabian Business, Global Citizen, CFI.co, and others.

Mr Farouk was cited by the National Newspaper as being “the right-hand man for Dubai families” (April 1, 2014) and is well-known within the region as a specialist within the business arena.

RESILIENCE The UAE economy is resilient and can accommodate changes to market dynamics, open new frontiers, and diversity thanks to the country’s strong infrastructure, technology, and logistics. The UAE seeks to create new sustainable and competitive economic models and adopt more flexible approaches that boost cooperation between the public and private sector.

This particularly suits the country’s international position as a main economic player and the MENA (Middle East and North Africa) hub on par with other global key markets such as London, New York, and Tokyo.

The UAE’s economy has remained sustainable thanks to its emphasis on sectors such as leisure & hospitality, financial services, and education. Training and development are widely considered key to ensuring the UAE continues its role as a centre if innovation for years to come. The future will be embraced with full confidence buoyancy even when the last barrel of oil has shipped as the nation invests in its capacities for enterprise and innovation – the country’s real wealth.

Despite the many challenges faced by the Middle East, the UAE has consistently conveyed a message of optimism to the world: it is a safe country, here to stay and do so at the top. i CFI.co | Capital Finance International

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> AJIL:

A Remarkable Growth Trajectory

A

JIL is a multi-purpose leasing company operating in Saudi Arabia. With clearly defined business objectives and shareholders of impeccable credentials representing a wide spectrum of business activity, AJIL ensures best practice and operational excellence in the delivery of financial solutions that meet customers’ specific needs.

AJIL is a financial leasing company that provides state-of-the-art financial solutions to a discerning clientele in the construction, transportation, 132

services, trading, and manufacturing sectors. As a closed joint stock company, it counts amongst its shareholders a number of distinguished Saudi companies as well as major international corporations. In less than fifteen years, AJIL has become a market leader.

AJIL’s vision is to maintain steady growth as the company diversifies its products portfolio and strengthens its position in each of the sectors served, further improves its rating, and consolidates its position as the leading financial CFI.co | Capital Finance International

services provider in the Kingdom of Saudi Arabia.

Employing best professional practice and operational excellence, AJIL strives to deliver client-centric financial solutions while exercising appropriate commercial prudence – enhancing shareholder value in the process.

The management team brings together many years of international leasing and financing experience, combined with the depth of specialist knowledge and sophistication expected from a professional

Spring 2015 Issue

and financing institution with shareholdings from both nationally and internationally recognised corporations such as Riyad Bank, Zahid Group Holding Company Limited, Mitsubishi Corporation, and other local partners. AJIL’s success gained yet another dimension in 2011 as total paid up capital was increased to $133.34 million. In 2012, AJIL marked another milestone by growing its total book size to beyond $ 1.36 billion.

BUSINESS PHILOSOPHY AJIL provides an inspired and informed approach to financing combined with prudent financial policies and a thorough, intuitive, understanding of its customers’ requirements.

The AJIL’s management team prides itself on its wealth of international financing experience, indepth industry knowledge, and creativity. Enjoying an excellent reputation and a leading position in the market, AJIL benefits from longstanding business relationships with major financial institutions throughout the Middle East.

AJIL offers innovative financing solutions in relation to the acquisition of capital assets such as equipment and machinery used in the construction, electrical power generation, material handling, industrial, medical, printing, agricultural, and engineering industries as well as trucks and buses used in the transportation and construction sectors, thereby allowing its clientele to fulfil contracts, realise projects, and achieve corporate goals.

AJIL seeks to provide innovative client-focused financial solutions by applying continuous improvements to its client related services.

AJIL’s team is determined to succeed and draws inspiration from challenges.

“Employing best professional practice and operational excellence, AJIL strives to deliver client-centric financial solutions while exercising appropriate commercial prudence – enhancing shareholder value in the process.”

company. With a firmly established and reputable position in Saudi Arabia, AJIL benefits from excellent business relationships with major renowned financial institutions throughout the Middle East.

MAJOR MILESTONES AJIL embarked on its successful voyage in 1997 as a captive finance company of the Zahid Group.

Soon after the completion of its first decade in business, AJIL was transformed into a closed joint stock company in 2008 – an independent leasing CFI.co | Capital Finance International

FINANCIAL HIGHLIGHTS AJIL has witnessed robust growth of business since its inception. Over the last six years, annual lease execution volumes went up from $365 million in 2008 to $730 million in 2014 with an aggregate lease portfolio worth over US$ 1,334 million. The same pattern is reflected at shareholders’ equity level total equity amounts to $ 232 million which, in conjunction with the excellent lease portfolio, holds the promise of strong future growth. The remarkable track record of AJIL is ongoing with other significant achievements accumulating.

The Sukuk Islamic bond issued by the company in 2012 claimed the coveted Best Sukuk Deal of the Year Award by Global Islamic Finance Awards held in Malaysia.

The financial performance translates the effort and commitment exerted by AJIL’s team which shows true dedication to providing the company’s customers with innovative services that carry a distinct competitive edge. AJIL has been expanding its market share and customer base throughout Saudi Arabia with its remarkable financial KPIs (key performance indicators) and high level of customer satisfaction ratings, thus enhancing its overall shareholders value.

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“The company is now present in fifteen cities and has attracted a 230-strong workforce of highly-skilled professionals.”

Azaz Ahmed Syed Mohammed

AZAZ AHMED SYED MOHAMMED Leadership, expertise, and experience: with one of the strongest track records in the Saudi financial services industry, AJIL General Manager Azaz Ahmed Syed Mohammed has placed his company on a track to solid and sustainable growth. During Mr Ahmed’s tenure, AJIL Financial Services became the largest leasing firm in the Kingdom of Saudi Arabia.

Mr Ahmed took over as general manager in 2009: “At the time, AJIL was a mid-sized firm looking for ways to expand its services and the scope of its operations. After the completion of a restructuring process, AJIL has managed to accomplish both objectives. The company is now present in fifteen cities and has attracted a 230-strong workforce of highly-skilled professionals.”

Along the way, a number of milestones were passed: in 2012, AJIL launched its first sukuk – the Islamic equivalent of a bond with the difference that the investor is granted a share of the underlying asset rather than hold part of a debt – for 500m riyals (GBP91m / EUR126m / USD133m) through AJIL Cayman, a special purpose company. “This was actually the first time such a credit enhanced structure had been employed in the kingdom by a non134

governmental issuer,” says Mr Ahmed pointing out that the sukuk – benefiting the Ryad Capital investment bank and Gulf International Bank – was significantly oversubscribed, signalling investor confidence in both AJIL and the quality of the instrument.

Mr Ahmed has also successfully diversified the company’s operations: “whereas AJIL was serving but a single sector in 2008, today the firm is active in multiple segments of the economy offering a broad range of financial services. We are actively supporting emerging companies and start-ups, considering that the Saudi economy is underpinned by strong core fundamentals.”

Despite the recent weakening of oil prices, AJIL’s general manager has no doubt that the Saudi economy will remain an exceptionally strong performer: “The kingdom is in a unique position with significant foreign asset reserves that enable the country to keep the pace of growth up regardless of any short-term fluctuations in the price of oil.” Mr Ahmed explains that a number of large-scale infrastructure development projects are currently underway and offer plenty of growth potential: “Most of these projects will take between five and seven years to complete and AJIL is well-poised to CFI.co | Capital Finance International

offer a major contribution to their successful execution.”

As a multi-purpose leasing company, AJIL offers bespoke financial solutions to construction, transport, and manufacturing businesses, amongst others, aiming to expand operations.

With the construction boom now well underway, AJIL has seen demand for its financial services rise as well: “Our company’s experience in offering innovative leasing solutions is without equal in the kingdom. With over $3 trillion of development projects to be launched in Saudi Arabia by 2020, opportunity abounds.”

Mr Ahmed is pleased to see that many Saudis who had moved overseas are now returning home to partake in the accelerated development drive: “I am actively engaged in a number of initiatives that will help the younger generation gather the knowledge and expertise this nation needs. This is a huge country with a virtually limitless potential. The optimised infrastructure now being put in place will inevitably lower the cost of oil production, recouping the loss of revenue caused by the currently depressed prices. When those prices rebound, as they must, profit margins will increase, leading to yet more growth. These are, indeed, exciting times for doing business in the kingdom.” i

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> GZA Group:

Smarter Living in the Middle East A new era has dawned in the Middle East. The region has been experiencing a shift in socio-economic needs, which has greatly impacted the populations’ living standards. That’s where development projects such as BeitMisk swooped in and seized the opportunity to break away from outdated infrastructure and unsustainable living arrangements. In return, BeitMisk offers modern residential and commercial apartment buildings, built with the residents’ requirements in mind and designed to be the harmonious continuation of their urban surroundings.

B

eitMisk secured its prominent international position by initiating and supporting smart and sustainable living and working solutions. The minimal level of environmental impact, efficient use of resources, and forward-thinking nature of its real estate developments earned the project the 2014 Best Smart City in the Middle East Award.

Spread over 655,000 square metres of green space in Lebanon’s mountainous Metn Region, BeitMisk offers the ideal blend of entertainment, culture, and leisure. It forms the perfect balance between a traditional residential village and a bustling city in a more modern, mixed ruralurban setting.

The development boasts a country club, a sports centre, and a culture and arts centre. It also offers world class amenities and comes with a range of built-in green hi-tech innovations. This series of integrated features have given BeitMisk’s design a considerable edge while providing residents, visitors, and the local workforce a healthier, more secure, practical, and sustainable environment.

The village is conveniently located merely minutes away from Central Beirut. It is easily accessible by a highway that strategically separates it from the hustle and congestion of the city.

SEAMLESS FIT The living arrangements found at BeitMisk vary from traditional or contemporary villas to townhouses, apartments, office spaces, and retail boutiques. Moreover, the entire project is nestled in the heart of a green mountain region and blends in seamlessly with its beautiful surroundings.

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Chairman and CEO: George Zard Abou Jaoude

CFI.co | Capital Finance International

Spring 2015 Issue

MiskTown

The entire village is well connected with stairways and pedestrian-friendly zones such as sidewalks and jogging trails that overlook the Mediterranean Sea. Around the village, inhabitants may enjoy a large number of uncongested green areas that encourage outdoor activities. BeitMisk also has an on-site tree nursery that is currently planning to plant an estimated 200,000 trees in the whole of Mount Lebanon. In addition, it has applied advanced water recovery systems and irrigation plants in all of its private and public gardens.

At the heart of BeitMisk’s green initiative lies MiskTown. The estate’s main square comprises three large piazzas and exhibits a series of residential and retail establishments to the around 10,000 residents. The vast green spaces, piazzas, and inviting pedestrian areas of MiskTown are also within reach of 21,000 surrounding households and accessible to over 30,000 people who work in the area.

By successfully merging the principles of smart urban design and pairing them with an ecoconscious way of life, MiskTown has earned the BREEAM (Building Research Establishment Environmental Assessment Methodology) certificate – the world’s most recognised indicator of eco-friendly development.

Master Plan

SMART SOLUTIONS In line with BeitMisk’s sustainable energy plan, the residential and retail spaces of the development and MiskTown are all powered by highly efficient and innovative sources of energy that were installed to improve the overall health and comfort of residents and guests alike. The site operates on smart solutions such as solarpowered heating systems, low energy lights, energy saving lifts, double exterior walls for improved insulation, innovative ventilation systems, and advanced VRV (Variable Refrigerant Volume) systems that heat and cool the premises at a lower cost – be it financially and environmentally.

Misk Town

Amber Neighborhood

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The village is well attended to and offers a range of custodial, maintenance, security, 137

MiskTown

and technological facilities and services that tremendously improve the quality of life onsite. BeitMisk and MiskTown include advanced firefighting, monitoring, and 24/7 security systems, as well as fibre-optic connectivity, and large common areas most of which are childfriendly. More importantly, the site is also well equipped to cater to individuals with physical disabilities.

Although BeitMisk was initially considered a high-risk investment, its principal backer, the GZA Group, went against the odds and proceeded with the execution of the project. According to the GZA Group’s founder George Zard Abou Jaoude: “We rolled up our sleeves and started working on it as soon as we got the green light.

We were particularly passionate about this project knowing that we would be actively contributing to creating a new vision for Lebanon and ultimately paving the way for future generations to enjoy a better quality of life.”

BRANCHING OUT Named after its founder, the GZA Group is George Zard Abou Jaoude’s biggest lifetime achievement.

The group principally incorporates George Zard Abou Jaoude’s real estate developments, activities, investments, and current expansion plans. Today, the GZA group is known as the backer of various real estate investment firms, thereby positioning itself as one of the largest real estate developers in Lebanon.

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M

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CM

Club House

MY

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CMY

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Meysan Villa

Over the years, the GZA Group has also branched out into different sectors, including resorts, media, and the automotive industry. Just under two years ago, the GZA Group added another valuable asset to its portfolio: Virgin Radio Lebanon. The radio station’s online and offline key performance indicators are a demonstration of excellence not only in Lebanon but worldwide.

Rawasi Neighborhood

Ward Neighborhood

On Facebook, the station has over 9.1 million likes and reaches over 300 million users with an impressive engagement rate. Moreover, one of the group’s latest achievements was to acquire the local dealership of the reputable automotive brand and Formula 1 icon Lotus. If the past offers any indication of what is yet to come, the GZA Group merits close attention in the years to come. i

Yasmine Neighborhood

Rawasi Neighborhood

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> SEDCO Capital:

Sound and Solid Investments Growing from a small family office in the late 1970s to become one of the world’s most notable Sharia asset management firms has been a metered yet meteoric rise for Saudi Arabia’s SEDCO Capital. The journey has been marked by several significant milestones: the company played a vital role in the development of the Dow Jones Islamic Index in 1999. In 2014, SEDCO Capital became the world’s first Sharia-compliant asset manager to join the United Nations’ Principles for Responsible Investment (UNPRI). This is the third year in a row that the company has been honoured with the prestigious Global Islamic Finance Awards’ (GIFA) Islamic Finance Social Responsibility Award.

F

or SEDCO Capital, its remarkable success may be ascribed to the company’s investment solutions that combine environmental, social responsibility, and governance (ESG) standards with the Islamic guidelines widely known as Sharia. Recognising the commonalities between the Islamic and ESG concepts – such as negative screening and creating sustainable economies – SEDCO Capital adds extra value to existing practices with a prudent approach, active involvement, and diligent management.

Built on a sterling history of advisory and management services, SEDCO Capital currently manages assets in a diversified spectrum of realty, equities, and other businesses with total assets under management (AUM) touching US$ 3.8 billion. The company has the largest set of Sharia funds registered in Luxembourg, and its investments span the globe.

With its solid track record, highly qualified professional team, and well-studied processes and strategies, SEDCO Capital continues to be amongst the major players in the asset management industry both regionally and globally. Meanwhile, parent company Saudi Economic and Development Company (SEDCO Holding) – founded in 1976 by the Bin Mahfouzs – one of Saudi Arabia’s leading banking families – continues to grow a handsome portfolio of fullfledged subsidiaries.

“The hallmark of SEDCO capital’s operations is formed by a corporate philosophy founded on the principles of ethicality, diversity, and partnership.”

RESPONSIBILITY WITHOUT BORDERS The hallmark of SEDCO capital’s operations is formed by a corporate philosophy founded on the principles of ethicality, diversity, and partnership. While the product offering is broadranged enough to satisfy most investors, it also covers several styles and strategies. Meanwhile, business relationships are always built on the partnership model – ensuring transparency, building mutual trust, and facilitating shared success.

While covering all aspects of asset management, what truly sets SEDCO Capital apart is the company’s diligent adherence to innovation and Sharia Law in the field. For instance, the company has provided clients with a wide range of unique investment solutions, many of which were first-of-kind available on Sharia-compliant platforms. Of these, no less than ten are also fully ESG-compliant.

With a choice of 14 different global equity funds, together with strong real estate and private equity offerings, SEDCO Capital can provide total

asset-allocation in a well-diversified portfolio for any Sharia sensitive investor located anywhere in the world. In logical progression from this leadership in Sharia investing, the company is also considered a pioneer in the still-nascent global concept of socially responsible investing.

INCREASED FOCUS ON REALTY INVESTMENTS With a keen focus on strong management functions and a value-oriented approach to new investment products, SEDCO Capital has emerged as a leading international player in the realty investment sector. Its range of clients is just as diverse – varying from sovereign wealth funds and pension funds to financial institutions and family offices, institutional investors, and ultra-high net worth individuals.

From its first modest investment in 2011, the company’s portfolio on its home turf Saudi Arabia has grown to include eight assets under the SEDCO Capital Real Estate Income Fund I (SCREIF I) – with a portfolio value of approximately SAR 596 million (last valued in December 2014).

The core fund focuses on the acquisition of highquality income-generating assets in the kingdom, with a target return of 7 per cent annual distribution. Late last year, the fund’s December acquisition of Burj Al Hayat in Riyadh was worth SAR 40 million and increased the portfolio’s value by 4.1%.

“With its solid track record, highly qualified professional team, and wellstudied processes and strategies, SEDCO Capital continues to be amongst the major players in the asset management industry both regionally and globally.”

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Spring 2015 Issue

SEDCO Capital CEO during Hope Leadership Summit Atlanta 2013

CEO: Hasan Al Jabri

The end of last year also saw the launch of SEDCO Capital Real Estate Income Fund II (SCREIF II), further consolidating the company’s regional position as a best in-class real estate investment manager. SCREIF II’s target size has been set at SAR 500 million and a separate account added recently offers a specialised strategy for individual investors allowing them to navigate alongside different stages of the business cycle, measured by durability and sustainability.

Unsurprisingly, this dynamic has expanded client base and improved market penetration.

education firm Nord Anglia International to develop a state-of-the-art facility for 2,000 students in Houston, Texas. The first built-tosuit project of its type involves an international tenant in a long term triple net lease arrangement. SEDCO Capital has also tapped into real estate in Texas’ other big city Dallas, with an investment in senior care housing – a sector that is booming on account of current US demographic trends.

SEDCO Capital is also pursuing new European real estate deals on top of the $300 million already invested in the sector. Plans are afoot to distribute its Luxembourg fund range through two European investment firms in addition to incumbent Credit Suisse. This European strategy particularly aims at bridging crossover opportunities between socially responsible and Sharia compliant options, and widening their appeal to conventional investors.

In February, SEDCO Capital partnered with commercial real estate player Madison Marquette to acquire Coral Landings III – a 176,575 square feet neighbourhood retail centre in Margate, Florida. This acquisition is the first in a programmatic joint venture to target high value retail, office, mixed use and multi-family assets in urban US markets where revenue potential can be enhanced with strategic leasing and repositioning. During acquisition, Coral Landings III was 85% leased to national tenants that included HomeGoods, Best Buy, and Jo-Ann Fabric & Craft.

BUILDING ON SUCCESS SEDCO Capital’s plans for the year ahead and beyond centres around acceleration in the realty division, with new senior members of staff, planned transactions in the build-to-suit offering, and the development of another Saudi Arabia focused realty fund. Strategic upgrades to operational, administrative, and risk management capabilities are being simultaneously buoyed by investments in compliance, audit, finance, treasury, and marketing. Re-negotiations of service contracts, recapitalising broken deals, and harnessing the potential of mispricing in distressed markets are also on the anvil.

BEYOND SAUDI SHORES Over the last three years, SEDCO Capital executed international realty transactions worth $1 billion through the acquisition of 19 new investments in key markets such as the US and the UK, and the successful sale of 21 investments in France, Malaysia, Singapore, UK, and Mexico.

The company focuses on non-cyclical and need-based sectors including retail, residential, industrial, and healthcare. Engaging in active asset management through an institutional approach has also led to sterling global partnerships with the likes of Townsend, LaSalle Investment Management, Palmer Capital, Bentall Kennedy, Lexington Realty Trust, and Group CBRE Global Investors.

In the US, where SEDCO Capital has a history of realty transactions dating back to 1976, the latest milestone is a strategic partnership with

In the UK, SEDCO Capital has acquired Blakelands Industrial Estate – the dominant industrial property in Milton Keynes and a strategic location for regional and international distribution centres. It has also acquired Colne Valley Retail Park, a leading furniture park in Watford with strong tenants including DFS, Dreams, Harveys, Carpetright, and Oak Furnitureland.

CFI.co | Capital Finance International

The company is constantly extending its physical and metaphysical boundaries by participating in regional and international conferences. Its annual Windows on Markets event – now in its fifth year – focuses on trends, challenges, and opportunities in international realty and sees wide participation by global advisors and experts alike. i 141

> CFI.co Meets the Founder and Managing Partner of Growthgate:

Karim A Souaid

K

arim A Souaid is the founder and managing partner of Growthgate Capital. Under the leadership and strategic guidance of Mr Souaid and his partners, Growthgate Capital has initiated and managed investments in seven platform companies, advised on twelve bolt-on acquisitions, conducted four liquidity events, and realized a debt-free capital appreciation of 200% from 2008 to 2014, representing a NAV (net asset value) of circa $400m as of December 31, 2014.

All exits completed to date have realised returns of a median multiple of 2.25x on the originally invested capital.

According to a recent finding by Bella Research Group, Growthgate Capital’s performance in terms of multiple of invested capital (MoIC) was in the top quartile when compared to the major emerging market private equity benchmarks: Cambridge Associates’ Global ex US Developed Markets PE/VC; Cambridge Associates’ Emerging Markets PE/VC; Preqin Global PE/VC; and Preqin Global Growth PE/VC. Growthgate Capital’s returns substantially outperformed several relevant emerging market benchmarks, such as the MSCI Arabian Markets (9.55% annual outperformance); MSCI GCC Countries (8.64%); and MSCI Emerging Markets (7.51%). Growthgate modestly outperformed the Russell Global Index and the Russell Emerging Markets Index with aggregate returns 6% and 3% greater than the indices, respectively. The S&P 500 and Russell 3000 indices, which have performed the most strongly of the seven public indices considered, both outperformed Growthgate’s investments as of December 31, 2014.

Prior to forming Growthgate Capital by end 2006, Mr Souaid was managing director of Global Investment Banking at HSBC (Middle East) starting in 2001, where he joined as a result of the acquisition of CCF (Crédit Commercial de France) by HSBC. At HSBC, Mr Souaid was responsible for regional activities in the key areas of corporate finance, privatisation, M&A, corporate restructurings, and equity capital raising. His experience in the Middle East started in 1995 and has encompassed all GCC markets, the Levant, Egypt, Morocco, as well as Iraq and Iran, covering various sectors including banking, telecoms, minerals & mining and energy.

Mr Souaid successfully led several privatisation mandates in the Middle East including Industries of Qatar (Qatar); Arab Potash Company, and Jordan Phosphate Mining Co. (Jordan); Oman 142

Founder and Managing Partner: Karim A Souaid

Telecommunications Company; Emirates Building Materials Company Arkan and Emirates Feedstock & Mineral Water Company Agthia (UAE); and the dual Mobile Telephony Operators (Lebanon).

Mr Souaid has led, between 1990 and 1994, a successful career as a corporate finance attorney in New York working at Gordon Hurwitz Butowsky Weitzen Shalov & Wein, a leading Wall Street law firm specialised in M&A and securities offerings.

In 2006, Mr Souaid advised on and led several landmark IPOs including Dana Gas, the first privately-held natural gas company in the Middle East, and the international IPO of Investcom, the leading emerging markets telecom. In the field of M&A, Mr Souaid has, amongst other deals, advised BaTelco (Bahrain) on its acquisition of Umniah Telecom (Jordan) and TECOM (UAE) on its acquisition of Inter-Route – the EU broadband network operator. He has also advised HSBC on its acquisition of Dar Al Salam Bank (Iraq).

Mr Souaid holds an LLB from the Jesuit School of Law at St Joseph University (Lebanon); an LLM from Harvard Law School, and several certificates from the Executive Programme at Harvard Business School in the areas of corporate valuation and corporate restructuring.

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Mr Souaid is a member of the New York State Bar Association, and serves on the board of EL Bank SAL. He is also an active contributor to Harvard’s University International Negotiation Programme. i

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> UAE Property Market:

Dubai Remains Slow as Abu Dhabi Ploughs On

By Shehryar Qureshi

Cooling measures in Dubai’s real estate sector continue to weigh on prices and transactional activity, bringing stability to the realty sector and boosting investors’ interest in the region. The 25,000 residential units slated for delivery in 2015 are expected to further lower the rate of rental increases, however, if the emirate manages to boost its population, the decline could be neutralised in the wake of an increased demand for accommodation, leading to a stabilised market.

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onsidering the inflow of expats leading up to the World Expo 2020, availability of affordable housing for the mid-income sector has become all the more relevant.

In terms of popularity and search trends, market research tools showed Dubai Marina to be on top of the list of the most sought-after localities for buying property in Dubai, followed by Downtown Dubai and Jumeirah Lake Towers.

Meanwhile, Abu Dhabi continued with its slow yet steady growth during the first quarter of 2015. With residential units located in central areas enjoying sustained rental price growth, property options in suburbs such as Mohammad bin Zayed City, Khalifa City A & B, and Mussafah gained popularity among price-conscious residents seeking affordable housing alternatives in the emirate.

Apart from the proximity to Abu Dhabi International Airport and Dubai, the increased number of schools, community retail centres, and reliable healthcare facilities are now attracting more families to the suburbs of Abu Dhabi.

Other than that, the recent completion of new units on Al Reem Island may have limited impact on the prevailing residential rental rates as they are being delivered just two weeks ahead of Cityscape Abu Dhabi, a major property show expected to bolster residential demand. The number of new residential units being delivered is actually less than the new job opportunities being created in the emirate, and this may increase demand further.

DUBAI SALES ANALYSIS Studio, 2- and 3-bed apartments in Dubai saw moderate to good rises in prices quarter-onquarter, while 4-bed and 1-bed apartments lost value and saw lukewarm demand in Q1 2015. Studio apartments experienced a 3.64% quarter-on-quarter increase in prices on the back of strong demand. The average price for Dubai studio apartments hovered around AED 734,000 (£134,000 / €186,000 / $200,000).

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“Four-bedroom apartments saw a very significant drop in prices, with a total year-onyear decline of 12.60%, which affected average apartment prices in the overall analysis.”

Two- and three-bedroom apartment prices increased 1.11% and 4.02% respectively across Q1 of 2015 in comparison to the same time period in 2014, with average prices in this year’s first quarter being AED 2,679,336 and AED 3,873,000, respectively.

Meanwhile, the prices of single bedroom apartments fell 2.77% year-on-year and settled on an average of AED 1,523,300. Four-bedroom apartments saw a very significant drop in prices, with a total year-on-year decline of 12.60%, which affected average apartment prices in the overall analysis.

Collectively, apartment prices in Dubai decreased 5.76% on average in this year’s first quarter compared with Q1 of 2014, owing largely to dwindling demand for, and decreasing prices, of larger (4 and 4+beds) apartments in the emirate.

The number of transactions also dropped 37.61% in a quarter-on-quarter analysis conducted by bayut.com based on figures obtained from the Dubai Land Department.

DUBAI RENTAL ANALYSIS Increasing rents across the emirate during 2014 has resulted in a higher interest in the affordable residential options of Bur Dubai and Jumeirah Lakes Towers. These two localities even broke the dominance of Downtown Dubai across the year as the second-most favoured residential location for renting in Dubai. Business Bay also saw a commendable increase in interest due to the speedy development of the Dubai Water Canal and conversion of office buildings to residential spaces.

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This year’s first quarter brought along an increment in all apartment types, the largest of which was a 15.29% quarter-on-quarter rise in the studio apartment category. Rents of all the other apartment types saw a more controlled and gradual rise.

Expectations of an across-the-board decline in rental prices in Q1 2015 proved to be wrong, and the solid demand for residential units kept rents afloat in many localities while others did indeed lose in rental value. However, owing to the number of residential units expected to be delivered later in the year, a wider quarter-onquarter rental decline is still expected once the new units hit the market.

One-bedroom apartment rentals rose 3.39% quarter-on-quarter with average annual rentals going up to AED 101,667 from last year’s AED 98,333.

Two- and three-bedroom apartments also saw a minor increase of 1.28% and 5.74%, respectively. Average annual rental yields in these categories are currently AED 158,333 and AED 215,000 in that order.

Four-bedroom apartment rentals increased 4.21%, quarter-on-quarter, going up to an average of AED 305,000 at the end of Q1 2015.

ABU DHABI SALES ANALYSIS With the exception of slight bumps here and there, the real estate market of Abu Dhabi performed considerably well and continued to strengthen throughout the first quarter of 2015.

Despite the general forecast of sustained growth across all segments, the market saw a drop in the prices and rentals of studio apartments, depicting a shift of buyers and tenants towards more spacious residential offerings in the emirate.

The prices of studio apartments across Abu Dhabi experienced a 6.15% quarter-on-quarter drop in Q1 2015. However, the prices of 1-, 2- and 3-bedroom apartments saw increases of

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UAE: Abu Dhabi

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UAE: Dubai Marina

4.75%, 1.23% and 0.29% quarter-on-quarter, respectively.

The 4+ bedroom apartment category registered a quarter-on-quarter rise of 19.04% in prices to finish as the favourite among investors.

Considering the mammoth increase, it can be safely said that buyers in Abu Dhabi have become more inclined towards larger units.

In the residential pipeline, the City of Lights development on Reem Island has delivered the lion’s share of the new supply in 2015, adding 906 new apartments to the market in the first phase of its Hydra Avenue project. Further expected prime residential unit supply in the emirate also includes the C21 and C22 towers

by Aabar Investments, expected to be delivered by mid-2015.

ABU DHABI RENTAL ANALYSIS The residential offerings of Abu Dhabi continued with their upward trends in rentals during the first quarter of 2015. There was, however, a decrease in the rental prices of studio apartments, which coincides with the decrease in sale prices highlighted above.

in rental increases of 7% and 9%, respectively.

The larger residential offerings such as 3- and 4-bedroom apartments registered comparatively marginal rental increases of 3% and 1%, respectively.

FINAL THOUGHTS With a substantial number of additional units (25,000) slated for entry into the UAE market throughout 2015, the residential sector is likely to feel some pressure. This may force owners to offer lucrative incentives to prospective tenants, like rent-free periods and special allowances in the form of reduced rental values, in order to keep their holdings relevant and competitive.

The residential sector also registered a quarteron-quarter dip of 2% with respect to the rate of sale of units. Office space rentals are expected to experience consistently strong demand ahead of Dubai Expo 2020, especially those situated in various free zones.

The rest of the apartment categories experienced modest increases in rents during the first three months of 2015. Quality projects in free-hold areas, such as Khalifa City A, were the most sought-after and the occupancy rates were also seen to be increasing across all of their residential segments.

Apartment rentals in Dubai exhibited fragmented growth patterns across various localities. It was observed that prime locations offering highend amenities continued to generate interest and subsequently increases in rentals. On the contrary, residential communities located farther away from the city centre experienced declines, possibly due to the lengthy daily commute to work and other amenities and facilities. However, renewed infrastructure developments efforts by the developers may help reverse the prevalent downward trend.

According to the online database bayut.com, rents of studio apartments in Abu Dhabi saw an average decrease of 11%, which is accounted for by the shift of tenants to more spacious options available elsewhere in the emirate. One- and twobedroom apartments were particularly favoured among tenants, and this added demand resulted

Abu Dhabi is expected to continue with its sustained growth pattern in the residential market. With a limited number of expected units lined up and an increase in business and job opportunities, the emirate may see a subsequent rise in population of expats leading to a heightened demand. Stable growth trends

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are expected to continue even with the lack of interest in studio apartments among the residents. Investors with holdings in the suburbs of Abu Dhabi are set to see a period of increased interest as their assets continue to gain in popularity.

“We continue to see strong rental demand in prime areas and there are good bargains available in the market for investing in property. There is a healthy job market which continues to blossom and this bodes well for the real estate market in the years to come,” said bayut.com CEO Haider Ali Khan. i ABOUT THE AUTHOR Shehryar Qureshi is a manager at the online UAE real estate portal bayut.com.

MOST-SEARCHED FOR LOCATIONS FOR BUYING PROPERTY IN DUBAI

1. Dubai Marina 2. Downtown Dubai 3. Jumeirah Lake Towers 4. Dubai Sports City 5. Dubailand MOST-SEARCHED FOR LOCATIONS FOR RENTAL PROPERTIES IN DUBAI

1. Dubai Marina 2. Jumeirah Lake Towers 3. Bur Dubai 4. Downtown Dubai 5. Business Bay MOST-SEARCHED FOR LOCATIONS FOR RENTAL PROPERTIES IN ABU DHABI

1. Al Reem Island 2. Khalifa City A 3. Al Raha Beach 4. Mohammed Bin Zayed City 5. Al Reef

Spring 2015 Issue

> CFI.co Meets the Chairperson of Concord International Investments Group:

Mohamed S Younes

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gypt’s moment has arrived. Whereas just a few years back interest was minimal, today investors are clamouring to get in.

“Now, people come to us,” says Mohamed S Younes, chairperson of Concord International Investments Group – a New York City firm established in 1988 and present in Egypt since 1994 where it became the first foreign fund to by fully licensed by that country’s central bank.

Mr Younes is happy to report the return to Egypt of both corporate and institutional investors: “The interest is currently very strong with more buying than selling going on.” The Concord Group, with a solid footprint in the country, just added a new fund to its line-up, exclusively dedicated to Egyptian equities. This fund will hold between $200m to $300m and is finding ready takers.

“While our firm kept quite busy during the recent spate of lean years, opportunity has come knocking and we are ready to reap its rewards.”

Mr Younes emphasises that the Concord Group is exceptionally well poised to maximise its exposure to the economic upswing currently underway: “The recent investor conference in Sharm El Sheik placed Egypt back on the map. The event heralded the end of about fifty years of stagnation.”

Although he has seen previous governments launch similar development drives, Mr Younes is convinced that the present administration possesses the stamina to obtain results: “Now, things actually get done. Take the project to expand the capacity of the Suez Canal to allow for two-way ship traffic.

That is a major undertaking which normally would have taken ages to complete. However, by August the project will have been completed.”

According to Mr Younes, this means that the medium-term outlook is positive indeed: “Over the short run, it is relatively easy to get things moving.

For the medium-term to look good, it is necessary that the government keeps its promises and maintains an investor-friendly climate that allows projects to get off the ground.”

Mr Younes sees a changed climate in Egypt – and it’s not due to global warming: “The impetus to keep the momentum is there. A remaining issue is, perhaps, that Egypt has historically not been very good at marketing the country to investors as a welcoming and safe harbour.”

While the new era takes root, it is important for investors to realise that success depends to a large degree on maintaining a local presence: “Change comes quickly here. This requires both agility and flexibility on the part of managers, in addition

Chairperson: Mohamed S Younes

to local knowledge. It is simply impossible to successfully manage private equity investments in Egypt from an office in, say, London or New York.”

If a solid local presence is a prerequisite to invest successfully in Egypt; so is the selection of a local partner: “Finding the right partner is key. Now, as far as statements go, that may be an open door.

However, the choice of a partner is nonetheless critical if investors are to become thoroughly acquainted with the local scene – as they must.

Investors need to see the reality as it is, and not through rose-coloured glasses. Egypt is an exciting place to do business but, just as anywhere else in the world, there are pitfalls to look out for. A partner with local expertise will know what to look for and how to properly navigate the waters.”

One particular aspect of the Concord Group’s approach to private equity is the provision of operational expertise to the companies it has a vested interest in. The firm does not merely contribute with financial know-how, but provides the managerial knowledge required to optimise CFI.co | Capital Finance International

processes and reach peak efficiency. To this end, the Concord Group maintains a number of experienced business managers on its staff – mostly former CEOs of major Egyptian corporations – who help drive these companies to operational excellence.

Mr Younes: “This is an important layer, often overlooked. Not many investment firms have the capability to actually manage, on a day-today basis, the operations of companies whose performance will ultimately determine the return on our investment. The experience we gained this way made the Concord Group decide to lengthen the maturity of its investments from an average of seven years to between ten and twelve years. This longer timeframe allows us to balance out possible economic slowdowns caused by atypical events.”

The approach of the Concord Group has yielded remarkable results with returns coming in far above the benchmarks and well beyond market averages. “Success attracts attention, and luckily for us: we do not suffer the least bit from a lack of attention.” i 147

> Growthgate Capital:

Success via the 3M Model

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rowthgate Capital was established in 2007 by a group of partners that included seasoned corporate financiers and investment bankers with a solid track record of deals (in excess of $6bn) including complete IPOs, mergers and acquisitions, and privatisations throughout the MENA (Middle East and North Africa) region.

To that end, the founders solicited the participation of under twenty shareholders, including stateowned banks, pension funds, and single-family offices from the region who contributed $200m in permanent capital. The mission of the firm is to participate via direct equity in mid-market companies located principally in the GCC (Gulf Cooperation Council) and other select markets of the MENA region. The firm follows a buy-andbuild strategy that centres on investing growth equity capital into profitable companies with 148

the ultimate aim of turning already successful local firms into regional champions. Growthgate Capital defines and pursues its targets according to the 3M investment model: Management: experienced, ethical, and with a readiness to undertake the path for growth in terms of increasing middle management bandwidth, delegating authority, installing reporting and information systems, and applying key performance indicators.

Model: simple and tested. Growthgate Capital does not seek to invest in complex businesses, or in green field or brown field ventures. The firm shies away from regulated industries, leveraged companies, and oversized asset bases. Rather, Growthgate Capital prefers targets that are nimble, have a proven track record in their sector, and are scalable beyond their domestic markets.

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Markets: Growthgate Capital values stable and growth-prone markets over demographics or any other indicator. Politically, socially, and judicially stable jurisdictions are the preferred choices (GCC + Morocco).

Since 2007, the company has deployed its capital into eight portfolio companies located mainly in the GCC and covering the following sectors: • Private aviation management and engineering • Waste management services • Logistics services • Construction and building materials distribution and manufacturing • Food processing and distribution • Steel design and fabrication • Animation and themed entertainment • Biometrics and credentialing services

Spring 2015 Issue

Figure 1: Growthgate’s MoIC Compared with Private Benchmarks

Figure 2: Growthgate’s IRR Compared with Private Benchmarks

All, or a substantial part, of the capital was deployed by end of 2010. Following the recovery of the regional markets from the shocks of the Arab Spring (2011 - 2013), Growthgate Capital completed three exits: Q1 2013 – The sale of its stake in Roots Steel International (Saudi Arabia) via a private placement.

Q3 2014 – The sale of its stake in Gama Aviation (UAE) through a reverse takeover of Hangar 8 plc and the subsequent listing of the combined company on AIM (Alternative Investment Market, a submarket of the London Stock Exchange).

Q4 2014 – The sale of its stake in Able Logistics Group (UAE) through a cross-border M&A to Kerry Logistics of Hong Kong.

“The mission of the firm is to participate via direct equity in mid-market companies located principally in the GCC (Gulf Cooperation Council) and other select markets of the MENA region.”

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RESULTS Growthgate’s investments (subject to the adjustments) generated a MoIC of 1.80 and a net IRR of 10.92%. Compared with all relevant benchmarks, Growthgate’s MoIC is in the top quartile. Growthgate’s IRR is above the median value for each benchmark, but below the top quartile (i.e., in the second highest quartile). These results are illustrated in Figure 1 (MoIC) and Figure 2 (IRR) above.

Today, Growthgate Capital has grown its assetsunder-monitoring to circa $1.6bn and its equity capital to circa $400m, as per the most recent NAV (net asset value) report prepared by E&Y in London.

The company’s performance review results, as reported by the Bella Research Group, have placed Growthgate Capital’s, in terms of multiple of invested capital (MoIC), in the top quartile when compared to the major emerging market private equity benchmarks. Growthgate Capital’s returns also substantially outperformed several relevant emerging market measures. i 149

> CFI.co Meets the CEO of Oman UAE Exchange:

Tonny George Alexander

H

olding a Master’s Degree in Financial Management, Tonny George Alexander heads Oman UAE Exchange as CEO since the company’s launch in 1995.

Mr Alexander joined UAE Exchange in 1988 and served the organisation in different functions before being invited by the management to spearhead the company’s move into the Sultanate of Oman – the first-ever full-fledged operation of UAE Exchange outside the Emirates. His varied exposure and experience include operations, treasury, and information technology.

Instrumental in assembling high-performing teams, Mr Alexander loves to lead from the front.

Under his stewardship, Oman UAE Exchange grew quickly to become the largest money exchange company in the sultanate. Today, the firm operates a network comprised of more than fifty outlets across the country, venturing into untrodden territories and offering convenience and superior service to the customers.

Mr Alexander nurtured a clear organisational vison and worked diligently towards creating a distinct financial institution through excellence in the delivery of services, state-of-the-art technology, human capital, thus providing customers with a superior service experience. His knowledge driven approach ensured Oman UAE Exchange its leadership position.

Creating a mark on the leadership front, Mr Alexander was acknowledged as one of the top business leaders in the country. Under his leadership, the company was voted as one of the top ten employers in Oman. His unwavering commitment, and remarkable passion, brought the company significant recognition as one of Oman’s super brands - the only one amongst exchange houses. The coveted recognition has been awarded annually since 2009.

According to the Oman Observer Survey conducted in 2011, the company was chosen as the No 1 brand amongst exchange companies. It was also ranked seventh amongst the sultanate’s 180 greatest brands. In the 2015 Oman Observer Survey, Oman UAE Exchange maintained the top spot as the premier money exchange. The Company also bagged the BIZZ Award for the last three consecutive years.

Taking inspiration from Dr BR Shetty – the visionary behind UAE Exchange – Mr Alexander served the diaspora as the first elected chairman of the Board of Directors of Indian Schools in Oman from 2011 to 2014. “Serving the society 150

CEO: Tonny George Alexander

in which one was nurtured and supported is of paramount importance. Dr. Shetty always reminds us,” adds Mr. Tonny. The Indian Schooling System boasts 19 schools imparting education to over 40,000 students of different nationalities, which predominantly consists of Indian origin.

18001:2007 for occupational health and safety.

Oman UAE Exchange also takes credit for being the only exchange company in Oman to have SWIFT connectivity, offering superior fund transfer facilities to its customers through a large network of correspondent banks.

In building a solid organisation that adheres to international standards and best practices, Mr Alexander now presides over a company that is – to date – the only IMS certified exchange house which includes ISO 9001:2008 for quality, ISO 14001:2004 for environment, and OHSAS

Built on core values of integrity, commitment, empowerment, and care, Oman UAE Exchange imparts world class service to its customers: “A passion to serve and deliver on promises made is what makes the organisation stand apart from others,” concludes Mr Alexander. i

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>

THE EDITOR’S HEROES

Random Acts of Kindness Paint a Pretty Picture

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From a runner, to an educator, to a philosopher: the CFI.co universe of heroes runs the gamut from action to thought and beyond. As a concept, heroism is tricky to nail down. The dictionary informs that a hero is a person of distinguished courage or ability, admired for brave deeds and noble qualities.

In the classical world, a hero was a being with godlike abilities and beneficence who came to be honoured as a divinity.

Whatever the preferred definition, heroes are easy to detect: society looks up to them in admiration. Just as crooks may be instantly recognised – and shunned and shamed – heroes are effortlessly identified – once they step to the fore. That, however, doesn’t come naturally to heroes. As befits their status, heroes often shy the limelight.

A fixture of CFI.co since its earliest days, heroes offer the magazine a way to celebrate the people who provide beauty to a world beset by challenges – a euphemism employed to obfuscate the misery and violence still all too common to the forward march of humanity. Luckily for every Jihadi John – a man who perhaps epitomises evil – there are countless people who go about their daily lives leaving behind smiles, warmth, and happiness.

Why not concentrate on the good folks, such as the mystery man who left a heart-warming note to a mother struggling to teach her son good manners while riding the London tube – an endeavour of epic proportions on the best of days.

Random Acts of Kindness (RAK) merit celebration. Moreover, they often act as a catalyst for “paying it forward.” Take Glen James, a man living rough on the streets of Boston, who found an envelope containing

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$42,000 and went straight to the police so that the cash could be returned to its rightful owner. When Ethan Whittington read about this, he immediately set up a fund for Glen.

Spurred on by social media, people from around the world sent in donations. Before long the fund reached $100,000, getting Mr James off Mean Street and giving him another chance.

And then there is the moving story of the WW2 hero who passed away in solitude. As no family or friends could be found to attend the service, funeral director Eddie Jacobs placed an appeal in a Lancashire community newspaper. It was picked up on social media and went instantly viral. Over 700 people answered the call and travelled from far and wide to pay their respects to Harold Jellicoe Percival.

Mr Percival was one of the last surviving veterans of RAF No. 617 Squadron of dam busting fame. The one and only love of his life, Jessie Campbell, succumbed to tuberculosis in 1935. Since then, Mr Percival had been a very private man, working in Australia for a number of years and leading a nomadic existence trekking around Britain with a backpack and picking up odd jobs along the way.

Contrary to what the nightly news portrays, the world is an inherently good place that suffers from a small number of derailed souls who insist on imposing their views and lifestyles on others – and do not think twice about employing the most vicious of ways to attain their goals. It is, of course, quite sad that these people fail to see the beauty of that which they work to destroy. Happily, they may be ignored for now. The following pages celebrate ten people – out of millions – who try to make a difference, and often succeed. i

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> ALISHER USMANOV A Likeable Oligarch Billionaire Alisher Usmanov is a Russian oligarch with a twist. Mostly known for his thirty percent stake in Arsenal FC, Mr Usmanov is also famous for the in-your-face style with which he habitually displays his vast personal wealth.

Flying about in his custom-fitted Airbus 340 wide-body jet and maintaining a few pricey properties in London, does not necessarily make Mr Usmanov a figurehead of frugality. However, this perhaps archetypical representative of Russian nouveau riche also has a few powerful, and surprising, tricks up his sleeve which possibly constitute redeeming qualities.

In December 2014, Mr Usmanov paid $4.8 million (£3.18m) at an auction in New York City for the Nobel Prize Medal awarded to US molecular biologist James Watson for his research on the structure of nucleic acids. This work later led to the discovery of the double helix structure of DNA. Dr Watson shared the 1962 Nobel Prize for Physiology or Medicine with fellow researchers Francis Crick and Maurice Wilkins.

Dr Watson had approached Christie’s, the world’s leading action house, to offer his Nobel Prize medal for sale in order to raise funds for scientific research. After he put in the winning bid, Mr Usmanov promptly returned the medal to its previous owner: “In my opinion it is unacceptable that an outstanding scientist must sell a medal that recognises his achievements.”

The Russian billionaire also noted that Dr Watson’s work has proved essential in the search for a cure for cancer: “My father died of that disease. To me it is important that the money spent on this memento helps support scientific investigation while the medal itself stays with the owner who deserves it.”

Mr Usmanov features prominently on the Sunday Times Giving List which shows him donating no less than £114 million to worthy causes in 2014. Going by the past few years, it would seem that Mr Usmanov is determined to annually gift about one percent of his £10bn fortune.

The Russian bestows his largess mostly on the arts, science, and sports. A talented sabre fencer who represented his native Uzbek SSR (Soviet Socialist republic) at international competitions, Mr Usmanov in 2012 was reelected to a second term as president of the International Fencing Federation. He also sat on the council of the 2014 Sochi Winter Olympics.

As a patron of the arts, Alisher Usmanov is a man of great gestures. He regularly buys up great collections which are subsequently donated to museums. In 2007, Mr Usmanov managed

to avoid the piecemeal sale of the famed art collection owned by the late Russian cellist Mstislav Rostropovich. He plopped down £20m for the collection and donated it to the Russian state. The artwork is currently housed at the Konstantinovsky Palace near St Petersburg.

Mr Usmanov also intervened to buy up the rights to a large collection of rare classic cartoon movies which he entrusted to a Russian television network for children.

Mr Usmanov made his fortune in the wild and confusing years following the collapse of communism with investments in mining and heavy industry. He has since diversified into technology, publishing, and broadcasting. Mr Usmanov wisely keeps close to those in power and is regularly showered with awards and medals bearing rather pompous titles such as

the Order for Service to the Fatherland IV Class.

He also dislikes press freedom, especially when it inconveniences his friends in high places, sacking the editor of his Kommersant Vlast magazine after the publication of a picture showing a ballot paper with a scribbled note suggesting President Vladimir Putin engage in a lascivious act.

Still, as Russian billionaires come, Mr Usmanov is one of the least offensive and, in fact, quite likeable. He shows genuine empathy to those in need and displays an understanding of those who may dislike him, going so far as to publically commiserate with the journalists of Kommersant Vlast when they expressed their anger over the dismissal of their editor: “Emotionally, I can understand their feelings. I only hope they may return the favour.”

“In December 2014, Mr Usmanov paid $4.8 million (£3.18m) at an auction in New York City for the Nobel Prize Medal awarded to US molecular biologist James Watson for his research on the structure of nucleic acids.”

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Spring 2015 Issue

> DIANNE FEINSTEIN Keeping the Eavesdroppers in Check Even a US senator can face an uphill battle.

Such it is with Dianne Feinstein, vice-chair of the Senate Intelligence Committee in charge of monitoring the entities that monitor global society.

Hers is an unenviable position: Mrs Feinstein has to help keep the expansive US intelligence community on the straight and narrow while ensuring that possible threats and conspirators are identified early-on and stopped.

Though of impeccable Democrat stock, Mrs Feinstein made few friends on the left with her vigorous defence of the need to breach the privacy of ordinary citizens in order to obtain the big data required to map presumed terrorist networks. She has repeatedly branded whistle blower Edward Snowden a “traitor” for disclosing the mass surveillance programmes involving the National Security Agency (NSA) and others.

She did, however, condemn the tapping of the mobile phones of friendly foreign leaders such as German Chancellor Angela Merkel.

Mrs Feinstein also supported a number of bills that include backdoor provisions through which the NSA may continue to conduct warrantless searches.

Perhaps not the stuff heroes are made of.

However, Senator Feinstein did cause quite a stir when she labelled the US government’s rendition programme a “stain on our values and on our history.” She has since been on the Central Intelligence Agency’s case, ensuring that it operates within well-established legal bounds and refrains from clandestine adventures.

Just before the Republicans reclaimed the chair of Senate Intelligence Committee on January 6, Mrs Feinstein introduced a legislative proposal that would outlaw the use of torture – euphemistically and malignantly described as enhanced interrogation techniques (EITs) – and limit the CIA’s legal ability to keep suspects in detention for longer than a few days.

Mrs Feinstein’s initiative aims to provide a legislative backstop to the executive orders of 2009 that were supposed to close all torture loopholes. Though these orders were signed into law by President Barack Obama, they can be easily revoked by a future president.

Mrs Feinstein was first elected to the US Senate in 1992 after a failed gubernatorial bid two years earlier. Since then, California voters have re-elected her four consecutive times. In 2012, Mrs Feinstein set a national record for senate races when she received 7.75 million direct votes.

While in Washington, Senator Feinstein gained notoriety as a staunch liberal. In 1994, her Federal Assault Weapons Ban was accepted

as a subsection on the Violent Crime Control and Law Enforcement Act. The ban included a prohibition on the manufacturing and sale of both semi-automatic assault weapons and largecapacity magazines for use by civilians.

Though the ban was repeatedly challenged in court for allegedly violating constitutional rights not specifically enumerated (Ninth Amendment) and breaching the Equal

Protection Clause of the Fourth Amendment.

Curiously, the ban was never fought under the right to bear arms provision as contained in the Second Amendment. The act – and the ban – remained in force until it was allowed to expire in 2004 as per its sunset clause. Since then, all attempts to renew the ban have failed.

Now 81, Mrs Feinstein is the oldest serving US Senator.

“Mrs Feinstein has to help keep the expansive US intelligence community on the straight and narrow while ensuring that possible threats and conspirators are identified early-on and stopped.”

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> RACHIDA DATI Brawn and Brains French Style

Daring stiletto heels and perfectly-fitting leather trousers: Rachida Dati does not lack selfconfidence. In fact, her composure is faultless.

A daughter not of landed nobility, but of an impoverished bricklayer from Morocco, Rachida Dati was the second-born in a family of twelve. She spent most her childhood on a dilapidated estate in Chalon-sur-Saône in east-central France, about midway between Dijon and Lyon.

Though raised in a Muslim family, Rachida was sent to Roman Catholic schools and went on to obtain a Master’s in Economics from the University of Burgundy and a law degree from the Panthéon-Assas University in Paris. In 1997, following a brief career in business, Ms Dati gained admission to the prestigious École Nationale de la Magistrature from where she emerged a judge two years later.

After meeting Nicolas Sarkozy in 2002 while working on anti-crime legislation, Ms Dati joined his Union pour un Mouvement Populaire (UMP) four years later, eventually becoming the future president’s spokesperson early 2007. After Mr Sarkozy was swept to power in May 2007, Ms Dati was appointed Minister of Justice – the first

woman of Muslim origin to hold that office.

Ms Dati caused a few eyebrows to raise when she in September 2008 announced her pregnancy without revealing the name of the father or expressing any wish to get married. The tabloid press proved insatiable: almost the entire who’s who of the French political establishment at one time or other was named as the missing dad, as were countless foreign leaders. The mystery was lifted only four years later when Ms Dati initiated legal proceedings against French casino tycoon Dominique Desseigne (70) – mostly known for his forever-young looks – who was eventually recognised by the court as the legal father of Zohra, now eight years old.

Never one to be deterred, Ms Dati was elected to the European Parliament in June 2009 for the hotly-disputed Île-de-France constituency.

Last year, Ms Dati cancelled her plans to run for the Paris mayoral office after Sarkozy’s rather spectacular fall from grace severely curtailed her chances of success in an extreme – and most unfortunate – case of guilt-by-association.

Full of ideas on financial reform and other complex issues, and quite relentless in their

pursuit, Ms Dati’s perhaps greatest contribution to date is the renaissance of femininity in politics she helped bring about. Unabashedly interested in fashion and all its accessories, Ms Dati argues – and, more importantly, shows – that flair and style need not exclude content. She has built-up a sizeable following outside France, and particularly in the UK where an unwritten rule seems to dictate that women diminish the outward appearance of their femininity in order to better accumulate and preserve power.

To Ms Dati, such talk is nonsense: “I was warned by Elisabeth Guigou, my predecessor at the Ministry of Justice, that the high heels would soon have to go. I, of course, ignored the advice.”

Not just that: while in office, Ms Dati appeared on the cover of Paris Match in fishnet tights and a pink leopard-print Dior dress as if to make a point – which she did.

While Ms Dati’s in-your-face attitude is considered offensive in some of France’s more conservative societal niches, her stance on feminism and the empowerment of women is generally well appreciated, if imperfectly understood.

“I was warned by Elisabeth Guigou, my predecessor at the Ministry of Justice, that the high heels would soon have to go. I, of course, ignored the advice.”

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Spring 2015 Issue

> SYLVESTER JAMES GATES The Thrill of Discovery US scientist Sylvester James Gates is a super guy: he leads the field in research on supergravity, superspace, supersymmetry, super conformal algebra, and superstring theory. Thankfully, he is also eager to explain – in layman’s terms – the nature and importance of his esoteric work on the cutting edge of physics – and beyond.

What Mr Gates and his colleagues are looking for is nothing less than the holy grail of science: a theory that encapsulates and links together all physical aspects of the universe: the Theory of Everything (ToE).

Mr Gates’ particular interest is drawn to superstring theory – the version of string theory that includes both supersymmetry and particles such as fermions, which adhere to the Exclusion Principle (two particles cannot simultaneously occupy the same place), and bosons, which do not. Mr Gates is also considering the existence of particles which share these traits.

While there was little doubt that as a math prodigy Sylvester Gates would pursue a career in science, his interest in theoretical physics in general, and supersymmetry in particular, was aroused by a need to compete. To distinguish himself from the hundreds of other physicists busily writing theses and research papers, Sylvester James decided on a survey of all literature pertaining to particle physics.

He soon found that the fields of superspace and supersymmetry were essentially wide open: “Essentially, nobody knew anything about these concepts. This was an area where an insight into geometry and an understanding of physics could pave the way to progress and discovery. It also helped that I seemed the only one interested.”

At the Massachusetts Institute of Technology (MIT), where as a graduate student Mr Gates conducted his research, nobody shared his interest, though faculty were most supportive: “By the time I graduated, I had reached the forefront of the field which meant that suddenly I was called the world’s expert on supersymmetry.

At the time, this was pretty funny.”

Mr Gates is a professor of Physics at the University of Maryland and sits on the presidential Council of Advisors on Science and Technology. In 2013, he received the National Medal of Science and is also a recipient of the Klopsteg Memorial Award issued by the American Association of Physics Teachers for his contributions to the advancement of popular interest in science.

Over the years, Mr Gates has dedicated considerable effort to explaining his work to a larger public: “As scientists we owe the public an

open report on what it is that we do in its name.

After all, the pursuit of science is a luxury that the public need not necessarily support.” Mr Gates is featured extensively in the widely viewed Nova television series broadcast in the US and in over a hundred other countries. Nova regularly broaches complex scientific topics in such a way that their importance becomes clear.

Mr Gates was also awarded a central role in the 2003 three-part television documentary

The Elegant Universe which introduces string theory and the quest of theoretical physicists to find common ground – and a unifying principle – between Einstein’s Theory of General Relativity and quantum mechanics. His excitement and vast knowledge, instantly obvious to all viewers, is rather infectious and does the world of science an excellent service in shedding light on a normally obscure area of human endeavour and allowing laypeople to share the thrill of discovery.

“While there was little doubt that as a math prodigy Sylvester Gates would pursue a career in science, his interest in theoretical physics in general, and supersymmetry in particular, was aroused by a need to compete.”

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> NANCIE ATWELL The Best Teacher in the World

“She is a prolific writer and published nine books on education.”

“It is the supreme art of the teacher to awaken joy in creative expression and knowledge” – wise words spoken over half a century ago by none other than Albert Einstein. Often under-appreciated and -remunerated, teachers stand at the bedrock of society, patiently forging the foundation of civilisation’s future. Theirs is not a particularly glamorous task; the most important jobs seldom are.

Lacking a Nobel Prize for excellence in education, the Varkey Foundation – a philanthropic entity set up by Dubai-based Global Education Management Systems (GEMS) – has instituted the Global Teacher Prize with a one million dollar cheque attached to it. The award aims to offer long overdue recognition to teachers of outstanding professionalism.

After a lengthy selection procedure, a US teacher was chosen as the recipient of this year’s 158

Global Teacher Prize. In 1990, Nancie Atwell – now crowned the world’s best teacher – founded the Center for Teaching and Learning (CTL) in Edgecomb, a quaint seaside town straddling the rocky shores of Maine.

Mrs Atwell’s school offers educators an opportunity to implement new and engaging ways to teach reading and writing skills. The centre boasts a library in each classroom and pupils devour on average forty books a year. Mrs Atwell has donated her prize money to the school in order the further improve its facilities.

Nancie Atwell, chosen out of a 5,000-strong universe of candidates, is passionate about education. She is a prolific writer and published nine books on education. Her 1998 In the Middle: New Understandings about Writing, Reading, and Learning sold over half a million CFI.co | Capital Finance International

copies in the US and established Mrs Atwell as an authority on the subject.

The high-profile Global Teacher Prize aims to draw attention to a profession – and calling – too often ignored. “When teachers feel that society values their job, outcomes can be so much better,” says Andreas Schleicher, education director at the Organisation for Economic Development and Cooperation (OECD).

Mrs Atwell received her prize at the Global Education and Skills Forum which took place in Dubai last March. Former US President Bill Clinton – honorary chairperson of the Varkey Foundation – said that the award should “help remind the public of the importance of the teaching profession.”

The first in her family to graduate from college, Nancie Atwell freely admits that learning was not a pleasant experience for her: “At school, I was not engaged. Though I was always reading, it was not the books assigned. I am convinced that we have people much to show about what a school could look and feel like.”

Surrounding her students with books in classrooms, Mrs Atwell is tireless in promoting both the value and pleasure of reading: “I try to show that each books contains exciting stories and that there is wealth of knowledge to be gained from diving in and finding out.”

The message is not lost: in the 7th and 8th grades, kids at CTL habitually read up to fifty books per semester. “The key is to allowing pupils to select their own books and not force students to read up on topics they may dislike or find boring.”

CTL’s library is exceptionally well-stocked with over 20,000 titles to choose from.

In her acceptance speech, Mrs Atwell emphasised that teachers need the liberty to innovate and discover new ways to pass on knowledge: “I implemented novel methods without waiting for either permission or approval from educational authorities. I was lucky to get away with that. However, other excellent teachers must conform to often outdated rules that dull the educational experience to the point where both professionals and children start losing interest.”

Spring 2015 Issue

> SLAVOJ ŽIŽEK The End of the End of Times Les Onzards is a title that failed to catch on – possibly because of embarrassment. Meaning literally The Eleveners, the name was coined with a wink to The 68ers: the fiercely anarchistic young students and workers who in May 1968 manned the barricades in Paris and caused the established order to tremble to such a degree that an airplane was kept in heightened readiness at Orly to whisk the embattled government to safety, and less revolutionary climes, in case the Fifth Republic came to its untimely demise.

As Les Onzards got moving in the summer of 2011, things were looking up: the Arab Spring had already ousted two corrupt presidents while in Spain and Greece students were taking over cities protesting austerity measures imposed at the behest of the European Union. This was undoubtedly becoming the millennial’s 1968: it surely wouldn’t be long before students started ripping up cobblestone streets to gather munition for the coming clash of generations. As it turned out, most media studies majors preferred to pitch tents.

It was against this backdrop that the Canadian anti-consumerist magazine Adbusters issued a call for the takeover and occupation of Wall Street in an attempt to bring the spirit of Cairo’s Tahrir Square to the very heart of the global financial system.

Within a few weeks, the Occupy Movement had spread to hundreds of cities and college campuses around the world. However, lacking specific realistic demands, the upsurge of popular anger was destined to fizzle out.

Four years on, the EU is still pushing austerity in southern Europe, the Arab world is muddling along with varying degrees of violence, and the capitalist model remains unchallenged and firmly in power. However, the tents are gone.

Cultural theorists have sheepishly come out of hiding to engage in some much-needed historical framing. But, there is an exception.

Slavoj Žižek is an abrasive, beguiling, fidgety, and fantastically verbose philosopher and cultural critic from Slovenia who singlehandedly managed to find a Marxist parable in Kung Fu Panda – no mean feat. Mr Žižek may look like a public intellectual; he may sound like a public intellectual, but don’t let that fool you: he really is a public intellectual.

Mr Žižek read philosophy at the University of Ljubljana (in what was then Yugoslavia) before going to Paris to study psychoanalysis. In 1990, he ran as a candidate in Slovenia’s first free elections for the Liberal Democratic Party. Eight years later, he published his first book, The Fright of Real Tears. It contains a treatise on the films

of Polish director Krzysztof Kieślowski. In 1989, Mr Žižek achieved international acclaim as a social theorist with his first book in English, The Sublime Object of Ideology.

It is a brave man who attempts to summarise this philosopher’s thinking. The primary innovation Mr Žižek brought to philosophy is his Lacanian psychoanalytical interpretation of Marx.

For Slavoj Žižek, ideology is the mechanism, or fantasy, by which the subconscious reconciles our deepest desires and motives with the existing social structure. He argues that Marx’ consciousness is false as it hides the real social structure.

Mr Žižek’s is not an imposed narrative but rather a spontaneous justification of the way things are. This interpretation is all the more vital in what many naïvely see as a post-ideological time. Francis Fukuyama and his end of history come to mind.

The unresolved dialectic of the 20th century has not been addressed. Communism proved such complete failure that capitalism – and the liberal democracy which it allegedly necessitates – appears as an end-point by default. Even the nominally socialist parties of western democracies meekly accept global capitalism as an inevitability.

The almost ubiquitous faith in capitalism has led to the likewise unanimous conviction that, eventually, all nations will come to embrace liberal democracy and prosper. Developing countries are merely deemed immature.

Ultimately, the free flow of capital will lift all boats. However, capitalism appears to do rather

well in the absence of liberal democracy as evidenced by the rise of China. It also seems to thrive on inequality which capitalism actually encourages as shown by French economist Thomas Piketty.

The one thing capitalism doesn’t seem compatible with is sustainability. Even in the face of severe environmental degradation heralding a future depicted as an apocalyptical scenario, global faith in established economic and corporate management practices remains largely unshaken.

Collective faith holds strong because there are no viable alternatives. Lacking any readily apparent substitute doesn’t make capitalism any less of an ideology – just a far more dangerous one. Identifying capitalism as such is the first vital step. Questioning it, raging against it, and battling it are mostly motivated because no proper alternative is available.

The Occupy Movement proves the value of Mr Žižek’s insights. The movement died not because it lacked demands, but precisely because it felt obliged to come up with them.

The result was hedonism. Forced into defining grievances within the bounds of established structures, and failing to do so, allowed the Occupy Movement to be banished to the societal fringes as yet another unproductive or idealistic blip. In times of competing paradigms one can be a revolutionary; without these, one is just angry.

At the very least, Mr Žižek reminds us that the present is also part of history: even if we are clueless about the future, there are no end times.

“I think that the task of philosophy is not to provide answers, but to show how the way we perceive a problem can be itself part of a problem.”

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> LASSANA BATHILY “I Am Lassana”

“As heroes go, the unassuming Lassana Bathily is a shoe-in: he acted bravely and selflessly when called upon to offer help. As such, Mr Bathily represents, and indeed embodies, the textbook definition of a hero.”

The name may not ring a bell, the story undoubtedly does. Lassana Bathily (24) is the store assistant who saved the lives of fifteen shoppers at the Hyper Cacher (“Super Kosher”) grocery store when terrorists stormed the building on January 9, killing four and taking fifteen hostage.

The attack on the Porte de Vincennes grocery store in Paris’ 20th Arrondissement came just two days after the assault on the offices of the satirical magazine Charlie Hebdo and the execution-style murder of eleven staff members and a police offer.

At the time of the attack, Mr Bathily was working in the basement of the store when terrified shoppers came running down, looking for a place to hide. Without a moment’s hesitation, Mr Bathily led the group to a cold storage room.

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He switched off the cooling system, told his charges to keep quiet, and then locked the doors and sneaked out of the building to rally help.

Meanwhile, Al Qaeda operative Amedy Coulibaly was holding his hostages at gunpoint, demanding safe passage for the brothers Saïd and Chérif Kouachi – friends he had met in 2005 while in prison serving a 6-year sentence for bank robbery – holed-up in a print shop on an industrial estate just north of the city. Armed with a submachine gun, an assault rifle, and two pistols, Mr Coulibaly threatened to kill his hostages should the Kouachi brothers come to any harm.

Slipping out of the building, Mr Bathily was promptly detained by the police. However, it soon became clear that the Mali-born store assistant CFI.co | Capital Finance International

was not involved with the hostage taker and had come to offer help. He provided the police with a detailed layout of the store and a bunch of keys.

The standoff came to a dramatic ending when the police stormed the building, killing Mr Coulibaly and freeing the hostages. Mr Bathily’s group, still hiding in the cold room, made it out safe as well.

As heroes go, the unassuming Lassana Bathily is a shoe-in: he acted bravely and selflessly when called upon to offer help. As such, Mr Bathily represents, and indeed embodies, the textbook definition of a hero. While some heroes may be celebrated for their particular endeavours, often entailing altruistic pursuits, others like Mr Bathily actually lay their life on the line.

In front of the cameras and microphones, Mr Bathily rejected the ascribed status with a niceto-meet-you line: “I’m actually not a hero; I am Lassana.” However, rocked by a series of terrorist attacks, France desperately needed a hero for its now enlarged pantheon of martyrs and victims. Mr Bathily is that hero. He shifted the story’s focus from an Islamic terrorist killing Jewish shoppers to a Muslim saving the lives of innocents.

Never a nation to lack in gratitude, France immediately bestowed its greatest honour on the store assistant: French citizenship.

President François Hollande personally ordered the naturalisation procedure to be fast-tracked.

Eleven days later after the events, French PrimeMinister Manuel Valls was able to hand Mr Bathily his papers during a ceremony at the Ministry of the Interior in Paris.

Spring 2015 Issue

> HILARY MANTEL On Plastic Princesses and Ragdolls Late February 2013, the London Review of Books published a lecture delivered two weeks earlier at the British Museum by novelist Hilary Mantel. In the time between its delivery and the transcript being made available, the lecture had been slammed in several newspapers as a spiteful mauling of their brand new Princess Kate.

The 5,500 word piece was reduced to a few quotes, predominately from the first paragraph; Mantel had called the future queen, amongst others, “a plastic princess deigned to breed” and “a jointed doll on which rags are hung.” Twitter posts were reprinted and vox pop segments appeared on news broadcasts showing the Great British Public sharing its disapproval – the controversy had become the story. Even Prime-Minister David Cameron felt compelled to denounce Mantel’s words.

In her Royal Bodies lecture, Mrs Mantel spoke about the role of royal consorts and the public’s relationship with the monarchy. She compared the public persona of the Duchess of Cambridge to a few of her historical counterparts such as Marie Antoinette, Ann Boleyn, Jane Seymour, and her late mother in-law Diana.

In response to the uproar, a few supporters claimed that Mantel’s words were merely examining the sheer oddity of monarchy and not a personal attack on the duchess. However, this doesn’t seem to be the whole truth either. There is certainly an ambiguity (perhaps a nuance) to the lecture: Mantel’s comments may have been intended to address the media entity rather than the princess herself, but when she contrasts the present duchess to her predecessor Princess Diana, Mantel’s comments do read as personal attacks.

The same day the London Review of Books published Mrs Mantel’s lecture, the Mail Online posted a follow-up piece under the title “Kate puts her baby bump on parade as PrimeMinister mauls best-selling author Hilary Mantel over ‘plastic princess made for breeding’ jibe.”

The article was accompanied by several photos of the princess showing off said royal bump as she braved the chilly morning, wearing a grey patterned wrap dress purveyed by the upmarket high street brand Max Mara. Mrs Mantel may have been on to something after all.

Hillary Mantel (Dame Hilary Mantel, CBE as of June last year) gained popularity as well as critical acclaim for her historical novel Wolf Hall and its sequel Bringing Up the Bodies, winning her the Man Booker Prize in 2009 and 2012 respectively. The series is a fictional account of Thomas Cromwell’s career at the Tudor court.

Mrs Mantel’s business is finding the flesh under painted fabrics and established interpretations. For most English schoolchildren, Hans Holbein’s Portrait of the Tudor King Henry VIII is emblematic of not only this particular period, but of English history in general. Such is the importance placed on this era that most school children at the very least know the mnemonic for marriage sequence of Henry’s six ill-fated wives*.

Hans Holbein’s portraits shape our imagery of both that time and the characters then alive in a typical relationship between historical fiction and period art. Mrs Mantel’s accomplishment is to have written characters that inform our reading of the art. Cromwell is not made a hero wholly misrepresented by history; just as the Saint Thomas More made a demon – at least no more than what the evidence will permit. Ann Boleyn is neither a deformed unscrupulous agent of catholic propaganda, nor the tragic prototypical feminist heroine.

As a painter, Mr Holbein hid his invalid, paranoid, obese monarch behind regal posture, gilded clothes, and a rather ludicrous codpiece.

Today’s court portraitists have 24-hour of news coverage to fill, a daily column to get out, and an online presence to maintain. They will do so one way or another and in response, royal PR requires

a total crackdown on personality, especially from those who marry in.

The Duchess of Cambridge will be described as intelligent, radiant, open, warm, and any other epithet applicable to feigned adulation. When innocuous adjectives have run out, they’ll move on to the dress because what else is there to say? Somehow, the gilded clothes seem to be a constant. If we ever find out who Catherine is, besides a womb and coat hanger, it will be from someone like Hilary Mantel and certainly not from the predatorily fawning press.

The third instalment of the Thomas Cromwell trilogy the Mirror and the Light is planned for release later this year.

As of now, the latest from the Daily Mail is that the duke and the six-month pregnant duchess have been spotted boarding a plane for London.

The duchess is seen carrying the 18-month-old Prince George, while Prince William carries her bag - a floral print Joules blue posy overnight bag.

A link to the web shop is duly provided. * Arrogant Bull Sees Cleaner’s Hair Parted • Katherine of Aragon (divorced, 1533) • Anne Boleyn (executed, 1536) • Jane Seymour (died, 1537) • Anne of Cleves (divorced, 1540) • Catherine Howard (executed, 1541) • Catherine Parr (survivor)

“I spend a lot of my time talking to the dead, but since I get paid for it, no one thinks I’m mad.”

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> CHARLES EUGSTER Track & Field Champion at 95 “I want people to realise that life is by no means over at 65. We have been brainwashed into believing that retirement is basically the end of things. We are supposed to slow down, stop working, and prepare to die. I do not accept that and see no reason to abide by this convention.”

Competing at the World Outdoor Masters Athletic Championships in August, Dr Charles Eugster is sure to add to his already considerable medal count. In March, the British runner, now residing in Switzerland, established a new world record on the 200 meter shaving 2.4 seconds off the one set in 2013.

After his record-busting sprint, Mr Eugster thanked fans and followers via his Facebook page. The former dentist has so far scooped up no less than 36 gold medals at track and field meets in Britain and elsewhere. Celebrated by some as the “coolest man alive,” Mr Eugster recently turned 95.

Charles Eugster didn’t always punch above his age: in fact, he used to be a couch potato, revelling in doing nothing. That, however, changed after he celebrated his 60th birthday: “I discovered a rowing club for veterans and decided to join.”

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However, Mr Eugster didn’t go overboard immediately. The realisation that old age had come knocking came only fifteen years later, as his friends started passing away. Still, Mr Eugster was not quite yet ready to retire. He carried on publishing a dentistry newsletter and rowing in his spare time.

Then, aged 85, Mr Eugster suffered a major blow: “One day, looking in the mirror, I saw this old man – overweight with a terrible posture and lose skin where once muscles had been. I was a wreck and probably not far from dying.”

Not one to take life as it comes, Mr Eugster marshalled his dwindling physical resources and snapped into action. He joined a club of bodybuilders. Lifting weights and guzzling protein shakes soon reshaped his body: “It became broader, v-shaped, and better toned. I felt younger too and the admiring looks women threw me didn’t hurt either.”

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Judo taught Mr Eugster how to fall properly while the added muscle mass protects his brain against the onset of Alzheimer’s. A poster boy for the resilience of the human body, Mr Eugster does not aim to beat old age; rather, he is after good health and vitality regardless of age: “I stopped thinking of dying and instead remain focus on getting my old body back.”

At a recent championship event in Germany, Mr Eugster defied his age by coming out on top in an impressive series of categories, even though he held two decades on his closest competitor, scoring 57 dips, 50 push-ups, 48 abdominal crunches, and 61 chin-ups in under 45 seconds each.

Mr Eugster is not all about smashing records and does not hide his ulterior motive: “I want people to realise that life is by no means over at 65. We have been brainwashed into believing that retirement is basically the end of things. We are supposed to slow down, stop working, and prepare to die. I do not accept that and see no reason to abide by this convention.”

In fact, Mr Eugster considers retirement extremely hazardous to both good health and longevity: “It is undoubtedly the greatest killer of all.”

Spring 2015 Issue

> GINA RINEHART Well-Behaved Women Seldom Make History

Gina-bashing has become a popular pastime in Australia, as has Gina-watching. Australia’s richest, and arguably most powerful, lady stirs the passions of an entire continent. Mostly, Australians seem to seesaw between cautious admiration and severe dislike of their country’s most visible – and audible – businesswoman.

Gina Rinehart’s life’s story reads like a movie script. Inevitably, its high drama of rough-andtumble business dealings, internecine power struggles, and wild forays into politics was made into a television series. Though the Channel 9 network took great care to portray events and protagonists in a non-judgmental way, allowed Ms Rinehart to preview the show, and agreed to cut a few scenes she considered offensive, the station is being sued anyway. That’s the kind of lady she is: do not mess with Gina, for you’ll just make her day.

Gina Rinehart is in the business of making money, not of winning a popularity contest. As such, Ms Rinehart may be the personification of the phrase originally coined by Professor of History Laurel Ulrich of Harvard University. In a study on the funeral rites of the Puritans, Mrs Ulrich famously remarked that, “well-behaved women seldom make history” – an expression now elevated to a rallying cry for feminists the world over.

Gina Rinehart is the executive chair of Hancock Prospecting, a privately-owned mining company founded by her father Lang Hancock in 1955. The business owns leases on about 500km2 of land in Western Australia’s Pilbara Region. This land contains the largest iron ore deposits in the world, estimated at well over two billion tonnes. The leases also hold some 500m tonnes of ferruginous manganese beside reserves of uranium, molybdenum, and other ores.

With a personal fortune estimated by the

“Beauty is an iron mine.” voyeurs of Forbes Magazine at close to $12bn, Ms Rinehart – who owns 76.6% of Hancock Prospecting’s shares – is one of the world’s richest, and most contentious, women. She has been embroiled in numerous lawsuits over Lang Hancock’s estate with both her stepmother and her daughter. After years of haggling, most cases were settled out of court.

At times her own worst enemy, Ms Rinehart’s recent attempts to gain a foothold in politics failed to gain traction. Her thoughtless comments, not unlike those uttered by Sarah Palin in the US, exposed Ms Rinehart to national ridicule. Noting that two dollars will buy a day’s labour in Africa, she concluded that Australia’s future looks bleak indeed.

This rather silly analysis of the country’s presumed ills had then-Prime-Minister Julia Gillard serve Ms Rinehart a most memorable retort: “It’s not the Australian way to toss people $2, to toss them a gold coin, and then ask them to work for a day. We support proper Australian wages and decent working conditions.” And with that Ms Rinehart was summarily dispatched to the sparsely-populated looney fringe of Australian politics from whence she has not emerged since.

An attempt to buy influence on the national debate also misfired. Taking a 14.9% stake in Fairfax Media, Australia’s largest media corporation and publisher of the Sydney Morning Herald, Ms Rinehart was denied representation on the board of directors after she refused to sign the company’s charter of independence. Doing so would have precluded her from meddling in CFI.co | Capital Finance International

editorial affairs. Thwarted, Ms Rinehart has now divested from Fairfax Media to turn her attention elsewhere.

Heroically, she has now identified agribusiness as the next frontier to be conquered.

Anticipating a rising demand in Asia for highquality food, late last year Ms Rinehart acquired a stake in Western Australia’s leading diary producer and bought two large ranches in New South Wales complete with about 3,000 head of wagyu beef cattle.

These are but the first baby steps in a new direction. A great leap is, however, in the making: last November Ms Rinehart signed a memorandum of understanding with the Queensland government to invest up to $390m (USD) in a dairy venture aimed at supplying the Chinese market with infant formula and long-life ultra-heated milk. The project includes a 5,000 hectare spread of prime grazing land and a dairy plant capable of producing 1.5m hectolitres of milk annually. The first shipment to China is expected next year.

Love her – or not – either way Ms Rinehart leaves little room for doubt. Though her political ideas may be bordering the infantile, Gina Rinehart’s business acumen is second to none and so is her determination to expand the reach of her corporate empire. While such traits may cause businessmen to be adulated, tough and decisive businesswomen are usually held to a different standard. Ms Rinehart seems determined to shatter that glass ceiling by simply ignoring its existence.

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> Americas:

Cuba - Out of the Doldrums Back in the early 1980s, the then-president of Tanzania Julius Nyerere, whilst on a state visit to Cuba, proposed turning the island nation into an open-air museum in order that future generations could have an opportunity to learn about the valiant attempts by humanity to escape the clutches of capitalism. At the time, President Nyerere may have suffered a momentary lapse of reason, but his suggestion almost became reality.

Cuba: Havana

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ut off from its benefactors in Eastern Europe, supported only half-heartedly

by Russia, and kept on basic life support by the nations of South America as a mere fig leaf hiding their own betrothal to the Yankee Empire, Cuba descended to irrelevance – a last holdout of contrarians lost in the mist of times gone by; a quaint and inoffensive little country that already spent its allotted fifteen minutes of fame without deriving any discernible benefits.

While the wider world marvelled at Cuba’s healthcare system, the eleven million or so inhabitants of the island were stuck in time, catching but glimpses of a world that had moved on and away. Without broad access to the Internet, or any other modern means of communication, and rife with cronyism and other institutionalised forms of corruption, Cuba turned into a cartoon-like island cast adrift and circled by sharks with a healthy appetite.

As people in Havana moved about by tractordrawn contraptions that passed for city buses, and shopped at stores lined with largely empty shelves, the regime received a modicum of life support from Venezuela and its flamboyant thenPresident Hugo Chávez, deceased in 2013, who in his later years became Fidel Castro’s new best friend.

Venezuela, itself now mired in a financial/ economic quagmire of epic proportions, is no longer able to provide Cuba the support it needs in order to survive. However, help may be on the way from the least expected of quarters. During a regional summit meeting in Panama City in April, US President Barack Obama broke the ice and invited his Cuban counterpart Raúl Castro – the younger brother of the ailing Fidel – to a formal bilateral side-meeting. It was the first time in well over three decades that the presidents of both countries met in an official setting. Prior contacts were limited to brief handshakes exchanged during multilateral events.

The rapprochement follows President Obama’s decision of December 2014 to at long last normalise relations with the old antagonist.

Prodded into action by the utter failure of the 55-year-old trade embargo, instituted to dislodge the Castros from power, and the loss of US influence in South America, President Obama also aims to keep the support at home of his Hispanic constituency which overwhelmingly disapproves of maintaining the crippling trade sanctions.

Living proof that the US sanctions, imposed in 1960, have run their course and failed on all fronts, Cuba in turn failed to replace its model – based on Soviet and East European handouts – with a more meaningful one for future growth.

Some foreign investment was allowed in – under rather draconian restrictions – and tourism flourished to a degree.

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“No longer on the US blacklist of countries that sponsor terrorism, Cuba expects its development to enter a new phase as international banks can now resume business with the island nation.”

Since 2004 the Cuban economy has expanded by over 42%, however, most other indicators remained stagnant or nosedived. In a wellresearched report on the development of the island’s economy during the half century that passed since the revolution, Cuba-born economist Carmelo Mesa-Lago concluded that the overall balance is negative.

Relative to other Latin American countries, Cuba’s position fell on 87% percent of the applied socio-economic parameters and remained mostly stagnant on the remainder. Mr Mesa-Lago also emphasised that, at the time of the revolution, Cuba ranked third in the region for GDP per capita – behind only Venezuela and Uruguay. It has now tumbled to twelfth place.

In a sign of how backward the country has become, only quite recently the government allowed inhabitants to legally acquire computers, DVD players, and microwave ovens. Mobile telephones have now also been permitted.

Clinging to rather outdated and quaint notions of dialectical materialism, Fidel and Raúl Castro reluctantly allowed for a degree of cooperative socialism in a belated effort to reanimate the moribund economy.

The so-called New Cuban Economy sees the state retreating ever so slightly in order to make way for worker-owned cooperatives and sole-trader micro-businesses. In line with other struggling economies, the regime has also put legislation in place to allow for the creation of special economic zones where foreign corporations may set up shop and exploit cheap local labour in addition to enjoying tax-free status and no restrictions on the remittance of profits.

Brazilian investors were the first the seize the opportunity and are set to spend $900m on container handling facilities at the port of Mariel, 45km west of Havana. Around Maribel Bay, an area of over 450km2 has been set aside for the economic zone where foreign businesses may freely operate. Last year, a glassware company from Brazil was the first to open a manufacturing plant at the zone.

Looking to diversify its economy and reduce its dependency on tourism – the island received close to three million visitors last year – the Cuban government hopes the special zone will reinvigorate the manufacturing sector and boost foreign trade. However, workers employed by foreign businesses setting up shop in the Maribel Bay Zone will enjoy few benefits. Foreign

CFI.co | Capital Finance International

companies are expected to pay wages directly to the state which will then pay the employees the equivalent of about $20 per month – keeping the balance to itself.

So far, but a handful of businesses have descended on Cuba. The country’s lack of access to the US market is hampering the special zones’ development into major manufacturing hubs.

Also, without a domestic industry of any note or relevance, Cuba may struggle to obtain the spillover benefits special zones elsewhere in the world produce.

Without local business to supply goods and services to the assembly plants, taxfree manufacturing havens generally do not contribute to the overall development of the host country. Similar projects in Jamaica, Haiti, and the Dominican Republic have largely failed to boost economic growth. With over 3,000 special economic zones now open for business across the world, larger companies often profit from a race to the bottom as the recipients of ever more enticing incentives that governments desperate for business bestow on them.

No longer on the US blacklist of countries that sponsor terrorism, Cuba expects its development to enter a new phase as international banks can now resume business with the island nation.

Prior to the thaw in US-Cuba relations, banks were actively discouraged from engaging with the island. In 2009, Credit Suisse received a $536m fine from US regulators for its dealings with Cuba which as a result soon became a pariah state as far as international finance was concerned. The support lent by the government in Havana to guerrilla groups elsewhere in Latin America landed the island on the dreaded list of state sponsors of terrorism in 1982.

Once bitten twice shy, bankers have not been cueing-up to return: “Just because something is allowed, doesn’t mean that it will also happen.

Though compliance costs have come down, and legal impediments were removed, most banks remain adverse to any risk, or even the remote perception of risk, and have so far preferred to keep their distance,” says Rob Rowe, vicepresident of the American Bankers Association.

Though welcoming closer relations with the United States, the Cuban government is also weary of allowing American cash to freely flow into the island. Trade and investment liberalisation are, for the moment, not high on the agenda.

President Castro stated that his government will first want to see “full and normal” diplomatic ties re-established before broaching other – and possibly more controversial – bilateral topics such as settling the legal disputes arising out of the wholesale seizure by the Cuban state of private property – mostly belonging to people now residing in the US – in the years following the 1959 revolution. i

Spring 2015 Issue

> CFI.co Meets the Founders of BONUS:

E Cáceres & JM Martínez

B

ONUS Banca de Inversión believes in long-term relationships with its customers for whom, as a leader in the infrastructure sector in Colombia, it provides customised solutions with high quality standards and permanent support from the moment of structuring a project to the execution and monitoring of the proposed solutions. BONUS’ commitment to its mission is a reflection of the people who lead and believed in this company that now makes large infrastructure projects a reality in Colombia and aims to expand internationally at the regional level.

Juan Manuel Martínez and Emmanuel Cáceres

WHAT IS BONUS’ PHILOSOPHY AND WORK DYNAMIC? Emmanuel Cáceres: “We have worked incessantly on the development of innovative and customised solutions for our customers with a view to provide comprehensive and bespoke advice delivered as the product of the firm’s entire team. To that purpose, the commitment of all professionals working at BONUS forms the basis of the value we have been delivering for nearly ten years.”

WHAT ARE THE CHARACTERISTICS THAT DISTINGUISH THE BONUS TEAM AS THE DRIVING FORCE OF THE COMPANY? Juan Manuel Martínez: “At BONUS we do not have a vertical corporate structure, but a transverse one. This has allowed us to consolidate a team that is highly committed to each of our customers.

Such a work dynamic allows projects developed at the firm to become the result of teamwork and collaboration between all persons who are part of the company.”

WHY DID YOU DECIDE TO START THE PROJECT BONUS BANCA DE INVERSIÓN? Emmanuel Cáceres: “BONUS was created in November 2005 as a result of a business idea born from the experience of Juan Manual in the public sector. He had worked at the National Planning Department and the National Concessions Institute of Colombia. This allowed us to identify a great market opportunity: to advise private companies and public entities on the different projects performed under the concession scheme.

To date, we have structured projects totalling more than 22 billion USD.” “Our medium-term goal is to continue expanding our working areas internationally in the region.

Currently, we are present in Peru and we have worked on different projects in countries such as Mexico, Panama, and Jamaica.”

WHAT ARE THE CHARACTERISTICS OF COLOMBIA THAT MAKE IT A PARTICULARLY GOOD PLACE FOR BONUS TO

EXPAND ITS ACTIVITY? ALSO, WHICH FACTORS HAVE CONTRIBUTED TO THE PERFORMANCE AND GROWTH THAT BONUS HAS EXPERIENCED IN COLOMBIA OVER RECENT YEARS? Juan Manuel Martínez: “It is no secret that in recent years Colombia has strengthened its economy significantly. This has led to sustained constant growth and excellent prospects for the country’s future. However, with a rugged topography, the country is lagging in terms of infrastructure. As a result, there are many opportunities to develop connectivity projects which – thanks to Colombia’s advantageous legal and regulatory frameworks – allows for an expanding market and helps BONUS attain a good position at a local level.”

WHAT CHALLENGES AND OPPORTUNITIES DO YOU SEE FOR BONUS OVER THE NEXT YEARS, TAKING INTO ACCOUNT THE ECONOMIC CONTEXT OF COLOMBIA AND THAT OF THE REGION? WHAT ARE THE MAIN OBJECTIVES OF BONUS FOR 2015?

Emmanuel Cáceres: “The company needs continued growth and must expand internationally in order to enlarge its regional footprint. Likewise, our objective is to continue our consolidation as a Colombian firm specialised in private investment initiatives and franchises covering social areas such as hospitals, schools, prisons, aqueducts, etc.”

WHAT ARE THE AREAS THAT OFFER BONUS THE BEST OPPORTUNITIES FOR THE EXPANSION AND DIVERSIFICATION OF ITS PRODUCTS AND SERVICES PORTFOLIO? Emmanuel Cáceres: “Pursuant to the policy of constant innovation and presenting an excellent, comprehensive, and customized offer to each of our customers, BONUS is firmly committed to maintain its leading position in the structuring and financing of infrastructure projects.”

WHICH COUNTRIES ARE YOU CONSIDERING FOR THE REGIONAL EXPANSION OF THE COMPANY? Juan Manuel Martínez: “Our medium-term objectives are focused on Peru, Uruguay, Paraguay, Guatemala, Honduras, and Mexico.”

CFI.co | Capital Finance International

WHAT IS THE PROFILE OF A GOOD BANKER OF THE KIND THAT HAS ALLOWED BONUS TO BECOME THE FIRM IT IS TODAY? Juan Manuel Martínez: “For those working at BONUS, the qualities that define a good banker are shaped not only by market experience and general knowledge – which are essential – but also by the skills and the capacity to understand the needs of the different actors involved in any type of transaction.

Properly identifying the interests of each of the parties involved will facilitate the achievement of success and benefit the final deal struck. In that sense, the study, understanding, and timely research of all stakeholder constitutes a fundamental component of all those who work in this sector.

It allows them to provide the ideal solution in a market full of opportunities.”

WHAT IS THE KEY TO SUCCESS FOR A FIRM SUCH AS BONUS BANCA DE INVERSIÓN? Juan Manuel Martínez: “That would definitely be the commitment and dedication of each of the professionals within the firm. Thanks to this team, we maintain our rate of growth and do so displaying considerable discipline: neither fatigue, nor the long hours demanded by the projects on which we work, have been obstacles to meet the needs of our customers.

That is what Emmanuel and I value most in the people we work with every day.”

JUAN MANUEL MARTÍNEZ Juan Manuel Martínez is one of the founders and the project manager of BONUS Banca de Inversión. A civil engineer by profession, he obtained a specialized degree in finance and has fifteen years’ of experience in structuring, financial modelling, and funding of infrastructure projects, valuation of companies, and in the development of consultancy projects in the field of investment banking. This led him to found BONUS Banca de Inversión as a personal and professional project that has undergone exponential growth in recent years.

EMMANUEL CÁCERES Emmanuel Cáceres is also a founder of BONUS and currently serves as the managing partner responsible for the daily operations of the firm.

He is a qualified civil engineer with experience in structuring, financial modelling, and funding of transport and public utility infrastructure projects, as well as in business valuation and the development of consultancy projects.

The role he plays has led him to incorporate the skills necessary to lead multidisciplinary teams, strategic planning, and research. i 167

> Grant Thornton UAE:

Governance vs Corporate Governance

By Mohamad Nassar

W

hen we hear the term “corporate governance”, we instantaneously parallel the phrase with rules and procedures, stock market regulations, codes, standards, compliance, etc. Corporate governance is perceived by many publically-listed companies as a burden that limits their freedom because of the strict reporting and operating requirements that they believe are imposed. However, this perception is deemed by many as a misapprehension.

Governance is related to doing the “right things” 168

in the “right way” by following a framework which is ultimately designed to achieve the desired goals of any organisation. Governance is not only required for publically-listed companies, but also for other companies of different types and sizes. What all these entities have in common is their aim of maintaining ongoing and profitable operations that meet their long term strategic goals and which ultimately satisfy their stakeholders.

Business governance, whether for governmental, public or private organisations, eventually aims to ensure the following: CFI.co | Capital Finance International

• Business processes, either technical or supporting, are functioning in an efficient, effective, and consistent manner.

• All types of business risks are identified, monitored, and managed.

• Internal controls are in place and functioning as designed to minimise the probability of a risk occurring.

• Owners, board of directors, and management have the appropriate tools that enable the organization to make the right decisions in an effective manner.

So why does the GCC (Gulf Cooperation

Spring 2015 Issue

Council), specifically the UAE seem to be lenient when it comes to corporate governance?

The majority of the business capital is held by government and wealthy families. Companies owned by these parties tend not to have an independent board of directors, a sense of busi-ness transparency and hence lack of information disclosure. In the GCC region, the govern-mental institutes tend to run a bureaucratic business with many senior stakeholders, in com-parison family owned businesses tend to have a tight knit structure. In both cases, continuing such practices may expose their business to major unforeseen risks.

If we consider large family business groups as an example, we have observed that the sec-ond generation have realised the risk which is of a growing concern for them. They are definite that in order to ensure a successful business, an appropriate governance framework must be adhered to, implemented and executed irrespective of who is leading the company. As the market dynamics and competition changes, it is imperative to have a stringent gov-ernance framework to safeguard the business and its assets given the number of increased internal and external risk factors.

Governance, if applied appropriately, can protect organisations against decay caused by poor performance, financial crisis, fluctuations of market trends, and change in leadership styles.

“Governance, if applied appropriately, can protect organisations against decay caused by poor performance, financial crisis, fluctuations of market trends, and change in leadership styles.”

CFI.co | Capital Finance International

What does good corporate governance require from the organisation in order to support growth, sustainability, and profitability? We believe the following is required to build an infra-structure of an organisation based on appropriate policies and procedures: • Enhance independence of directors who oversee the organisation’s affairs. In case of family businesses, independent experienced, and knowledgeable individuals should be added to the board of directors.

• In case of governmental entities, only highly competent officials should be appointed to sensitive positions that can have the vision to direct, monitor, evaluate, and take the appropriate actions.

• Establish specialised committees to oversee certain vital activities and functions, such as: the audit committee, investment committee, budget committee, executive committee, etc.

• Roles and responsibilities of each of the board and committee members or senior management should be specified and formalised, agreed upon and signed by each position holder so that he/she becomes accountable for decisions and results which establishes a base for measuring performance.

• Develop comprehensive and integrated policies and procedures for all processes and sub-processes to ensure consistency and standardisation of flow of operations in the most efficient and effective manner.

• Establish a firm-wide ongoing risk management process to identify, assess, monitor, and mitigate all types of strategic, financial, operational, informational, and reputa-tional risks.

• Encourage and support the establishment of an 169

independent internal audit function either in house or outsourced to continuously examine and evaluate the system of internal controls and the process of risk management.

• Develop a business continuity plan and crisis management plan to ensure the organi-sation is protected under any scenario or circumstance.

• Develop a succession plan to avoid gaps and failures in certain functions and posi-tions.

• Develop a code of ethics to encourage certain styles of behaviour in certain situations and with various parties.

• Develop fraud prevention policies and a whistle blowing system to define what is considered an un-desired / illegal act and explains the related disciplinary actions.

The above are just some of the elements which need to be adopted by organisations to distinguish and establish corporate governance within the organisation. This will provide measurable results which leads to business success and long term prolific success for organisations. The practice of corporate governance is embraced in Europe and the western world, whereas the GCC continues to make steps towards embedding these practices which will eventually promote business efficiency and ultimately contribute towards business success.

So how do you put these practises into action?

Without getting senior stakeholder buy in, change is difficult if not impossible to implement.

The owners, directors, or senior management should realise the need for having certain management processes, tools, and mechanisms embedded within their entities operations and aligned with the overall operating style of the entire organisation. The return on invest-ment would be enhanced business sustainability, profitability, and safeguarding the business for any adverse external and internal influences.

every internal stakeholder within the business to continue raising internal awareness on best practice methods and specifically governance.

Adopting corporate governance has a twopronged approach, as it enhances a company’s efficiency which results in increased profits and therefore benefits the wider economy.

Today’s fast-paced business environment, shifting economic conditions, access to the global marketplace, evolving information technology and increased demand for enhanced corpo-rate governance and accountability are all contributing factors in propelling the board’s role in corporate governance. These new demands require boards to be more involved, knowl-edgeable, and proactive.

The need to develop, adopt, and demonstrate a high level of corporate governance is far greater than it has ever been, it is therefore essential to choose a partner who is knowledge-able, constructive and independent, which coupled with senior internal stakeholder en-gagement can drive growth for any business. i ABOUT THE AUTHOR Mohamed Nassar is the business risk services partner at Grant Thornton UAE and has over twenty years of experience. His professional portfolio includes ten years within professional services prior to joining Grant Thornton working in Cairo, Jeddah, and Dubai. He has also worked for some of the most reputable government agencies and one of the largest oil and gas suppliers in the world. Mr Nassar specialises in a wide range of industries, such as oil and gas, hospitality, facility management, and financial services, amongst others. Mr Nassar is a UScertified professional of CIA and CCSA. He is also a registered public accountant.

With anything, management philosophy and operating style are the main drivers of any or-ganisation. However, people are known to resist change. If senior management drive the change it is known that the engagement will be enhanced and in due course change will be embraced.

Governance cannot achieve the aimed results unless the following values are embedded in the organisation culture and encouraged by senior management on a regular basis: • Transparency • Integrity • Accountability • Competency The introduction and implementation of corporate governance is dependent upon manage-ment who then filter the message down to ensure the organisation embraces the level of change management that is required. Once done, it becomes the responsibility of each and 170

CFI.co | Capital Finance International

Spring 2015 Issue

> CFI.co Meets the President of Maran Group:

Mario Terán del Río

T

he cachanilla is a type of plant that not just survives, but thrives, in the hot desert climate of the Mexicali Valley in the north-west of Mexico. Cachanilla is also the term for people born in the area. Mario Terán, President of Maran Group, is cachanilla through-and-through: he was born in Mexicali and has lived his entire life in the area. He has great pride in his home town and its hardy people.

Mr Terán is the definition of a self-made man: he began his life as an entrepreneur at a young age, selling fertiliser and seed to local farmers.

As he grew up, so did his ambitions and his companies. Maran Group would eventually include businesses that sold farm equipment and heavy construction machinery, in addition to a brick factory, a construction company, and, finally, the Maran Industrial Park – the premier industrial park in Mexicali. Mr Terán is honoured that Maran Industrial Park has been chosen by Capital Finance International to receive the award of Best Industrial Park Construction Partner – Mexico for the year 2015.

Q. HOW DID THE IDEA OF MARAN INDUSTRIAL PARK COME ABOUT? A. I owned some property that was on the southeastern edge of Mexicali, at the crossroads of our three major highways, next to a railroad, and only ten minutes from the border crossing.

I saw many new manufacturers starting up in buildings that were not the sufficiently adequate for their needs. It seemed logical to me that a world-class manufacturing company would want a world-class manufacturing facility that was built using the highest quality materials, and the latest construction techniques. From that thought came the idea to develop the Maran Industrial Park on my property. I had the land, the brick factory, and the construction company to make this dream come true.

Q. HOW DID YOU FIND THE FIRST CLIENT FOR THE MARAN INDUSTRIAL PARK? A. I started my life as a businessman when I was still a young man, knocking on the doors of local farmers selling seed and fertiliser, basically coldcalling. I took that same approach to finding my first client for the Maran Industrial Park. I bought a list of manufacturers in southern California, and wrote letters, stuffed the envelopes, and sent them out. Two weeks later started, I made follow-up calls. My first client was a company that made industrial racking. They started with a 4,600 sq. meter (50,000 sq. foot) building, but quickly expanded to 11,200 square meters (120,000 sq. feet).

President: Mario Terán del Río

Q. THE AVERAGE TENURE OF THE CLIENTS IN MARAN INDUSTRIAL PARK IS UPWARDS OF 15 YEARS. WHY IS THAT? A. The Maran Industrial Park is in the ideal location to help keep costs low for our clients, which, on top of the great service that my team offers them, has led to my clients not just staying in the park, but growing their operations there as well. There are more than 300,000 people living within a two mile radius, and we have fourteen public bus lines that service the stops at the park. This reliable pool of labour keeps turnover rates low which, in turn, saves time and money for our clients. We are 12 minutes from both border crossings with the United States, and only three minutes from the hotel district. We have the best location for industrial development.

Q. CAN YOU TALK A LITTLE ABOUT WHY YOU THINK THE MARAN INDUSTRIAL PARK WAS NOMINATED BY YOUR CLIENTS FOR CAPITAL FINANCE INTERNATIONAL’S BEST INDUSTRIAL PARK CONSTRUCTION PARTNER - MEXICO? A. My philosophy has always been to look for long-term business, and to find the way to say yes with a win for both parties. I have been in business all my life, and therefore know the correct questions to ask in order to help define the needs of clients. With a clear definition of their needs we can then fulfil those requirements. As I mentioned before, I build world-class buildings and that attention to quality and detail has brought me very good clients that have stayed and grown their operations within Maran Industrial Park.

CFI.co | Capital Finance International

Q. MEXICALI IS THRIVING AND THERE IS A REALLY EXCITING ATMOSPHERE IN THE AIR. IT SEEMS THAT EVERYWHERE THERE IS NEW CONSTRUCTION, THE CITY IS CLEAN AND OPEN FOR BUSINESS. TO WHAT DO YOU ATTRIBUTE THAT FEELING? A. Funny as it sounds, one of the answers is the very hot summers that we experience here. Mexicali is in the middle of a desert.

During the summer we experience weeks of temperatures of over 46 degrees Celsius which basically means the people that live here, really want to live here. You don’t have the transient population you see in other Mexican border towns. This leads to the lowest labour turnover rates in Mexico. Our universities give manufacturers a steady flow of well-educated graduates specialised in engineering, business management, and human resources. Mexicali has green energy; all of our electricity is generated in geothermal power plants. Mexicali also has an abundance of water and natural gas. We have two border crossing with the United States and a third one opening soon.

Goods come and go by rail, road, and by sea via the ports of Ensenada, San Diego, and Long beach. All of these attributes have led to Mexicali organically developing aerospace, automobile, health sciences, mechatronics and high-tech industry clusters and their tier 2 and 3 vendors, as well as many other stand-alone industries.

Q. HOW DO YOU SEE THE FUTURE OF MARAN GROUP? A. That really depends on the requirements of our clients. We are currently in the planning stage of another industrial park on the outskirts of Tijuana. Within that park, we are planning with some current tenants for the expansion of their current facilities. We are also starting to facilitate companies that are looking into manufacturing in Mexico with the start-up of the soft landing company.

Q. A TWO PART QUESTION: WHAT ARE SOME OF YOUR BEST MEMORIES OF MARAN INDUSTRIAL PARK AND WHAT IS YOUR HOPE FOR THE PARK? A. The day that I signed a lease contract with Procter and Gamble, I remember thinking “this is exactly the type of client I had in mind for the park” – a global company with a great reputation. The idea of a world-class industrial park was again confirmed when I signed a lease with Mitsubishi Consumer Electronics for their large screen television manufacturing facility. As to my hopes for the Maran Industrial Park, that is easy: that our outstanding team of management and employees will maintain the prestige, high quality, and efficient service that our clients have come to expect. i 171

> Maran Group:

Turnkey Plant Solutions for Manufacturers

M

aran Industrial Park is the premier industrial park in Mexicali, Mexico, and the crown jewel of the Maran Group. The park boasts worldclass manufacturing tenants such as Newell-Rubbermaid, General Dynamics, Mitsubishi Electric, and Honeywell. Situated at the junction of Mexicali’s three major highways, the park is only twelve minutes from the city’s two border crossings. Since its founding in 1974, the park has registered steady growth and created long-term relationships with its tenants. The park also continues expanding its operations to this day.

172

The Maran Industrial Park is one of the few in Mexico that has been audited and certified as meeting the Mexican Secretariat of Commerce’s Norm number NMX-R-045-SCFI-2011, which defines stringent federal standards, including green spaces, public lighting, safety, hazardous waste management, energy efficiency standards, and others. This certification is evidence of Maran’s dedication to the environment and the health and safety of employees; all of which help out the bottom line of our tenants.

Maran Industrial Park is located in Mexicali, the capital of the Mexican state of Baja California. The CFI.co | Capital Finance International

city sits on the US-Mexican border, just a hundred miles east of San Diego, California. Mexicali shares the border with its sister city, Calexico, California. Mexicali offers manufacturers quick and easy access to the United States via rail, or highway, and with the rest of the world through the Mexican port of Ensenada and the US Ports of San Diego and Long Beach.

The population of Mexicali is around one million people. Unlike other border towns, Mexicali has a very stable population leading to the lowest employee turnover rates in all of Mexico.

Fourteen universities and technical schools, led

Spring 2015 Issue

by CETYS University and the Autonomous University of Baja California, provide a constant flow of highly educated graduates in engineering, business, and human resources.

“Green” electrical power is provided by a huge geothermal generation plant just south of the city.

Water is supplied by the Colorado River, while there is also a plentiful supply of natural gas. Due to these and other factors, Mexicali has become a hub of manufacturing. The city’s facilities and advantages have decisively contributed to the organic growth of both an aerospace and an automotive industry cluster.

One of the major factors underwriting the success of Maran Industrial Park is the construction techniques and materials employed in the park’s buildings. Maran has always been a leader in the Mexicali area by strictly adhering to the latest, and most stringent, US and Mexican building codes with the idea that worldclass companies will want world-class manufacturing facilities. Maran Construction has built facilities that are 100% covered by Factory Mutual-certified fire control systems, and has built production-specific ISO Class 5 certified clean rooms.

Maran Group’s other businesses offer a range of services to companies considering the move of production to Mexico for the first time, including site selection consulting, a “soft-landing” company to facilitate the start-up of operations, build-to-suit leasing or property acquisition, and architectural and construction management services. There is also a project in the works for an industrial park just to the east of Tijuana which will include both industrial and commercial buildings, low-cost housing, and railway access.

The basis for the continued growth of the area is the Maquiladora Programme which was instituted in the 1960s as a way to bring manufacturing jobs to the border areas of Mexico. With the implementation of the NAFTA free trade deal, the Maquiladora Programme experienced rapid growth and has now become the second largest source of income for Mexico, second only to the petroleum industry.

In short, the Maquiladora Programme allows manufacturers to import their equipment and raw materials into Mexico on a temporary duty-free basis, and then export the finished goods, again free of duty. This allows companies to take advantage of the lower wages south of the border. More than half of all exports from Mexico are now associated with the Maquiladora Programme.

“The Maran Industrial Park is one of the few in Mexico that has been audited and certified as meeting the Mexican Secretariat of Commerce’s Norm number NMX-R-045-SCFI-2011, which defines stringent federal standards, including green spaces, public lighting, safety, hazardous waste management, energy efficiency standards, and others.”

CFI.co | Capital Finance International

Maran Industrial Park has a staff that is fully dedicated to keeping the facility operating efficiently and looking its best. The maintenance crew consists of ten fulltime employees, including three gardeners to help with the upkeep of the park’s many green areas. The high quality of service has led to an average tenant tenure of over fifteen years.

With the experience of helping major manufacturers take advantage of the Maquiladora Programme, the Maran Group’s industrial parks are well placed in the market and set to experience continued growth throughout the first half of the 21st century. i 173

> Principles for Responsible Investment:

Fiduciary Duty Coming of Age

UNDERSTANDING TH

The process of public society has a number of cla Fiona Reynolds gathering, decision-making, By implementation, evalu each.

Unfortunately, fiduciary duty can be a contested term when it comes to investments, with different legal interpretations in countries around the world.

F

iduciary obligations exist to ensure that those who manage other people’s money act responsibly and in the interests of their beneficiaries (or clients), rather than serving their own interests. The nature of the fiduciary relationship means that a fiduciary is expected to be loyal to the person to whom they owe a duty. In particular, fiduciaries should not put their personal interests before the duty to their beneficiaries: they should avoid conflicts to the extent possible (and, if they cannot be avoided, conflicts should be minimised, disclosed, and carefully managed to prevent any breaches of loyalty obligations); they should ensure that their fiduciary duty does not conflict with other legal duties or their own interests; and they should not profit unreasonably from their fiduciary position.

An important part of managing someone else’s money, is to act with the same care and diligence as you would when managing your own affairs. That means managing risk. Risk covers a wide variety of issues and includes environment, social, and governance risks, which can, and do, affect investment returns.

For some, fiduciary duty and environmental, social, and governance (ESG) considerations do not always sit well together. Part of this has to do with how legal cases over the years have been interpreted with regard to fiduciary duty. Another part of it is how people assess risks. Some investment professionals believe that looking at any considerations other than financial performance is a breach of their fiduciary duty. The answer to this latter point is that we need to expand our risk universe and our interpretation of financial risk as a company may look solvent according to the bottom line but a host of ESG time bombs might be waiting to go off which could place in jeopardy the reputation, financial performance, and even survival of the organisation. In recent years, we have seen this all too frequently, with ESG scandals from oil spills to Libor rigging erupting across well-known organisations.

Fiduciary duty and ESG risks really came into

174

UNDERSTANDING THE POLICY L from the Kay Review, published in July 2012.

Professor Kay conducted a year-long of of public policy has areview number of stag “An important part of The process the UK equity market and was highly critical of fashion: identification, information gathering, dec managing someone else’sevaluation, the way it worked. termination and renewal. Investors nee money, is to act with theeach. One of his main findings was that investment were too long, with growing numbers same care and diligence as chains of intermediaries between an investor and you would when managing the company in which they invest. He argued that this led to increased costs, misaligned incentives, and reduced trust. your own affairs.”

01

the spotlight a decade ago when the landmark UNEP FI (United Nations Environment Programme Finance Initiative) report, The Integration of Environmental, Social, and Governance Issues into Institutional Investment was published. The report concluded that “integrating ESG considerations so as to more reliably predict financial performance is clearly permissible and is – arguably required – in all jurisdictions.”

In 2005, a report by international law firm Freshfields Bruckhaus Deringer concluded that pension funds are legally required to consider an ESG criterion, if there is a clear consensus amongst beneficiaries in favour of this criterion or if the criterion is believed to be financially beneficial.

The report went on to say that when exercising their powers, trustees must take into account all relevant considerations and ignore any irrelevant considerations. This is the duty of adequate deliberation, and concerns the nature of trustees’ decision-making process rather than the scope of the power itself. There are no “hard and fast rules” as to what might be relevant.

For example, it is fairly well settled that the tax consequences of a decision will usually be relevant.

According to Prof Kay, the central problem was “short-termism” in which many investment managers “traded” on the basis of short-term need to be made on movements in share priceDecisions rather than “investing” and howvalue to proceed. on the basis of the fundamental of the This will i company. Furthermore, shareholders littlethe to informatio about the did issue, control bad company decisions. actors to be consulted and the

IDENTIFICATIO

that may be available.

WHO HAS FIDUCIARY DUTIES? In investment, the most common fiduciaries are Policy processes may be initiated by investors concer the trustees of trusts or pension funds. Beyond regulatory frameworks (e.g. Ceres call for the SEC to trustees, different jurisdictions have different disclosure of climate change related information in S interpretations of who exactly holds fiduciary about weaknesses the implementation obligations and who in simply has duties of care. of regulatio forAResponsible Investing in South Africa comparison between the United Kingdom andwas catalyse concerned asset owners were not sufficiently ac the Unitedthat States provides a good illustration corporate of these governance). differences. In the UK, investment consultants do not generally define themselves as fiduciaries, whereas they are accepted as such in the United States.

Moreover, in the US the Employee Retirement Income Security Act (ERISA) explicitly states that fiduciary liability attaches not only to trustees but also to anyone exercising discretion over investment plan assets. That is, under ERISA, asset managers have direct fiduciary obligations, and the appointment of asset This will involve reviews of managers is itself a fiduciary function. In the the available evidence, and UK by contrast, where fiduciary obligations are discussions with key not defined in this way, some asset managers stakeholders andhas opinion Following on from the Freshfields report, in consider that their relationship with clients formers.

It will also include some initial analysis 2014 the Law Commission in the UK released a a fiduciary character whereas others consider it of the issue in question, of the options action, and report looking at how the law of fiduciary duties defined by, and limited to, the contractfor between merits of alternative courses of action. applies to investment intermediaries and of to thethem. evaluate whether the law works in the interests of the ultimate beneficiaries. The project arose This question of who holds fiduciary duties is Investors can contribute by providing information on

02

CFI.co | Capital Finance International

INFORMATION GATHERING

current practice (e.g. the insurance industry provided this input on Solvency II), and through providing practical support to policymakers (e.g.

Japanese investment trade bodies helped to

Spring 2015 Issue

“This autumn, PRI will be publishing a report, in conjunction with the UNEP FI, covering fiduciary duty across eight national jurisdictions: US, UK, Canada, Germany, South Africa, Brazil, Japan, and Australia.

We hope that this report will serve as a global roadmap – or action plan – for ESG integration across the financial services sector and help remove the last remaining barriers to the question of ESG and fiduciary duty.”

CFI.co | Capital Finance International

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likely to change. The shift in many countries to contract-based defined contribution (DC) pensions raises the question of who is responsible for protecting the interests of these savers. The specific question that policy makers will need to address is what duties are owed by insurance companies, asset managers, and sponsoring organisations (i.e. employers) in contract-based schemes (i.e. where the pension provider does not have fiduciary or equivalent obligations to the beneficiary in the way that a trustee would in a trust-based scheme).

In the Netherlands, the board members of a pension fund have a statutory duty to - in the performance of their duties - follow the interests of the scheme members, deferred members, the pension beneficiaries, and employers. The board must also ensure that these parties can feel that the consideration of their interests is balanced.

Also in the Netherlands, a draft legislative proposal introduces a catch-all clause with a fiduciary duty for providers, advisors, and intermediaries regarding - in short - investment properties, electronic payments, current accounts, loans, savings accounts, and insurances. This draft proposal does not apply to investment firms. The proposal states that these financial services providers must observe the interests of the client carefully; that advisors must act in the best interest of the client, and that these financial services providers must refrain from acts or omissions that have or may have negative consequences for their clients.

CAN FIDUCIARIES ONLY CONSIDER FINANCIAL FACTORS IN THEIR DECISIONS? In many jurisdictions, fiduciary duty is widely considered as imposing obligations on trustees or other fiduciaries to maximise investment returns. This narrow interpretation originated from the concern that trustees might put their personal ethical values over their fiduciary obligations to their clients or beneficiaries; this position appeared to be confirmed in the widely cited 1984 case of Cowan vs Scargill, although this narrow interpretation has been challenged (see, for example, UNEP FI (2005), Fairpensions (2011), and Kay (2012).

Apart from the legal implications of this case, the practical consequence has been that environmental, social, and governance (ESG) risks have tended to be neglected in investment practice; that the maximisation of investment returns has focused on short-term returns rather than seeking an appropriate balance between short and long-term returns; longterm and systemic risks to savers have been overlooked, and there has been relatively low demand for active ownership (e.g. engagement) directed at the creation of long-term sustainable investment value.

This is changing in a process driven by three factors. The first is that as the materiality 176

of ESG issues has become clear, meaning the argument that investors should not take account of these factors in investment practice has become less tenable. The ground-breaking 2005 Freshfields Report on fiduciary duty stated: “…in our opinion, it may be a breach of fiduciary duties to fail to take account of ESG considerations that are relevant and to give them appropriate weight, bearing in mind that some important economic analysts and leading financial institutions are satisfied that a strong link between good ESG performance and good financial performance exists” (UNEP FI, 2005, p. 100).

The second is that expectations of investors are changing. As more and more investment organisations make commitments to responsible investment it is likely that the duties that investors owe their clients will also evolve to reflect these changes. That is, the interpretation of fiduciary duty, both in practice and at law, is likely to be much wider than at present.

The third is that the assumptions (e.g. in relation to the efficiency of markets) underlying the prevailing finance theories used during the last half of the 20th century have been questioned over the past decade, in particular as a result of the global financial crisis. The consequence is that investors are increasingly expected to take account of factors such as systemic risks and low probability/high consequence events (“black swan” events), as well as the insights from areas such as behavioural finance, in their investment decisions.

We are also starting to see action by beneficiaries who believe that trustees who do not take issues such as climate change into account are in breach of their fiduciary duty, by not properly assessing the risk that climate change may cause to investments over the long term.

Recently, it was revealed that the law firm Climate Earth is preparing for such an action against the trustees of a yet to be named UK pension fund. There is also discussion of a claim against a US endowment fund, for the mismanagement of the funds finances due to the fact that the fund has a large holding in fossil fuels.

This autumn, PRI will be publishing a report, in conjunction with the UNEP FI, covering fiduciary duty across eight national jurisdictions: US, UK, Canada, Germany, South Africa, Brazil, Japan, and Australia. We hope that this report will serve as a global roadmap – or action plan – for ESG integration across the financial services sector and help remove the last remaining barriers to the question of ESG and fiduciary duty. i

ABOUT THE AUTHOR Fiona Reynolds is the managing director of Principles for Responsible Investment (PRI).

CFI.co | Capital Finance International

With Your Trust..

We Attain New Heights We have successfully scored an (A/stable/--) rating from Standard and Poor’s, which is considered the highest credit rating scored by a Saudi insurance company. This overwhelming achievement is an assurance of our outstanding competitive position, strong underwriting performance, financial flexibility and our ability to manage risks professionally and efficiently.

These are the sources of our strength, which grant us your valued confidence.

> Corporate Properties of the Americas:

Hallmarks of Success

C

orporate Properties of the Americas (CPA) has been providing multinational clients with high quality warehouse and light manufacturing facilities throughout Mexico for nearly twenty years. Chief Executive Officer Jaime De la Garza shares some keys to the company’s success together with a few thoughts on the future of industrial real estate in Mexico.

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CONSISTENT, FOCUSED BUSINESS PLAN Since teaming up with a major US pension fund in 2002, CPA has been singularly focused on generating long-term, high quality, stable income streams from the development and acquisition of industrial real estate in Mexico. Mr De la Garza commented: “We have had opportunities to pursue development in other countries in Central and South America, as well as to expand CFI.co | Capital Finance International

into other real estate markets in Mexico. Our pension fund partner has a global perspective and very specific goals for each of their operating platforms. CPA’s goal is to continually optimise its Mexican industrial portfolio and generate consistent above-market returns for shareholders.

We interface and share best practices with other platforms supported by the same pension fund, but our mandate does not vary.”

Spring 2015 Issue

CREATE A FULL-SERVICE OPERATING PLATFORM When CPA began, the nascent industrial real estate market in Mexico had little to offer multinational tenants seeking an institutional developer and/or a reliable landlord, executing professional property management. The founders recognised the need to hire and cross-train an integrated operating team that could serve clients from site selection to buildto-suit construction and subsequent property management, to ensure the longevity and high performance of assets.

“CPA does not have a strategy of selling core assets,” says Mr De la Garza. “Therefore, we must live with what we develop, and the only way to ensure long-term quality is to construct with exacting standards and encourage disciplined maintenance. Our clients know that the same company that helped them choose the right location and refine the building layout and specifications, will own that asset during and beyond the initial lease term. The client does not need to rely on third parties; their landlord is local, with on-site property managers and accessible executives, all seeking to exceed the client’s expectations and generate follow-on opportunities for growth.”

HIRE AND GROOM THE BEST TEAM “IN THE COUNTRY” Nearly 100% of Corporate Properties’ staff are Mexican citizens, most are bilingual (some multilingual), and few had any prior real estate experience. “All of our key executives are fluent in the important client-focused areas of the business. I served as chief financial officer (CFO) before becoming CEO; our current director of asset management grew up in the leasing side of the business; and our investments group is closely involved in business development and portfolio management. The average tenure of our managers is 12+ years, giving rise to an extremely experienced team which has worked effectively together through a variety of real estate cycles. CPA is not a US company doing business in Mexico; we are a Mexican company serving clients from around the globe.”

“The founders recognised the need to hire and cross-train an integrated operating team that could serve clients from site selection to build-to-suit construction and subsequent property management, to ensure the longevity and high performance of assets.”

CFI.co | Capital Finance International

PURSUING A DEFENSIBLE, “ALL WEATHER” STRATEGY CPA has thrived despite enduring the global financial crisis and various Mexico-specific challenges (currency fluctuations, drug trafficking-related violence, and the vagaries of the US Department of Homeland Security).

Mr De la Garza attributes this to a few key advantages: “Our pension fund partner has a very long-term investment horizon, giving us unparalleled access to patient capital.

They also have an appetite for measured risk, which has allowed CPA to take significant land positions in core markets and execute an aggressive programme of speculative building development. Finally, we decided early on that 179

CEO: Jaime De la Garza

“Even in the depths of the crisis, we were reluctant to cut staff, knowing that our clients would continue to require excellent service and perhaps space for growth when the economy recovered.”

CPA would remain at the premium end of the market, where clients always knew to expect quality performance and a consistent presence.”

“Even in the depths of the crisis, we were reluctant to cut staff, knowing that our clients would continue to require excellent service and perhaps space for growth when the economy recovered. As a result, we enjoy best-in-class tenant retention rates, and we serve many clients in multiple markets. To me, that is the hallmark of a successful business.”

SUPPORT, SUSTAINABILITY AND BEING A GOOD NEIGHBOUR All CPA buildings are constructed to LEED Core & Shell specifications. Higher level 180

qualification is available depending on specific tenant finishes. Several CPA industrial parks are located in areas that have benefited greatly from the employment opportunities generated by the tenants in the parks. “And in Mexico City, we redeveloped a brownfield site that had been vacant and an eyesore for many years, into one of our most in-demand logistics centres in the country,” says Mr De la Garza. “We take seriously the responsibility of being stewards of the pension fund resources, as well as the obligation to be a good corporate citizen of Mexico. In 2014, Corporate Properties was certified as a Great Place to Work and part of our qualifying profile was related to how we interact in the community. All of our stakeholders benefit from this approach to business.”

CFI.co | Capital Finance International

Looking ahead, Mr De la Garza expects Mexico to continue on its path as a preferred destination for global manufacturers, with an improving economy and demographic profile. “Mexico’s energy industry reforms should attract significant foreign investment and result in more favourable employment opportunities for the country’s citizens.

While the recent fiscal reforms have caused some short-term disruption, we believe that increased government support for education, infrastructure, and security, will result in a more positive environment in the future.

Corporate Properties will continue to grow along with Mexico, we are confident in the country’s direction and our opportunity for market success.” i

Activist Investing in Europe 2015 May 19th – The Waldorf Hilton – London

Spring 2015 Issue

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Shareholder activist campaigns continue to increase in the U.S. markets, and not a week goes by without seeing a new campaign waged against a prominent corporation. As hedge fund activists continue to explore new jurisdictions and show strong interest in targeting European corporations, it is out of necessity that the management, boards and advisors of these companies have had to gain an understanding of the objectives, strategies and approaches of U.S. activist investors. Activist Investing in Europe taking place May 19 in London explores what may attract an activist to target a company, and what to expect if one becomes the object of an activist campaign.

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181

> Asia Pacific:

Vietnam - Home to World’s Most Dynamic Economy Forty years after the cessation of hostilities, Vietnam is getting ready for a second shot at accelerated development – yet another a great leap forward. The previous attempt – the Doi Moi economic reforms launched in 1986 and touted as the creation of a socialist-oriented market economy – did boost economic growth but also burdened the country’s banking system with a heavy load of bad debts. By 2008, inflation had reached 23%. Economic growth, however, remained steady throughout, hovering around 5.5% annually.

Vietnam: Ho Chi Minh City

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W

hile most countries would celebrate a like clip of growth as an achievement of epic proportions, in Vietnam it dampened the national spirit.

Initially the reforms had unleashed the country’s pent-up enterprising spirit, resulting in growth rates in excess of ten percent annually. This propelled the country’s GDP per capita from next to nothing to slightly over $2,000 (nominal, 2014).

After twenty years of war, during which more ordinance was heaped on the country than employed in all of World War II, Vietnam’s economic base – its take-off point – was extremely narrow – the only way was up.

Already one of the fastest-growing economies in the world, Vietnam is now set to further boost its development drive as big business pours money into the country to set up manufacturing plants. Japanese and South Korean companies have taken the lead with Kyocera quadrupling its production of printers and copiers, and Samsung becoming so large that the company now maintains and operates its own freight terminal at the Hanoi Noi Bai International Airport.

As wages in neighbouring China keep rising in tandem with that country’s prosperity, large multinational corporations pull up their stakes and move south of the border where labour costs are still modest. According to the Vietnam Foreign Investment Agency, last year FDI (foreign direct investment) amounted to $12.35bn, up 7.4% over 2013. Just 15 years ago, the FDI level stood at a mere $2.4bn. In Vietnam, upward change happens fast.

The country’s prowess as a budding Asian Tiger became apparent to all when Vietnam muscled ahead of regional manufacturing powerhouses Malaysia and Thailand – and all other ASEAN (Association of Southeast Asian Nations) member states – as the biggest exporter to the United States. “By moving very early into the space vacated by China, Vietnam has first-mover advantage and it is now starting to show,” says Frederic Neumann of the Asian Economics Research Division of HSBC Holdings in Hong Kong. Mr Neumann concludes that Vietnam is “really the big winner from China losing its competitive edge because of rising wages and a strong currency.”

Vikram Nehru, senior associate in the Asia Programme and Bakrie Chair in Southeast Asian Studies at the Carnegie Endowment for International Peace in Washington, goes a few steps further and predicts that Vietnam will become the fastest-growing economy in Asia and, quite possibly, the world: “It has all the ingredients for rapid growth if it can address the challenges in the state sector.”

PricewaterhouseCoopers (PwC) agrees wholeheartedly and points to Vietnam’s

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privileged geographic position and its young, well-educated, and dynamic workforce as the twin foundations upon which riches will be piled. In its recently published country report on Vietnam, PwC cites calculations by the International Labour Organisation (ILO) that show average monthly wages to stand at $613 in China and $391 in Thailand, while not exceeding $200 in Vietnam.

The country also benefits from its demographics.

China is aging, with 13% of its population 60 years or older compared to barely 9% in Vietnam. John Hawksworth, one of the authors of the PwC report, writes that he woke up to the shifting realities in Southeast Asia while on a shoe-buying spree in China: “Trying to get new shoes, I just couldn’t find a pair made in China.

All the shoes I sampled came out of Vietnam.”

The country is not only flooding the world with manufactured goods, in 2013 it also became the world’s second largest exporter of rice and coffee. As it prepares to embark upon an additional growth spurt, Vietnam mulls joining the US-inspired Trans-Pacific Partnership (TPP) – to which China was pointedly not invited – in order to gain improved access to markets farther afield. However, TPP membership – widely seen as a way for the country to avoid getting stuck in the middle-income trap – requires the implementation of a number of reforms, both political and economic.

TPP accession involves reducing state participation in economic life, allowing unions to freely organise the labour force, and imposing internationally accepted standards of corporate governance. The latter requirement could conceivably cause state-owned enterprises to fail wholesale. TPP rules also state clearly that state-owned businesses may not be granted preferential treatment. Prime-Minister Nguyen Tan Dung seems willing, even eager, to accept the challenge: “These agreements require us to be more open. So our markets must become more dynamic and efficient.”

The effort is not without its rewards. TPP rules of origin would necessitate Vietnam to supplement and support the country’s growing manufacturing base with a vast network of domestic suppliers – considerably expanding the universe of small and medium-sized enterprises. In return, the country would enjoy preferential access to the US and other major markets.

The only obstruction now standing in between Vietnam and TPP membership is China which a decade ago also exerted pressure on the government in Hanoi to discourage it from joining the World Trade Organisation (WTO).

Not one to be easily intimidated by superpowers throwing their weight around, Vietnam signed up to the WTO in 2007. The country is unlikely to be any more impressed by China’s exertions this time. i

Vietnam: Halong Bay

Spring 2015 Issue

> CFI.co Meets the CEO of AnandRathi Private Wealth Management:

Rakesh Rawal ANANDRATHI PRIVATE WEALTH MANAGEMENT IS ONE OF ONLY A SELECT FEW FIRMS THAT FOLLOW A TRUE ADVISORY MODEL AND HOLISTIC WEALTH MANAGEMENT APPROACH. COULD YOU PLEASE ELABORATE ON THE APPROACH AND ITS BENEFITS? Wealth management plans often revolve around wealth creation, conveniently leaving behind aspects of safety and wealth distribution. Using resources to safeguard wealth in terms of “ringfencing” it or tax efficiency are not given enough importance. So, to maximise wealth creation as well as plug gaps in risk and safety, we approach wealth management, layer by layer. The advisory model focuses on understanding clients’ goals and requirements and arrives at optimal asset allocation. This is followed by a suitable investment strategy that drills down to careful product selection. Thereafter, a portfolio is optimised in terms of taxes, cushioned for safety and structured to carry out seamless distribution of wealth. At every stage, a high degree of client involvement is encouraged.

YOUR SIMPLE MODEL IS NOW BEING WIDELY ACCEPTED BUT DOES IT ENSURE YOU DON’T MISS OUT ON EXOTIC OPPORTUNITIES? The model is widely accepted because it is uncomplicated. It is designed to meet two chief objectives: generating decent, consistent returns and safeguarding wealth by using estateplanning solutions. We maintain a great degree of clarity in terms of what works for clients and what does not when attempting to achieve these objectives.

An opportunity may be lucrative from a business perspective, but if it is detrimental to the client we’d much rather let go of it. We are strictly against force-fitting products and using services merely in order to tap opportunities.

Nevertheless, there are instances when a certain client is keen on specific products, which we may not recommend but may incorporate if a client insists. However, this step is taken only after a client is fully aware of the pros and cons.

THE LONGEVITY OF YOUR RELATIONSHIP MANAGERS (RMS) WITH YOUR WEALTH MANAGEMENT DIVISION IS HIGH. TO WHAT CAN THIS BE ATTRIBUTED? As independent individuals, each relationship manager has his or her own sets of strengths and styles of functioning. As an organisation, our endeavour is to ensure that they use these strengths and skills to their fullest potential in order to deliver what they’ve set out to. We adopt an entrepreneurship model where RMs set their own targets, design their own strategies and choose their own communication styles.

There are no restrictions on areas of operation or limitations on the number of clients they can

CEO: Rakesh Rawal

handle, or the gains they can make through incentives. To fill in the gaps in terms of skills that they may lack or may not yet have developed, research and support teams as well as related experts are always available to assist them and help them strategize. This flexibility is possibly the reason why RMs have chosen to stick with the organisation.

WHAT DO YOU THINK WOULD BE THE KEY DRIVER OF PORTFOLIO PERFORMANCE OVER LONG PERIODS? DOES ANANDRATHI PLAN TO CAPITALISE ON THE LIKELY PROSPECT OF A RALLY? At present, several global and domestic factors are working in India’s favour. High inflation, which has affected the country for a while now, is in control and a stable government at the centre is helping get the country back on the growth track.

We are also observing a refreshing movement of investment from safe havens such as gold and real estate – a favourite among Indian HNIs – and debt instruments to riskier assets such as equities. In this phase, we are keeping a close eye on equities and have been advising clients to make the most of the anticipated bull-run.

Although we are optimistic about the turn of CFI.co | Capital Finance International

events in future, our varied experiences have taught us to be cautious optimists. In the long run, what really gives results is sticking to one’s strategic asset allocation. So, each portfolio should be dealt with on a case-to-case basis in terms of the extent of deviation from strategic asset allocation to make the most of a rally.

HOW HAVE YOU DONE THIS YEAR? WHAT DO YOU SEE FOR THIS BUSINESS IN THE NEXT THREE TO FOUR YEARS? Fiscal year 2014-2015 has been a great year for us. Our AUMs [assets under management] have gone up significantly and our business has risen twofold. The advisory proposition of PWM [private wealth management] has resonated well with our clients, considering it is in tandem with the changing face of the Indian economy and reforms ushered in by the new government.

Against the backdrop of the positive sentiment prevailing in the country and an upbeat Indian economy, the environment seems conducive for the private wealth management sector to flourish. In the next three to four years, we expect our business to register about a 30% CAGR [compound annual growth rate]. i 187

> Banco Nacional Ultramarino:

Over a Century Pushing Macau Forward

F

or more than a century, the Banco Nacional Ultramarino (BNU) has been part of the financial life of Macau, maintaining an active role in the social and economic development of the territory while supporting local business. The knowledge and experience thus acquired have been instrumental in securing the success of the bank customers’ businesses and projects in sectors such as real estate, retail, manufacturing, transportation, construction, public utilities, and international trade. The highlights of the past few decades include: • In the 1970s, BNU supported a sustained boom in local manufacturing by providing 188

documentary credit services that facilitated the export of goods; • BNU assisted in the financing of the acquisition and installation of power generators, thus reinforcing the output of Macau electrical utilities; • In the early 1990s, BNU financed the construction of the Macau Airport which became operational in 1995; • Despite the 1997 Asian Crisis which depressed regional markets, Macau’s economy remained both healthy and vibrant. To cope with the future developments, BNU inaugurated its new head office, built over the historic 1924 building; • With the establishment of the Macau CFI.co | Capital Finance International

Special Administrative Region (SAR), BNU’s contribution to the local economy remained of paramount importance. The bank was granted the Professional, Industrial, and Commercial Merit Award by the Macau SAR Government; • BNU also kept its status as an issuing bank and agent of the Macau Treasury; • Since the gaming industry was liberalised in 2002, BNU has become deeply involved with the sector, supporting new operators with financing and the provision of a wide range of banking services.

More than ever, BNU is focused on granting support to local small and medium-sized

Spring 2015 Issue

enterprises (SMEs) which remain a cornerstone of Macau´s economy. Dedicated teams have been formed to assist SMEs with products and services tailored to their specific needs.

In 2012, the bank launched the BNU Advantage service, targeted to affluent customers.

In 2013, the BNU network was expanded from 14 to 18 branches. The bank is on track to reach its target of twenty branch offices by the end of next year. As part of a large European banking group, CGD, BNU is present in 23 countries. The bank has a particularly strong presence in Lusophone countries and has been actively engaged in the promotion of business, and trade and investment flows, between China and the Portuguesespeaking world.

The accomplishments of the Banco Nacional Ultramarino may best be expressed by the following numbers: • Volume: Business volume has increased 56% since 2011. Deposit have grown by 56%, while the credit portfolio has increased by 59%; • Profitability: Net income from interest spreads has grown by 43% with net profits increased by 36% since 2011; • Quality of assets: The ratio of past due loans has been reduced from 1.73% in 2011, to 0.43% in 2014. Over the same period, the volume of past due loans decreased by 60%.

Corporate social responsibility has always been at the core of BNU’s mission and vision. The bank cooperates with a number of worthy projects, such as: • Supporting Tung Sin Tong, a leading local charitable organisation established in 1892 that provides free medical services and education for citizens in need; • Support the fight against drug abuse; • Sponsor the creative arts; • Blood donation drives; • Offering scholarships; • Support of cultural and sports projects; • Support for the triennial gathering of the Macanese diaspora in Macau. Participants arrive from the four corners of the earth to partake in the event.

Banco Nacional Ultramarino

“It is an exceptionally competitive market: though the special administrative region boasts only around 600,000 residents, no less than 29 banks are licensed and in business.”

As Macau develops further, BNU continuously updates its operations and practises to face any and all future challenges, fully committed to support the territory.

THE MACAU BANKING INDUSTRY In the recent years, Macau’s financial market has been growing at an accelerated pace in terms of business volume. It is an exceptionally competitive market: though the special administrative region boasts only around 600,000 residents, no less than 29 banks are licensed and in business.

Currently, the average net interest income – the difference between what banks charge in interest on credit operations and pay on deposits – is slightly over one percentage point. This is one of the smallest spreads worldwide.

CFI.co | Capital Finance International

According to BNU CEO Pedro Cardoso, “Competition is good for the overall society, since it encourages banks to provide better and more efficient services to customers. Nevertheless, it is important to keep a reasonable margin in order to allow banks to build reserves for possibly harsher future times.”

BNU is particularly well capitalised with a solvency ratio of over 23%. It is also an extremely liquid bank with a loan-to-deposit (LTD) ratio of around 53%. The LTD average in Macau hovers around 80%.

The competitive strength of BNU derives from the following facts: • BNU’s presence in Macau spanning well over a century; • BNU’s status of note-issuing bank in Macau; • One of the leading banks in Macau; • The strong presence of the CGD (Caixa Geral de Depósitos) Group in Lusophone countries; • A vast accumulated experience in supporting trade and investment flows between China and the Portuguese-speaking world; • The extensive CGD Group network spanning 23 countries in Europe, Asia, Africa, and the Americas; • The leading position of the CGD Group in several markets.

THE CHINESE MARKET BNU maintains a representative office in Shanghai and its parent company CGD has a branch office in Zhuhai.

The representative office can only offer consultancy services, while the Zhuhai branch has a relatively limited business scope.

Given its attractiveness and growth potential, BNU remains focused on the Chinese market.

Currently, the bank is analysing how to better leverage its presence in China to further develop its business. Particular attention is being paid to the development of the Hengqin Island which is expected to help diversify Macau’s economy in the near future.

According to Mr Cardoso it is likely that the Chinese financial market continues to be an attractive one for the foreseeable future and may possibly open up to new players: “We expect to see a continued increase in cross-border business between China, the Macau SAR, and Portuguesespeaking countries. We also sense a growing interest of Portuguese companies in China. BNU has supported some, facilitating their entry into this market. However, we have been particularly active in the opposite direction, i.e. to support Chinese and Macanese companies that wish to invest in Portugal.”

“We of course remain dedicated and equipped to support the flow of trade and investment between China and Lusophone countries. BNU is keeping a close watch on a number of possible ways to further expand its business in the Chinese financial market, leveraging BNU’s unique strengths.” i 189

> InstaForex:

Globally-Recognised Excellence

T

oday there are lots of brokerage firms on the forex market. The lion’s share of them are small dealing centres working under a license of a larger broker. As a rule, such companies charge higher service fees or hide their charges behind additional terms and conditions. Moreover, these 190

brokers offer no more than just access to the market.

overview is devoted to a broker of that fits both requirements – InstaForex.

Market experts and savvy traders recommend opting for major companies having not only many years’ experience and a large customer base, but also featuring a well-known brand. This

InstaForex started its operations back in 2007.

It took the company eight years to appear at the forefront of the forex brokerage service. From the very first day of its existence, InstaForex has

CFI.co | Capital Finance International

Spring 2015 Issue

tailored its services to the customers’ needs. Streamlining its products, services, and technologies, InstaForex was in on the ground floor of an efficient and competitive business model.

Traders choosing InstaForex as their broker obtain a set of benefits which allows them to concentrate on trading and making money. The forex market may look like uncharted waters to a newcomer. Consequently, it could a take long time before a profit is turned. It is crucial to remember that brokers act not only as an intermediary between the global market and a trader: they provide an educational environment, information support, a technical base, and the freedom to choose between trading tools and profit-making techniques.

InstaForex runs the gamut of things needed for a currency trader. It therefore takes much less time for traders to get into the swing of the trading process and make profits. In a rapidly changing financial environment, and upon gaining experience, a private investor needs an increasing amount of information in order to spot the opportunities.

Not every broker can ensure the professional advancement of its traders and provide them with all they need at their particular level of professionalism.

Thus, InstaForex’ expertise means the can identify with its traders’ growing money-making needs, rolling out new services and boosting its technical firepower.

However, let’s deliver specifics.

Directly cooperating with marketmakers, InstaForex charges low spreads (commissions), providing its customers with a wide range of trading instruments. Whatever a trader wants to invest in, InstaForex will enable him/ her to make the most of the opportunity, complementing its offerings with highprofile service.

Customers of the broker get efficient 24/7 support as well as a chance to attend free online webinars. They are also encouraged to make use of InstaForex analysis overviews and forecasts prepared daily by dozens of seasoned experts.

“The highly skilled members of the company’s team work incessantly to provide innovative high-tech solutions that meet the needs of traders.”

The highly skilled members of the company’s team work incessantly to provide innovative high-tech solutions that meet the needs of traders. This makes InstaForex one of the prime movers behind the advancement of technology altering the forex industry’s landscape.

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Special mention should be given to the InstaForex affiliate programme which has been at the core of the firm’s operations since the very beginning.

The following classical example may shed some light on how the affiliate system works: In 1996, online retail behemoth Amazon launched a then unprecedented affiliate programme which allows websites to write product reviews and get paid referral fees in case a customer buys from Amazon through the affiliate’s link. Despite the fact that the forex affiliate programme is slightly more complicated, as there are no traditional sales, the company grasped the opportunity to branch out using this promising model. In context of forex, partners are more than just webmasters; they are people raising other traders, developing trading software, and preparing much needed market overviews.

Thus, affiliates on forex not only attract customers; they also supplement the broker’s services. This is InstaForex considers the affiliate program a priority. Providing one of the best terms on the market, the company also offers a myriad of promotion and analysis materials from high-resolution banners to complex systems of web analytics to boost its affiliates’ efficiency.

InstaForex has the following business creed as its guide: help a customer start making money and become a partner in a profitable venture. It proved to be a most successful approach, bringing in more than two million customers from over eighty countries.

Over one thousand traders open accounts with InstaForex each day.

The company has now evolved into an extensive network of branches with more than 200 offices in 25 countries.

InstaForex is a world-class forex broker and gained wide recognition for the excellence of both its products and services. The company received an abundance of awards from, amongst others, World Finance, CNBC Business Magazine, European CEO, International Finance Magazine, and Global Banking & Finance Review. Moreover, InstaForex rarely leaves any financial conference or exposition without adding to its award collection. InstaForex received awards at the China International Online Trading Expo, International Investment and Finance Expo, ShowFx World Expo, and Forex & Investment Summit, Jordan EXPO. i 191

> AnandRathi:

An Unconventional - and Uncommon Approach to Wealth Management AnandRathi Private Wealth Management shuns norms, goes informal, and introduces emotion and information to build better relationships.

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n the “suited-up” age, the bold Indian financial services firm AnandRathi (AR) chooses to drop the blazer and go casual in order to warm up otherwise emotionless relationships that wealth managers share with clients.

Owing to the culturally diverse Indian market, each client’s approach towards wealth management is drastically different. The nature of an Indian HNI’s (high-net-worth individual) expenses and savings often carry heavy cultural influences.

Besides, many have only now begun to shift from a “savings” approach to an “investing” one. Moreover, disclosure of money matters to an external entity is a difficult step for many to take. Therefore, as a service provider, AnandRathi ensures that it is not devoid of emotion when dealing with a customer’s personal wealth.

Unlike competitors, the organisation maintains a low profile and consciously refrains from heavy marketing or generating inflated perceptions of its products and services. “Private wealth management is not a business of financial services but one of relationships. Thus, every effort taken and every penny spent is in the direction of strengthening such relationships,” says Mr Rakesh Rawal, CEO of AnandRathi Private Wealth Management.

BUILDING RELATIONSHIPS BY SHARING INFORMATION Over the past few years, the HNI pool in India has been rapidly swelling. In a country where “saving” and blocking money in physical instruments has been a cultural norm, HNIs are beginning to explore other avenues. Yet, awareness about financial instruments and their ability to create wealth are still low. For example, estate planning is a lesser-known concept in India than in other parts of the world. Despite a plethora of familyrun businesses, succession planning is not considered critical. The envisaging of a family dispute, for instance, strikes a rather sensitive chord culturally. Therefore, it takes patience to disburse knowledge and allow clients to appreciate and grasp the importance of wealth protection and distribution.

Mr Rawal believes that wealth managers have much more to do in terms of generating awareness

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“Private wealth management is not a business of financial services but one of relationships.”

Rakesh Rawal, CEO Anand Rathi Private Wealth Management

and eradicating scepticism toward financial instruments and other services, especially when the country is experiencing a slow shift in investment style.

Several wealth management outfits in the country consider themselves to be “client-centric” and focus on analysis of clients’ requirements and goals. For AnandRathi, however, wealth management goes far beyond that. The firm believes that the strength of a relationship lies not only in the service provider’s ability to understand its clients but also its clients’ ability to understand and gauge the quality of service provided. Hence, transparency and clear communication are held in high regard.

The organisation has observed that explaining the intent of a wealth plan in the relevant context allows a client to make informed decisions. This may call for innumerable interactions in certain cases; more often than not, it culminates in a strong relationship earned through good faith.

Even in terms of its offerings, AR is realistic about things that work for a client and those that don’t. If the latter, no matter how lucrative they be from a business perspective, they are eliminated from the system. The organisation develops and uses in-house evaluation methods that delve into the nuances of products to gauge their quality and performance. Based on the data gathered, products or strategies may be retained or eliminated. The intention is to have products and services that are relevant and beneficial to clients in the long run. Only a long-term approach is likely to build lasting relationships.

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BUILDING AN ENTREPRENEURIAL CULTURE The PWM (private wealth management) segment in India faces a huge challenge in terms of RM (relationship manager) retention; an RM-client relationship is often short-lived. While this is detrimental to longevity of a client-organisation relationship — “losing an RM implies rebuilding a client relationship from scratch; the transition could be discomforting from a client’s perspective”— AR seems to have this figured out, too.

First-of-its kind in the industry, AR employs an entrepreneurial model wherein RMs function as independent business units. They plan their own business and design solutions that they deem most appropriate for their clients. The purpose of adopting such an approach is to shift focus from “investment templates” to strategies that truly match clients’ goals. This freedom, the firm believes, impels RMs to identify client needs with more vigour and seek the necessary resources to meet those needs.

Choosing to offer a high degree of flexibility and avoiding a rigid framework in terms of operation and gains seem to have paid off by translating into client benefits and satisfaction. “No two clients are the same. Diversity in the client base calls for diversity in solutions, as well. We are propagators of customised solutions, and customisation requires a great degree of decision-making by RMs. So we employ the necessary support teams and experts to help them make those decisions,” says Mr Rawal.

While being true and transparent with clients serves one side of the relationship, being supportive and adding value to its relationship managers serves the other. The organisation readily experiments with new methods to upgrade its services. For example, in several cases relationship managers have chosen to work in partnerships. In almost all cases, the synergy has had spectacular results in terms of quality of service as well as contribution to the growth of the organisation.

ANANDRATHI GROUP Starting out in 1994 with institutional equity research, over time the AnandRathi group branched out into investment banking, investment

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services and equity advisory, wealth management, commodities and currency, general insurance, and global finance. As it gained momentum, AR re-vamped its research wing, which eventually served as an important source of information and analysis for the rest of the organisation. This move significantly enhanced the quality of services and served as a robust support system for all the verticals and their performances.

As the organisation gained popularity for its wide range of services, individuals, families, and corporates looking for a one-stop-shop gravitated toward it. As a natural progression, the private wealth management wing was established to pay more attention to the needs and goals of HNIs – a base that was beginning to experience expansion in India.

Today, in less than a decade, AnandRathi Private Wealth Management is one of the top wealth managers in the market, with a dedicated advisory team to address client requirements.

Although the group has made forays into a wide range of services, its strength lies in its high degree of inter-verticals cohesion. This particularly helps relationship managers as it allows them easy access to information relevant to their client-specific wealth strategy. The flow of information keeps the team well-informed and prepared to transmit the right kind of information to clients.

INVESTOR EDUCATION EFFORTS Over the past few years, owing to the underdeveloped succession planning market in India, AnandRathi has focused on generating awareness about this concept. Services such as drafting of wills and establishing trusts are often met with much resistance. Another market that is nascent is that of structured products, not as well developed as it is globally.

The firm has taken it upon itself to bust myths associated with such under-appreciated yet innovative products that have the potential to contribute significantly to an HNI’s portfolio.

Against the backdrop of changing investment styles, awareness about several products, concepts and services is likely to help investors approach the handling of their wealth in a holistic manner.

In terms of distributing knowledge, the organisation does not restrict itself to HNIs. It takes advantage of its all-India reach to address investors across the country, update them with market trends and various related subjects.

AR shares its views regarding these trends and recommends relevant solutions. The company periodically holds investor education initiatives in smaller cities where awareness levels are much lower. The intention is to upgrade the knowledge of individuals and investors irrespective of whether or not they are associated with the organisation in order to help them make the best use of the products and services available. i CFI.co | Capital Finance International

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> IFC:

The Art and Science of Benefits Sharing

By Liane Asta Lohde. Co-authors: Clive Armstrong and Veronica Nyham Jones.

Non-renewable natural resource projects – that is oil, gas, and minerals – are usually seen as part of a nation’s wealth. Accordingly, their use for the longterm sustainable development of a country is a prime objective of any legitimate government. The role of government in establishing a framework to manage and invest revenues derived from oil, gas, and mining projects is crucial to ensure that the sector contributes positively to sustainable development.

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he fair sharing of the net benefits of natural resource developments, i.e. benefits in excess of costs, between government, investors, and other stakeholders, is important to ensuring that projects and their positive impacts are durable and resilient to change over time.

Investors, governments, communities, and other stakeholders share a strong interest in a reasonable distribution of benefits.

Most private-sector investors realise that projects that are good for the host country and communities, and whose benefits are perceived to be shared reasonably, are less likely to face disruption, renegotiation, or even expropriation.

Terms and conditions that deliver shared benefits are more likely to survive changes in societal expectations, political regimes, or market disruptions and reward investors over the long run for the capital and skills deployed and the risks taken. As developers better understand this connection and experience stakeholder challenges and even social conflict, their interest in a dialogue to create shared benefits and value is growing.

The International Finance Corporation (IFC) recognises the important technical and economic differences between the oil, gas, and mining industry, and understanding project and country specifics is crucial. Nonetheless, the three sectors share certain characteristics that distinguish them from any other industry, including high degrees of uncertainty and risk (geological, exploration, technical), price volatility, long project lead times with significant capital expenditures up front, and often a large footprint with environmental social effects.

These factors profoundly influence how, when, and to whom benefits and costs accrue and the process by which a durable benefit sharing agreement across stakeholders can be reached.

In this light, an overall approach to assessing benefit sharing that covers oil, gas, and mining is proposed.

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“High levels of crossshareholding and concentrated ownership in the banking sector and the overall market means related-party transactions, particularly lending, remain a key challenge.”

THE IFC APPROACH Guided by its development mandate, IFC looks carefully at an extractive project’s potential to contribute to a country’s economic and social development, and how project costs and benefits will be distributed when considering a potential investment. IFC also reviews the profitability of the proposed investment and the underlying economics of the project to make a financial decision on whether or not to put its own capital at risk. These factors are considered throughout the life cycle of an IFC investment along with other key criteria that determine IFC’s engagement, including IFC’s prospective role and value addition, strategic fit with World Bank Group country engagement, and institutional priorities as well as general compliance with policies.

A full investment cycle from early review to investment and eventual exit from a project consists of many steps and can unfold over many years, especially in the natural resource sector, where projects have long lead times and face high levels of uncertainty.

An assessment of prospective project development impacts and benefit sharing is an integral part of IFC’s investment appraisal approach. A benefitsharing assessment typically considers: I. The country and community context, the processes by which sharing was determined and how proceeds are managed and used; II. Environmental and social issues and risks, CFI.co | Capital Finance International

mitigation measures, and opportunities to enhance outcomes beyond mitigation as well as stakeholder expectations and concerns; III. The overall distribution of diverse, uncertain and sometimes unquantifiable benefits and costs across affected stakeholders, using IFC’s stakeholder framework (Lysy, Bouton, Karmokolias, Somensatto and Miller 2000). The timing of these, which are grouped by financial, economic, environmental and social impacts, is also reviewed.

IFC will assess the broader context, starting with the role of the natural resource sector in the country, its economic contribution to date, its prospects, and government vision for its future.

Understanding country and sector governance issues and capacity, as well as expectations and concerns by host governments can help determine whether a project will likely contribute to sustainable development.

The assessment includes a review of “traditional corruption”, as it may occur during the acquisition of mineral rights. IFC looks carefully at the private investors in projects it is asked to support. This is done both to satisfy IFC of their integrity and the possible presence of political insiders whose presence may be an indication of a sweetheart deal. Where corruption is a factor, IFC will not invest.

Poor country and sector governance often poses an impediment to the transformation of resource wealth into sustainable development.

The engagement of the World Bank (WB), the International Monetary Fund (IMF) and other development actors in a country will help judge the risks along the value chain and verify a country government’s commitment to reform and change.

IFC reviews ex ante the risks weak governance poses to key project development benefits. In general, IFC makes careful judgments about whether it should support natural resource projects where governance is weak but development payoff may be significant, such as supply chain

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development, shared infrastructure, investment in local communities. IFC also considers projectspecific arrangements that can help reduce governance risks, such as technical assistance to build local capacity in revenue management, enhance transparency and accountability. IFC supports the global transparency agenda and initiatives like the Extractive Industries Initiative (EITI). Also, IFC has taken the lead among other development finance institutions by championing full revenue and contract disclosure in its projects.

Understanding who the key stakeholders are, what their aspirations, concerns, and expectations of a project are, and what drives these is important for judging the reasonableness of a benefit sharing settlement and its legitimacy and durability over time. If project realities are not commensurate with stakeholder perceptions – be they informed or not – a project may be at risk. Typically, key stakeholders include the government (federal and sometimes subnational), citizens at large, affected communities, and investors.

Figure 1: IFC Stakeholder Framework and Areas of Project Impact

As part of its due diligence before investing and part and parcel of project supervision, IFC through its performance standards requires a stakeholder analysis and engagement plan for the range of stakeholders that are interested in the project.

Stakeholder engagement plans must be scaled to the risks and impacts, the development stage of the project and tailored to the characteristics and interests of affected communities.

Stakes in project may go much beyond the immediate project boundaries and the directly affected communities, and they can be high.

Especially, projects that are big in scale and are transformational for an entire country or even region, national expectations and concerns will inform project-level dynamics and vice-versa.

At the core, IFC assesses a project’s costs and benefits and their distribution across stakeholders, in three broad, overlapping areas of impact. IFC considers a variety of questions as part of its due diligence and decision-making process: 1. Fiscal impacts: How are the net financial benefits of projects shared through profit sharing, taxation, and in other ways – at both the national and subnational levels of government and with communities and others?

2. Economic impacts: What additional economic costs and benefits are generated and shared, such as jobs and training, the introduction of technologies, spending with local suppliers, investment in infrastructure, the supply of energy, such as oil, gas, coal and electricity, or the supply of other raw materials at competitive prices to local industry and households?

3. Environmental and social impacts: What are the positive and negative environmental impacts and risks that the project brings and who bears them? How do impacted communities, including vulnerable groups within communities, gain or lose from the development in other ways?

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IFC EXPERIENCES AND LESSONS LEARNED As both a development institution and an investor, IFC is in a unique position to simultaneously share the perspectives of investors, host countries, and other stakeholders. As a result of balancing these dual roles over many years, through commodity price cycles and industry change, a number of lessons have emerged that have a bearing on how to assess and secure a durable benefit-sharing arrangement: 1. Uncertainty is a key feature throughout the project life cycle A project’s expected business outcomes and performance over time are exposed to many uncertainties. The future values of key drivers of project performance, such as costs of production and commodity prices, are uncertain and can be volatile. Even the scale and quality of a resource may not be fully known until late in the development and its extraction. And there may be substantial technical and production challenges that need to be addressed.

Projects may require many billions of dollars, may take years to come to fruition and many more to generate a financial return once operational.

Against this backdrop, the planning of programs intended to benefit communities may be difficult, given business and other uncertainties.

Government policies and regulations can change and other political events may have major impacts on a project’s success and commercial viability. Tax frameworks and agreements and their impacts on projected benefit sharing that seemed reasonable at the outset of a project may look very different in the future. For example, much-higher-thanexpected commodity prices over the last decade boosted the profitability of natural resource projects and companies. A number of governments came to believe they were not receiving a fair share of project benefits because their incomes from taxes did not increase in parallel – partly because tax structures and agreements were not designed to cope with these changes.

The considerable deterioration in prices for various commodities in the recent past, as well as the notable price volatility generally seen during the last years, has changed the conversation again, bringing into relief the uncertainty that mediumto long-term investors and governments face in this sector.

2. Every project is unique Individual projects vary greatly in their size and life cycles, the richness of the resource, ease of access, cost of extraction, profitability, and impacts on people and the environment. Oil and gas is a different business from mining. However, gas is also very different from oil, and mining projects vary greatly from one another.

In regulating the natural resource sector, governments must strike a balance between accommodating the special circumstances of projects and maintaining a transparent, standard, 196

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and manageable regulatory framework and a bureaucracy that supports it. The way a project is treated and perceived depends on its host country and community context, the present and future economic role of the natural resource sector, and the government’s vision for it as an engine for sustainable development.

Investors seek acknowledgement for the uncertainty and unique project circumstances they face and value stability of the arrangements that govern their obligations to the government and other stakeholders. Especially for megaprojects, investors and governments may enter negotiations about specific aspects as regards project development and benefit sharing. While deal-by-deal negotiation allows for greater tailoring to project specifics, legitimacy rests heavily on transparency of process, symmetry in the access to information, and technical know-how and capacity. This may not be achieved in many weak governance countries.

3. Government policy impacts benefit sharing Governments face multiple competing demands and the policy objectives they set impact benefit sharing—including whether, when, and how to develop their natural resources. Although the overriding objective of most governments is to ensure their country benefits to the greatest extent from its natural resources, there are many different ways they may try to ensure this. Government commitment to transparency and accountability, due process and prudent public financial management are key.

Good policy does not necessarily require governments to maximise the net revenue they receive from every project. The benefits of offering standard terms and conditions may outweigh the costs and complexity of trying to implement a more sophisticated tax system or setting terms and conditions project by project. New, emerging countries may be best served by setting relatively attractive terms to encourage a steady flow of new investment. It may also be an appropriate long-term strategy for building a robust, lasting industry, as some of the most important, resource-producing countries, such as Australia, Canada, Chile, and Peru demonstrate.

Governments may accept less tax income in return for investors helping them achieve other development objectives. For example, investors may be expected to increase local procurement and skills development, build, manage, and provide affordable access to infrastructure (power, rail, roads) for use by others, or process production locally rather than export raw materials.

Governments play an important role in providing an enabling environment for private-sector actors so that natural resource projects can link into the local economy and generate benefits for as long as resources are economically recoverable.

4. Perceptions and expectations matter Diverse stakeholder groups have different perceptions and expectations about natural CFI.co | Capital Finance International

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resource projects and their potential impacts. In particular, countries and communities with little experience developing natural resource projects may have difficulties to fully understand all of the issues, including the scale and nature of future impacts. Even when projects have been constructed and in operation for some time, it can be difficult to fully capture the economic and social impacts that have accrued over decades.

Many older projects lack baseline data which can further impede tracking and may breed distrust of company practices and government policies.

Expectations and perceptions by host communities and other affected stakeholders will have a bearing on project success. Stakeholders are unlikely to share equal access to information or understanding of a project’s fiscal, economic, social, and environmental effects and impacts.

Transparency and access to information are essential to manage misperceptions and enforce mutual accountability among stakeholders.

In IFC’s experience, imbalance of information coupled with poor stakeholder engagement can derail an otherwise healthy project. Proactive management of diverse local expectations via honest dialogue about benefits, costs, risks, and mitigation measures can help build trust. Ideally, this creates a platform to cooperatively plan strategies to smooth costs and benefits across constituencies.

5. Processes are important The processes by which benefit sharing is determined directly influences public perceptions about the reasonableness of the distribution of costs and benefits. This starts with how contracts were awarded, how environmental and social impacts are monitored, how affected communities are consulted to the collection and use of fiscal revenues for the economic development of the country. Transparency of processes along the value chain is important for creating accountability of key actors by enabling access to information and a better understanding of the project benefits and costs.

A process that is perceived as opaque and not inclusive can generate suspicion and negatively impact a project, as stakeholders may persistently challenge the arrangement, including any proclamations about net benefits.

Even if company and government agree on what they view as a reasonable split over time, an uninformed, excluded electorate may at some point decide to change the government and the project terms as a result.

There has been a welcome trend of greater transparency about natural resource projects – including revenue flows, contract terms, and reporting to communities. But for benefit-sharing arrangements to be durable, the process must be consultative and participatory. Consultation with affected communities should start early – even during the exploration phase – and should be iterative throughout a project’s life, taking into account dynamic, environmental, and social 198

risks. Communities must be able to register their grievances and see them addressed. Resilient agreements are those that are supported by affected stakeholders who have meaningfully participated and can influence decisions about project aspects that affect them. This may relate to land access, water management, immigration, and infrastructure development.

Broad community support is central to managing project risks over time.

6. Fiscal benefits are only one part of a project’s costs and benefits Benefit-sharing discussions usually focus on the distribution of the financial (fiscal) benefits and costs of the project between private investors and the central government. However, there is a broader range of other non-fiscal costs and benefits that need to be considered to understand the full range of impacts and opportunities of natural resource development For example, communities are immediately – and sometimes negatively – impacted by projects near them. Their lives will be impacted in varying ways, and different groups within these communities will fare differently. In addition to tax revenue, projects may bring jobs, infrastructure, local sourcing, and competitive supplies of energy and other materials that may benefit the country as a whole or particular regions and sectors. Projects will also have environmental impacts that need to be assessed and tracked.

7. The arts and science of benefit sharing For IFC, determining whether a project has a reasonable balance of benefits and costs depends on an informed, overall judgment based on expert, multi-disciplinary input and

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review. From a development and commercial perspective, IFC tests for a range of outcomes, and thresholds exist with respect to financial, economic, environmental, and social considerations. For a project to be supported, it must demonstrate, at minimum, that it is profitable, that its economic benefit to society and economic return on investment is positive and greater than its financial return, that it is compliant with IFC Performance Standards (IFC PS), and that affected communities are broadly supportive.

However, given the diversity of national contexts, geographical potential, and business arrangements, IFC has found that there is no single blueprint that can be used to determine what equitable sharing looks like. In practice, investigation and professional judgment from a diverse team of experts, representing specialty areas such as finance, engineering, environmental and social, economics, and law, to name a few, is required.

Often precise measures or cut-offs between what is acceptable, for example with respect to the fiscal sharing between the public and private sector, and what is not, are at best imperfect and at worst misleading. Rather, it is important to contextualise and assess fiscal sharing against other project characteristics and drivers, stakeholder expectations and concerns (see Figure 1), and potential impacts. Even when the overall judgment is that there is a balance of costs and benefits at a particular moment in time, circumstances can change and present risks that need to be addressed and managed carefully. i

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> CFI.co Meets the MD of Quippo:

Mrinal Vohra

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is team calls him The Inspiring Action-Oriented MD. Mrinal Vohra was appointed to this role at Quippo Oil & Gas Infrastructure in December 2014. The company’s business includes contract drilling; acquiring, operating, and producing oil blocks / concessions; oilfield services such as the provision of surface seismic acquisition; and drilling-associated ancillary services and turnkey project management for oil field-related well construction.

UAE, Singapore, Indonesia, Malaysia etc. being awarded increasing levels of responsibilities in Baker Atlas spanning operations, sales, business development and general management.

Mr Vohra has acquired significant international experience and is very well regarded as a professional with a wide and deep skillset which is quite exceptional in the oilfield services business. He is comfortable with nearly all aspects related to the sector, from geoscience, operations, sales, financial management to mergers and acquisitions. Mr Vohra’s expertise spans the entire upstream and downstream segments of the oil and natural gas industry.

Mr Vohra boasts both broad and deep domain expertise and experience with various oil and gas disciplines in reservoir evaluation, geological interpretation, geophysics, well construction, integrated project management, sales, mergers and acquisition, integration, and services models. He has been actively involved in the Society of Petroleum Engineers, SPWLA Society of Petrophysicists and Well Log Analysts), Formation Evaluation Society of Indonesia, and other professional entities.

Mr Vohra rose to the senior levels of international business management in his early 30s while working with global oilfield services companies in a number of countries. He is recognised as one of the top managing directors of the industry.

Already at a young age, Mr Vohra took on roles of increasing seniority and complexity with major oilfield service companies. He succeeded in delivering consistently high levels of growth and performance. Under his leadership, Quippo Oil & Gas has been able to further improve its operations and expand its success.

Mr Vohra’s achievements as Quippo managing director: • Quippo Oil & Gas has received the Best Onshore Oil & Gas Drilling Team India 2015 Award in the CFI.co Oil and Gas Awards Series.

• Quippo Oil & Gas acquired a total of nine rigs.

• Under Mr Vohra’s guidance, Quippo Oil & Gas’ safety and performance record has improved tremendously with TRIFR (total recordable injury frequency rate) dropping from 9.68 in 2012 to 4.13 in 2014, while LTIFR (lost time injury frequency rate) was reduced from 1.97 in 2012 to 1.65 in 2014.

• Revenue growth has increased year-on-year.

• Quippo Oil & Gas expects to be award its single largest contract ever, worth $120 million.

BIOGRAPHIC PORTRAIT Prior to moving to his current assignment, Mr Vohra was the Asia business leader for Downstream Products & Services for GE. He was appointed to this role in January, 2014.

This business delivers products and services to refineries, petrochemical plants, and fertiliser

Mr Vohra began his career in the oil and gas industry as a wireline logging engineer with Halliburton in 1992, operating across India and West Africa for five years before moving to Baker Hughes to assume a more internationally oriented profile.

MD: Mrinal Vohra

industries in Asia – including China, India – and the wider Asia Pacific Region – including Australia, New Zealand, Japan, Korea, and Taiwan.

Mr Vohra was the CEO for GE Oil & Gas’ India Region from September 2011 through December 2013. This job covered GE’s entire oil and gas portfolio which included turbo-machinery, drilling & surface, subsea, and global services.

Prior to GE, Mr Vohra worked at Weatherford International where he was head of commercial and business development for the Asia Pacific Region. His responsibilities included mergers and acquisitions, joint venture alliances, and driving enterprise business growth strategies across the multiple product line segments in the region, encompassing a number of premier markets: Australasia, South East Asia, China & North Asia, and Indonesia.

Prior to his job at Weatherford Int’l, Mr Vohra was with Baker Hughes for twelve years where he held various assignments. His last job at Baker Hughes was as regional head for the Middle East based in Abu Dahbi, spanning countries from Egypt to Bangladesh.

Among his many international assignments with Baker Hughes, Mr Vohra headed the Asia Pacific Region while based in Singapore with Baker Atlas until 2007. From 1997 onwards he was with Baker Hughes and lived and worked across multiple countries including the USA, CFI.co | Capital Finance International

A citizen of Singapore, and born in India, Mr Vohra obtained a degree in Electrical Engineering from the Indian Institute of Technology in Kanpur.

During his career, Mr Vohra participated in various executive development courses, including the Thunderbird Executive Management Programme in Phoenix (USA) and at GE’s Global Learning Center in Crotonville, NY. He is married and has two sons. In his spare time, Mr Vohra enjoys playing golf and tennis. He is an avid readers and likes to spend time with his family.

THE MANAGING DIRECTOR’S VISION Mr Vohra aspires to see Quippo Oil & Gas become India’s leading drilling contractor in addition to an international services company – providing oil and gas well construction, and drilling and seismic services.

To achieve this, Quippo Oil & Gas needs to be agile in responding, listening, and executing the different requirements of the industry. The Quippo team is increasingly safety conscious, operationally efficient, cost effective, and willing to adapt to the customer’s needs.

Mr Vohra: “The past year has been tough and the current environment, with its low prices, is a challenge to everybody in the business. The resulting pressure to sustain our business is forcing the company to substantially increase its efforts and to step up by becoming the best performer. For this to happen, all efforts have to be directed at setting the appropriate strategy, building the requited culture, and carefully allocating capital within the firm.” i 199

> Quippo:

Choice Purveyor of Winning Rigs Quippo Oil & Gas Infrastructure Ltd (QOGIL) is the leading and most progressive Indian upstream assets and services provider with an international presence. The company employs more than 350 people.

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QOGIL’s focus is on providing stateof-the-art rigs for contract drilling and the provision of 3D/2D seismic services. The rigs are equipped with the latest technology and worked by world class crews. Most of the rigs are equipped with top drives to undertake highly specialised drilling operations in technically challenging environments.

Headquartered in New Delhi, QOGIL is a subsidiary company of Srei Infrastructure Finance Limited (Srei). It is one of India’s leading and fastest growing drilling contractors with both domestic operations and an ambition to expand its international footprint. Srei has led the sector from the forefront in almost all stages of the infrastructure value chain. The firm is amongst the first Indian non-banking financial companies (NBFC) to access the international markets for funds; the first Indian infrastructure NBFC to be listed on the London Stock Exchange (LSE); and the first company to lay the foundation of India’s passive telecom infrastructure.

Quippo operates high-tech rigs ranging from 750HP to 3,000HP and is gradually increasing its presence and activities in the petroleum sector. The company recently mobilised its 1,300HP rig for Waha Oil in Libya and is presently discussing projects in Iraq and other countries in the Middle East.

Quippo currently has a fleet of ten rigs. One of these, Rig #3, while working under a contract for Cairn in 2014, completed 365 days without loss time injury (LTI). Two of Quippo’s rigs – both 2,000 HP – are now at Basra Port in Iraq, awaiting deployment. QOGIL is an ISO certified company with a sound quality management system (QMS) in place that encompasses all areas of operations.

“Quippo operates hightech rigs ranging from 750HP to 3,000HP and is gradually increasing its presence and activities in the petroleum sector.”

With a team of over 350 highly trained, qualified, and experienced oilfield professionals, QOGIL offers best-in-class equipment to enable highly efficient and safe drilling operations for all its clients. The company has a comprehensive health, safety, and environmental management system (HSEMS) in place. The drilling team of QOGIL witnessed an average NPT (nonproductive time) of less than 8% on its rigs last year.

RIG CHAMPIONS Quippo’s rigs recently received awards from the director general for mining safety (DGMS) during the 28th Mines Safety Week 2014.

Quippo’s Rig #5 was awarded the 2nd prize, while Rig #4 claimed 3rd prize for its HSE performance. The company’s safety record has further improved with total recordable incident rates (TRIR) falling from 9.68 in 2012 to 4.13 in 2014. The lost time incident frequency rate (LTIFR) dropped from 1.97 in 2012 to 1.65 in 2014.

Quippo’s management team comprises leaders with global experience overseeing the functional departments of drilling operations, technical, preventive maintenance, quality & HSE, logistics, commercial, HR, and finance & accounts. The team has experience of working in different countries and under high pressure

& high temperature (HPHT) conditions with a number of international operators. Some of its rigs are presently operating in the desert state of Rajasthan.

Quippo has experience in mobilising rigs and conducting drilling operations in the notoriously difficult topographic conditions of north east India, including the states of Arunachal Pradesh, Tripura, and Assam. Besides, the company has worked in various other regions of India. Its efficient preventive maintenance system (PMS) and project management (PM) skills ensure that the contractor has minimal down time on its rigs, even in areas with poor infrastructure.

Quippo is accredited with ISO 9001:2008 as well as OHSAS certification (OHS 601828).

The company is also accredited by the IADC (International Association of Drilling Contractors) and the IWCF (International Well Control Forum).

The company’s track record includes operations for various E&P (exploration and production) operators such as Cairn India, ONGC, Reliance, Oilex, Jubilant Oil & Gas, Geo Enpro, Prize Petroleum, amongst others. The contractor’s project management offerings and efficient services have been appreciated by many operators.

QOGIL has been using the latest technology equipment in its projects which include the use of iron roughneck for the making and breaking up of tubulars. This is an efficient and safe way of tubular handling. Capable of operating with oil based muds, and equipped with top drive units, QOGIL is capable of drilling faster.

Using bottom hole assemblies (BHA) with mud motors helps it providing faster penetrating rates. Other equipment that Quippo regularly

“Quippo Oil & Gas Infrastructure Ltd boasts a proven track record of providing onshore drilling and related services that spans over ten years. The company has displayed an innovative approach to onshore drilling management.”

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Spring 2015 Issue

of the complicated logistics and governmental regulatory requirements of operating in remote areas and believes this to be a valuable asset for its project management outcomes.

CAPABILITIES & EXPERTISE Drilling oil and gas wells in an efficient, fast, and safe manner remains Quippo’s core competence. The operating teams aim to reduce the customer’s pain points by optimising and grouping multiple services together in order to provide a comprehensive solution as a single package. The teams interact closely with customers from the well planning stage onwards and help review well plans in order to assist customers in the optimisation of their operations. The company offers many additional services to develop and implement integrated well construction programmes.

These additional services come in handy and are available to customers throughout the drilling process.

Additional services include: • 3D/2D seismic services • Mud engineering services • Mud logging services • Fishing tools services • Casing running services • Drilling tools rentals • Fishing tools rentals QOGIL operates with the following objectives: • Achieving zero downtime through operational excellence • Maintaining the highest HSE standards • Achieving customer engagement to alleviate customer’s pain & share risk • To provide hi-tech and specialised on-shore drilling equipment • To enter into strategic relationships with global leaders in the upstream oilfield services and technologies sector to increase offerings

provides are PVT Systems as opposed to the traditional dipstick methods, casing liners handling equipment, and whipstocks, unitised wellheads, chair-type “derrick man” devices, etc.

approach to onshore drilling management. The corporate goal is to differentiate Quippo from its competitors by providing quality drilling rigs matched with the highest level efficiency delivered by expert crews.

Quippo Oil & Gas Infrastructure Ltd boasts a proven track record of providing onshore drilling and related services that spans over ten years.

The company has displayed an innovative

With an impeccable safety and environmental management record, QOGIL continues to strive for further improvements to its QHSE systems.

The company has an excellent understanding CFI.co | Capital Finance International

QOGIL offers: • Highly efficient mobile / skid mounted onshore drilling rigs • Drilling rigs equipped with new top drives • On-shore mobile work-over rigs • World class tubular handling capabilities • Highly qualified, experienced, and motivated teams • Efficient and effective preventive maintenance schedules to ensure minimal downtime • Strategic alliances to provide customised solutions • Contractual arrangements for long term contracts to ensure steady service The future ambitions of QOGIL are: • Acquire producing E&P Blocks • Establish seismic operations • Expand the drilling rig fleet in India and internationally • Expand into the provision of ancillary rig related services • Enter the off-shore drilling market i 201

> World Bank Group:

Should Oil Exporters Shift Capital Stock to Renewables?

By HĂĽvard Halland, Alan Gelb, and Silvana Tordo

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s the Financial Times pointed out recently, oil companies such as ExxonMobil and Shell would, under measures considered for the global climate pact to be sealed in Paris next year, cease to exist in their current forms in 35 years. A proposal to phase out global carbon dioxide emissions by as early as 2050 was not resolved during the UN climate talks held in Lima last December.

However, the adoption of even a watered-down version of this proposal, in Paris or in later rounds of climate negotiations, would mean that the amount of oil and gas produced by these companies, and the quantity of coal mined by enterprises such as 202

Rio Tinto, would need to be greatly reduced by mid-century. Such long-term concerns might over the next years trump current worries about an oil price slump that could be on the wane as soon as marginal projects and producers are shaken out from the bottom of the market.

GOVERNMENT OIL REVENUE TO FALL Whereas ExxonMobil and Shell are private companies, national oil companies such as Saudi Aramco, Statoil, and others control about threequarters of all crude oil production and more than 90% of reserves. For a radical reduction in global carbon emissions to be achievable, state-owned oil companies would need to dramatically reduce the CFI.co | Capital Finance International

production of hydrocarbons.

If that should happen, government revenues from hydrocarbons would be a fraction of what they are today. But oil-rich countries have become so dependent on oil exports that a viable economic future is hard to imagine were these exports to be significantly reduced. National oil companies’ production decisions are likely to be less affected than private companies by price mechanisms such as a carbon tax, particularly for those companies that benefit from large low-cost reserves. However, in the long run, carbon pricing and technological developments in the renewables sector are likely to affect even these companies.

Spring 2015 Issue

RENEWABLE ENERGY EXPORTS COULD REPLACE OIL Many of today’s oil and gas exporters are doubly blessed: they are endowed with rich oil, gas and mineral deposits and also exhibit exceptionally good conditions for the generation of renewable energy (high intensities of sunlight or wind, an abundance of land that might be used for solar plants and wind farms, and relative proximity to major energy markets). These conditions provide them with the option of maintaining their traditional sources of energy exports, while developing alternative energy sources.

Consider Saudi Arabia and other oil-exporting desert nations. The vast deserts of the Arab peninsula could provide enough solar energy to satisfy a significant share of European demand, while leaving capacity to spare for neighbouring regions. Other oil and gas exporters are blessed with windswept coastlines where energy can be captured from wind, waves, and ocean currents, and sold in regional markets. Such exports would likely require large investments in transmission infrastructure and the development of innovative financing models, as well as the deployment of recent and further innovations in energy storage.

CAPITAL AND ENERGY POTENTIAL ARE COMPLEMENTARY The idea of exporting solar power to major markets from neighbouring desert regions is not new. Morocco is fast developing its solar energy potential, at first for domestic consumption – to reduce a reliance on fossilfuel imports that has strained its balance of payments – with ambitions to export power to Europe later. Oilexporting nations, meanwhile, have been able to use proceeds from oil sales to build up very large capital reserves in the form of foreign assets held in sovereign wealth funds (SWFs).

Globally, SWFs hold assets worth approximately $6.5 trillion, of which about half is held in oil funds – SWFs that are capitalised by proceeds from oil and gas exports. The world’s largest oil fund, Norway’s Government Pension Fund Global (GPFG), holds foreign assets worth $893 billion. The funds of the United Arab Emirates and of Saudi Arabia are not far behind, with assets worth $773 billion and $757 billion, respectively.

“Whereas ExxonMobil and Shell are private companies, national oil companies such as Saudi Aramco, Statoil, and others control about three-quarters of all crude oil production and more than 90% of reserves. For a radical reduction in global carbon emissions to be achievable, state-owned oil companies would need to dramatically reduce the production of hydrocarbons.”

CFI.co | Capital Finance International

Based on capital costs per watt in the range of $2.50 per peak watt for concentrated solar power, the capital cost of plants providing peak power equal to the average consumption of the European Union could be around $1 trillion. (This does not include costs of transmission infrastructure, or transmission losses). Overall costs are also coming down rapidly, and Dubai’s state utility last November accepted a bid for a photovoltaic solar power plant with a cost per kilowatt-hour of less than six cents. This sets a world-wide record low for the cost of solar electricity, significantly below recent records in Brazil and India of around 8–9 cents per kilowatt-hour.

Unlike private investors, whose incentives are stacked in favour of the short term, SWFs are able to consider the home country’s strategic long-term interests. For most equity funds, with managers frequently judged on quarterly performance, the “long-term” rarely goes beyond 3-5 years, the time required to buy a company and then “fix and flip” it, and pressures from shareholders often keep investment horizons below two years. But sovereign funds, given the 203

right mandate, are in a position to provide large amounts of patient capital. They thus provide oil exporters with a potential strategic advantage in adjusting their economies to a low-carbon world, while potentially reducing risk and earning a fully competitive return.

MACROECONOMIC FEASIBILITY Traditionally, oil funds have been used to save for future generations, to stabilize the home economy in the face of highly volatile oil and gas prices, and to reduce the risk of large oil revenues generating asset bubbles and exchange rate appreciation. For these reasons, oil funds tend to invest in foreign assets, mainly traded securities. Such funds may, however, find it increasingly attractive to invest in renewable energy, including in their own home economies.

First, preserving capital and earning a competitive return on renewable energy investments will become increasingly achievable as solar and wind technologies continue to improve, and as more penalties are imposed on carbon emissions through carbon taxation and regulation.

Second, many of the components of wind and solar power infrastructure are typical import goods. This makes a “Dutch disease” or upward pressure on the exchange rate, less likely. “Dutch disease” and asset bubbles are generated by excessive spending on goods and services that are not internationally traded, such as construction work and locally produced construction materials. Imports, on the other hand, do not generate domestic price pressures because supply is in most cases highly elastic, and prices are determined by global demand.

The macroeconomic risk of investing in renewable energy at home could thus be manageable, and countries would need to find a balance between the use of imports and the option of developing national manufacturing industries to produce components for the renewables sector.

INVESTING THROUGH PARTNERSHIPS Last year, Norway’s GPFG significantly reduced its exposure to coal and tar sands, a decision that resulted from the fund’s long-term risk assessment. Other oil funds are likely to follow suit, but few large institutional investors have yet moved beyond tracking risk to actively divesting from carbon-intensive sectors – although the pressure to do so is increasing.

Further down the road, decisions to increase investments in renewable energy may involve both commercial and strategic objectives. Whereas foreign sovereign funds’ investment is mainly a commercial undertaking, governments are increasingly seeing their domestic sovereign funds as a vehicle for optimizing returns and strategic national investments through equity and project finance. Domestic investment mandates are motivated by several distinct concerns.

A country may find that there are positive externalities to domestic investment, including 204

growth and productivity-enhancing effects which are not fully reflected in their financial returns.

For investments in the renewable energy sector, such externalities could include the development of domestic technological capacity to produce intermediate products for wind and solar plants, and generation of employment.

been tasked with leading the implementation of the kingdom’s renewable energy policy. According to a recent report by consulting firm Wood Mackenzie, technological development in solar energy could be so fast and disruptive over the next decade that traditional energy companies that are unable to adapt would face a tough market.

Investing in power transmission infrastructure may foster profitable export markets. Such bulky investments may require a large institutional investor, or direct government investment, to be feasible. The pursuit of first-mover advantage is also relevant. As regional renewable energy markets develop amid rising carbon prices and more efficient wind and solar technology, current oil exporters with well-capitalised SWFs may be able to establish dominant market positions early on.

No oil-exporting country has yet fully started to replace hydrocarbons in its export composition.

Over the next decade, however, oil-rich nations may find that investing in their capacity to remain energy exporters in a low-carbon world should be their highest strategic priority. i

Governments are then faced with two separate, but related, questions – of allocation and of agency.

First, should they allocate more investment to building a stock of fixed capital for renewable energy generation? Second, should these investments be undertaken through the government budget or by the SWF, possibly through a separate subsidiary?

Both are feasible options, and governments could leverage their own capital through publicprivate partnerships. A SWF, on the other hand, can act as an expert independent investor, with greater flexibility than the government, within its established mandate. The fund may use a variety of risk-sharing mechanisms to make projects bankable, thereby crowding in private and sovereign investors.

WHAT ARE THE RISKS? An oil-to-renewables strategy of fixed capital investment is not without risk. The primary risk is to the wealth objectives of the SWF – to its ability to preserve and grow its capital, if non-commercial objectives are allowed to prevail over commercial ones. Co-investing with like-minded public or private investors is likely to reduce this risk, by strengthening investment discipline. Additionally, renewable energy investments must be subject to well-defined return objectives and strict corporate governance principles, allowing the fund to operate as an independent specialised investor within its mandate. This would require the fund to develop the requisite sector expwertise to operate a renewables portfolio.

A STRATEGIC PRIORITY? Some large oil exporters have begun investing significantly in the production of renewable energy, though not yet for export. Saudi Arabia has embarked on an ambitious program of renewable energy production for domestic consumption, and aims to generate 54 gigawatts of renewable power by 2032, most of it solar.

Several national oil companies are already operating in the renewable energy sector, and their technical and managerial skills are likely to be critical for a successful shift away from hydrocarbons. In Saudi Arabia, Saudi Aramco has CFI.co | Capital Finance International

The views expressed in this article are not necessarily those of the World Bank.

The authors are grateful to Otaviano Canuto, Bryan Land, and Marijn Verhoeven for their highly valuable feedback on earlier drafts.

ABOUT THE AUTHORS Håvard Halland is a natural resource economist at the World Bank, where he leads research and policy agendas in the fields of resource-backed infrastructure finance, sovereign wealth fund policy, extractive industries revenue management, and public financial management for the extractive industries sector. Prior to joining the World Bank, he was a delegate and program manager for the International Committee of the Red Cross (ICRC) in the Democratic Republic of the Congo and Colombia. He earned a PhD in economics from the University of Cambridge.

Alan Gelb is a senior fellow at the Center for Global Development. He was previously with the World Bank in a number of positions, including director of development policy and chief economist for the Africa region. His research areas include the management of resource-rich economies, African economic development, results-based financing, and the use of digital identification technology for development. He has written a number of books and papers in scholarly journals. He earned a B.Sc. in applied mathematics from the University of Natal and a B.Phil. and D.Phil. from Oxford University.

Silvana Tordo is a Lead Energy Economist Sustainable Energy Department, Oil, Gas and Mining Unit of the World Bank. Her area of focus includes upstream oil and gas sector policies and strategies, legal, regulatory and institutional frameworks, taxation and petroleum contracts, sovereign wealth funds, and local content. Prior to joining the World Bank in 2003 Silvana held various senior management positions in new ventures, negotiations, legal affairs, finance, and mergers and acquisitions. Her experience includes a wide range of business development activities in the oil and gas sector.

Spring 2015 Issue

> CFI.co Meets the CEO of Banco Nacional Ultramarino:

Pedro Cardoso There are few other places in the world as competitive as Macau. Here it takes skill and smarts to outwit the competition. Banco Nacional Ultramarino (BNU) has plenty of both and managed to keep its lead by appealing to the timeless value of excellence in customer service. “It’s simple really,” says BNU CEO Pedro Cardoso: “In order to differentiate our bank from the competition, we maintain a sharp focus on the quality of the delivery of services. This must be absolutely impeccable.

Our customers must feel valued and appreciated at all times.”

T

he approach – both elegant and effective – has significantly expanded the bank’s customer universe with about one in three Macanese now entrusting their banking requirements to the venerable Portuguese institution.

Founded in 1864 as an issuing bank for the overseas territories of Portugal, Banco Nacional Ultramarino has been present in Macau since 1902. The former territory, now a prosperous Special Administrative Region (SAR) of China, to this day uses the Macanese pataca, its currency, as issued by BNU. “Both the currency and our bank are not merely present in Macau; we are part of its history and, indeed, have helped shape the region’s development.”

Mr Cardoso is an experienced banker. In the 1980s, he helped set up the Banco Comercial Português (BCP) and went on to become the deputy general manager of its New York City branch in 1996. In 2004, Mr Cardoso accepted a position as manager of a groundbreaking Portuguese online bank owned, in part, by one of the country’s largest corporate powerhouses – the Grupo Banco Espírito Santo. He made the switch to the Caixa Geral de Depósitos (CGD), owner of the Banco Nacional Ultramarino, a year later. In 2011, Mr Cardoso assumed his current position as CEO of BNU. “During my tenure we have expanded the training opportunities offered to our staff. This has been a fundamental part of the drive to optimise the quality of our services”. Mr Cardoso emphasises that BNU strives to fully leverage the advantages derived from its unique position and geographical footprint: “With CGD offices in Shanghai and Zhuhai, and a network spanning the globe, BNU is able to bridge the world’s preeminent markets. BNU thrives in a competitive environment. The bank is known for its operational agility. That, plus unequalled service excellence, allowed BNU to navigate unscathed the turbulent times now past. As we head to the future, BNU is exceedingly well-poised to reap maximum benefits of the economic upswing.” Deeply interested in everything related to the Chinese culture, his current hobby is to learn and practice Mandarin, having already used this Language, as a guest speaker, in conferences held in China. i

CEO: Pedro Cardoso

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Blair vs Clarkson: Hope for Two Happy Endings

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he man who singlehandedly redefined the British Labour Party, and made it into a soulless Tory-Light monstrosity, is set to resign from his role as Middle East peacemaker. Former UK Prime-Minister Tony Blair will no longer be the envoy of the four powers – United States, European Union, United Nations, and Russia – trying to bring peace to the Middle East.

Mr Blair’s sudden exit is the result of American complaints about his performance – or lack thereof. US officials have been quoted saying that Mr Blair is considered a “standing joke” in the region. A former UK ambassador to Libya called Mr Blair’s appointment, eight years ago, a “monumental mistake” and said his exit was “long overdue.”

Seeking Centre Stage

Attending a conference on economic development in March, Mr Blair caused consternation stating that “effective government” is more important than democracy. While admitting that elections do play a role, Mr Blair said that efficacy is as important – if not more so. The former PM went on to say that heads of state need not necessarily be authoritarian, however “they do need to be direct.”

In July 2014, Mr Blair was appointed special advisor to Egyptian President Abdel Fattah alSisi who ousted his predecessor over concerns regarding the Muslim Brotherhood. While the former army chief has received much praise for his handling of Egypt’s battered economy, the al-Sisi Administration is also criticised on its human rights record.

Mr Blair was increasingly hampered in his role as peace broker by his varied and colourful business interests. Cozying up to the President al-Sisi has not endeared him to the Palestinian Authority – a rather unhelpful development.

Since vacating Downing Street 10 in June 2007, Mr Blair has amassed a personal fortune conservatively estimated at $128 million.

He has done so by dispensing advice to both governments and private corporations around the globe.

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“Instead of gracefully retiring from the public stage, Mr Blair chose to peddle easily digested platitudes to those who should know better.”

Through his company Tony Blair Associates, the former PM has, for example, assisted the government of Kazakhstan – ruled by a “direct” president – on judicial, political, and economic reform. Kazak opposition groups repeatedly asked Mr Blair to refrain from whitewashing the image and human rights record of a “dismal regime.” Mr Blair was unmoved and answered that he prefers to “nudge controversial figures onto a progressive path of reform.”

Providing spin-on-demand to the highest bidder, Mr Blair epitomises the cynicism that seems to have taken hold of world affairs. Instead of gracefully retiring from the public stage, Mr Blair chose to peddle easily digested platitudes to those who should know better. Monetising his role as special envoy – if not directly then certainly by association – he did the already challenging Mideast peace more harm than good – burning bridges, instead of building them.

Whereas global politics could quite possibly benefit from a slightly lesser infusion of religious thought, Mr Blair boldly went the other way, setting up his umpteenth charity – the Tony Blair Faith Foundation – to foster mutual understanding between people of faith and tackle global poverty while so engaged. Aware of his own rather tarnished reputation, Mr Blair in 2010 tried – and predictably failed – to wipe his slate clean with a multimillion donation to a sports centre for soldiers injured and maimed in the wars he ordered them to fight.

Some people just don’t seem to know when their time is up. Mr Blair is one of them. It is highly unlikely he will refrain from seeking centre stage CFI.co | Capital Finance International

even after his eight-year stint as peacemaker comes to a timely end. In that highly improbable role he was, after all, doomed to fail from the outset: the man who helped incinerate the Middle East and environs in a misguided – if not malicious – attempt to find mythical weapons of mass destruction was singularly unfit for the job.

Contrast, if you will, Mr Blair’s rather tiresome career to that of another British icon – Jeremy Clarkson of Top Gear fame. The embodiment of political incorrectness and never far removed from controversy, Mr Clarkson provided almost limitless enjoyment to countless millions across the world. His latest – and for now last – run-in with polemic saw him become frightfully upset at his show’s producer for failing to secure a supply of steaks at the end of a day of filming.

Mr Clarkson – in-your-face rude, slightly uncouth, but unfailingly funny – has now been sacked by the BBC notwithstanding a campaign that saw over a million of his fans sign an online petition imploring the public broadcaster to show magnanimity yet again and forgive Mr Clarkson his latest faux pas. The BBC stoically ignored the request.

For what it’s worth: Mr Blair’s exit from the world stage would do the UK a world of good; Mr Clarkson’s departure not so much. The wrong guy got booted. Jeremy Clarkson is beyond doubt the most-loved Brit globally. Vrooming about in fast and flashy cars, banging up lesser vehicles in the most imaginative of ways (as in, say, subjecting them to a piano dropped from a crane), and embarking on the most exotic of road trips are three things nobody can really dislike.

Mr Clarkson’s is a language that cuts across borders, faiths, and political divides. It would cause no real surprise should fighters of Islamic State be found cracking a smile at Mr Clarkson’s vehicular antics. As such, Top Gear provided the common ground that eluded Mr Blair throughout his career. The conclusion writes itself: one will be missed, the other one not really. The irony of life is that Mr Blair is left standing, while Mr Clarkson is now an “unemployed man” – a title he bears with irrepressible good humour. i

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