Global Business Outlook Issue 02 2021

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Volume 05 Issue 02 | 2021

QATAR’S FUTURE ICONIC

DESTINATION Inspired by the rich cultural heritage of the region

FINANCE | TECHNOLOGY | ENERGY | REALTY | BRANDS | EDUCATION | GBO AWARDS

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Editor's note May 2021

... so far in 2021 In Qatar, Qetaifan Projects is redefining real estate luxury with its iconic destinations. The developer is focused on building cities with sustainable and intelligent infrastructure and support Qatar’s long-term economic vision. Meanwhile, taking advantage of the depleting oil prices amid the pandemic, China stocked up its oil reserves by importing cheap Venezuelan oil despite US sanctions. In the Philippines, we see the entry of a new telecom company that could potentially change the very nature of the industry.

In this edition, we look into how Dito telecom’s entry into the market could end the duopoly established by Globe Telecom and PLDT. PostBrexit, the UK seeks to establish new trade deals with partners across continents. New trade deals are in place with Australia and Japan and the Boris Johnson-led administration is keen to improve trade with Africa, which houses some of the fastest-growing economies in the world. Shifting our focus to the Middle East, we see that Oman finally levied VAT. So, what’s taxable and what’s exempted? Is 5 percent VAT levied by Oman enough? In Africa, troubled carrier South Africa Airways is finally solvent. But what does it need to do to return to the sky?

In this latest issue of Global Business Outlook, we also explore how the UK real estate market is bouncing back post-Covid-19 and how the administration is playing its part in it. Further, we try to capture Vietnam’s renewable energy boom, its solar success and the bright prospect it presents for investors, Kenya’s growing potential to become a fintech hub in the region and how Singapore’s insurance sector is thriving despite the pandemic.

Thomas Kranjec Editor thomask@gbomag.com

Global Business Outlook | May 2021| 3

Content May 2021

Redefining real estate luxury

Projects has set an 18 Qetaifan exemplary commercial landmark that will create a window of opportunity for the tourism industry

Features

64

Analysis VAT in Oman and its economic implications

06 | UK real estate market to bounce back post-pandemic

26 | Philippines telecom: No longer a duopoly

12 | China’s import of

60 | Post-Brexit trade

Venezuelan crude

deal with Africa

40 | SAA is solvent and

80 | Singapore insurance

54 | Dubai Startup Hub

needs to return to the sky

sees growth amid pandemic

attracts global attention

4 | May 2021 | Global Business Outlook

46 | Mobile money revolutionises Kenyan fintech

Director & Publisher Krushikesh Raju

Interview Banking

36

Gregory Schmidt Chief executive officer, KiwiGo

Are super apps the future?

Technology

Sean Andrew Sanders Chief executive officer, Revix

74

Are crypto-bundles going to be a game changer?

Insight Energy

32

Vietnam’s renewable energy growth

Editor Thomas Kranjec Production & Design Brian Williams David Brenton Ian Hutchinson Shankara Prasad Editorial Alice Parker, Ashley Samberg, Rachel Taylor, Tom Hardy, Stanley Rogers Business Analysts Avinash Nair, David Pereira, Ryan Anderson Business Development Manager Benjamin Clive, Mike Lloyd Marketing Danish Ali Research Analysts Richard Sam, Sophia Keller Accounts Manager Edyth Taylor

Regulars Editors Note News

Press & Media Contact Craig Penn Registered office: Global Business Outlook Magazine is the trading name of Business Outlook Media Ltd Winston House, 2 Dollis Park, London, England, N3 1HF Phone: +44 (0) 207 193 3740 Fax: +44 (0) 203 725 9247 Email: media@gbomag.com

Global Business Outlook | May 2021| 5

Industry Real estate

Analysis

UK real estate market to bounce back post-pandemic Ashley Samberg Stamp duty holiday has been extended till the end of June 2021

6 | May 2021 | Global Business Outlook

UK’s real estate market has been roaring in prosperity in the past six months. Following that, according to the nation’s leading analysts, the market is now showing signs that it might touch base. Amidst the onset of Covid-19, October 2020 was considered the busiest in at least a decade.

The number of homes that changed hands surpassed the total records in the months before the pandemic. The UK government department that handles tax collection estimates that 105,630 residential transactions occurred in October 2020. The numbers are usually adjusted depending on the seasons to account for predictable and regular annual fluctuations in the real estate sector. The industry was shattered during the nation’s first lockdown. During April and May, the deals also plummeted, and the transactions have surpassed the pre-pandemic levels seen in the lead-up to the closures. Eventually, the reopening of the UK property market and the stamp duty holiday caused a significant influx of buyer demand.

As the spread of the virus came into control towards the end of 2020, demand also began to rise and translate into transactions. The lagged nature of selling property and the positive health report seemed to be the beginning of a gradual increase in transaction volumes from November 2020.

The prices of the property came down in January for the first time since June 2020. The buyers’ enthusiasm also faded amidst the stamp duty holiday deadline and the lockdown

Industry \ UK real estate

due to Covid-19. Property values increased 6.4 percent annually in April 2021, which is down from 7.3 percent in December 2020 and the average price in the UK was $313,694.

Covid-19 impacts on the UK economy The government has been targeting to have all the adults vaccinated and is expecting to pave the way to ease restrictions on public health. The British houses were built to save a war chest of around £180 billion in 2020.

Once the lockdown comes to an end, a quarter of this savings is expected to be spent on a ‘degree of euphoria’ by the government, especially among

the high-end classes who tend to treat themselves when the economy opens up. The government plans to focus on the furlough scheme, self-employment and a super-deduction policy to encourage business investments. It is an extra £60 billion in a year borrowed money. The borrowing process is expected to be significantly higher in the upcoming financial year. It will rise to a peacetime high of £354.6 billion in 2021 which will contribute to the economy. The UK debt pile size is expected to remain prominent than the economy until the middle of the decade. Officials state that the country, along with the world, will take a long time to recover from the current

economic crisis due to the first and second wave of Covid-19.

The extension is considered fair because of the completion dates for buyers and sellers that have been jeopardised. The three-month taper until October could make any cliffedge in June feel less steep. The extension is a significant relief to the people involved in buying and selling of properties. Analysts from the UK expressed that another kick-start to the property market would help it steady better, especially during the spring month. The extension also gives borrowers another chance to make it to the deadline and retain borrowers who were about to withdraw from

Global Business Outlook | May 2021| 7

Industry Real estate

the house purchase process. Though it is not a cheap measure, it is estimated to cost taxpayers around £1.6 billion.

The market to bounce back The real estate market in the UK has the highest possibilities to bounce back because of various contributing factors like an economic recovery or increase in income growth. The government has also eased the lockdown measures and restrictions on social distancing. Additionally, UK’s fast and efficient vaccine roll-out programme will boost buyer sentiments. This

continuous support from the government will also help boost the industry in a short period of time. The mortgage interest rates have been lowered making borrowing more affordable for homebuyers and property investors.

The demand for homes in the UK from January to March 2021 has risen 5.7 percent quarter over quarter as per the data released in early April. The data had measured the index based on the demands and homes under contract or sold against the total number of properties in the market. In the UK, the demand was

The demand for homes in the UK from January to March 2021 has risen 5.7 percent quarter over quarter, as per the data released in early April

8 | May 2021 | Global Business Outlook

Industry \ UK real estate

at 60 percent in the first quarter of 2021 compared to 54 percent at the end of 2020.

In mid-February, London’s sale of luxury homes rose 15 percent annually in three months from November 2020 to January 2021. The houses saw increased demand and were priced between £2 million and £5 million. In the face of the global pandemic, homes in prime London areas continued to attract buyers who were seeking more privacy and space. During the same period, the number of apartment sales in the same price range fell 1 percent year over year. Yet, the most prominent low was for the apartments that were priced between £1 million and £2 million.

The low was calculated to be an 8 percent decrease during the same period. Overall, house prices in prime London areas rose 5.2 percent annually compared to a 0.4

percent increase for apartments from November 2020 to January 2021.

The average prices also increased 1.6 percent compared to the previous year. New listings earlier this year was down by 15 percent from that of the year before. It was also a time when many new sellers were blooming in the market. In early 2020 the market in central London was speeding up.

Stamp duty holiday in the UK Stamp duty land tax is paid on the purchase of properties or land in England and Northern Ireland. Last summer, the government increased the cap to £500,000 which means buyers completing a purchase on main residential property that could cost up to £500,000 before June 30 need not pay stamp duty.

Properties valued more than that were taxed based on their value above the amount.

The nation expected the stamp duty holiday to expire on March 31, however, it was extended to the end of June. It was one of the catalysts for the UK’s thriving real estate market.

Stamp duty holiday has affected the property sales’ timing, and few first-time buyers are placed better to afford homes after saving some finance during the lockdown.

There have been multiple requests by the public to push back the deadline on the tax saving. In early March, the UK government announced it is to further extend the stamp duty holiday till the end of June 2021. After the extension, the nil rate band is expected to be set at £250,000. It has doubled its standard level that will remain the same until September end. The

Overall, house prices in prime London areas rose 5.2 percent annually compared to a 0.4 percent increase for apartments from November 2020 to January 2021.

UK House Price Index values in the first quarters

2020 11,525.2 2019 11,249.2 2018 11,201.6 2017 10,930.4 2016 10,501.9

Global Business Outlook | May 2021| 9

Industry Real estate

extension will make the transition smooth after the global pandemic. It will be back again to the usual £125,000 only by October.

There was also a relief from the equivalent taxes for the property buyers in Scotland and Wales.

Analysts also suggested that it would be a sensible move to narrow the holiday and eschew cliff-edge moments for the housing market or the economy. The mobility of labour should also be taken into consideration while deciding the tax.

However, in the second half of 2020, it is

Real estate after Brexit Though the UK left the EU on 31 January 2020 under the agreement of withdrawal, till 31st December 2020, the UK was still treated as a part of the EU. As the transition period came to an end, the effects of the withdrawal began to take shape in the UK laws and regulations. Both the parties signed a Trade and Cooperation Agreement (TCA) to govern significant aspects of the trade relationship between them from 2021.

The fundamental impact of Brexit and the end of the transition period has been and continues to be commercial rather than legal. It is well known that the UK property market is not insulated from Europe and is highly receptive to political changes both in the UK and abroad and does not seem to respond well to uncertainty. Covid-19 is also a catalyst for change, but it was rather global than a domestic issue. Thus, Brexit has now been priced into the market that has shifted the focus on the impact of the coronavirus.

Brexit effects on commercial property have subsided and taken over by Covid-19. Occupational trends like housing shortages, internet shopping and flexible working seem to impact areas such as residential, logistics and retail.

The pandemic has pushed these trends and encouraged a degree of on-shoring concerning supply chains

10 | May 2021 | Global Business Outlook

expected that demands become steady and more seasonal. According to the HM Revenue and Customs (HMRC) figures, the government’s annual take from the stamp duty is about £12 billion. This is roughly equivalent to 2 percent of the tax collected by the Treasury.

Election and the real estate market The general election that happened in December resulted in a rush of activity as buyers who were tensed of regime change returned to the market. The Conservative manifesto is committed not to increase income tax, VAT or natural insurance.

The system is said to have a strategy of using corporation tax as a lift for foreign investments in the country. The market embraced the news in 2020. It meant that activities at the start of the following year are likely to be subdued in comparison.

The seller confidence was impacted highly because of the weather, the latest lockdown and the plan to end the stamp duty holiday back in March. In July 2020, the UK officials introduced a stamp duty holiday that suspends taxes on the first £500,000 of the properties sold in England and Northern Ireland. The stamp duty was to help boost the real estate market. It was planned by the government that the amount of money employees earn before paying tax be frozen at £12,570 until the middle of the decade. About 1.3 million people are estimated to start paying income tax by 2036 due to this freeze. When employees start paying higher tax, 40 percent of the tax rate will then be frozen at £50,270 from April. This move will also bring in an extra million people as taxpayers in the band within five years.

Tax revised in UK, Scotland and Wales Since July 2020, people buying homes in England and Northern Ireland have not paid tax for their first £500,000.

Industry \ UK real estate

Stamp duty was recently planned by the government to be reintroduced on sales of other things. For first-home buyers, it has saved up to £15,000. Second-home buyers and landlords also use the tax cut, but they still pay the extra 3 percent of stamp duty that they were charged in the previous rules. From June 30 till the end of September 2021, the real estate market expects a staggering return to the last stamp duty rates.

From July 2021, the first time property buyers need not pay stamp duty on property purchases for up to £300,000.

Lenders of the High Street are also preparing to offer mortgages to borrowers with a deposit of 5 percent under a new scheme of the government. The policy is designed in a way it benefits first-time buyers to secure a home. It will be available to buyers purchasing a home that costs up to £600,000 unless they are buy-to-let, second homes or new-builds in some cases.

Along with the revised taxes for property buyers, landlords of Scotland paid an extra 4 percent Land and Building Transaction Tax on top of standard rates.

Like Scotland, the Welsh government also had temporary tax relief on certain sales.

Until the end of June, homes in Wales that cost less than £250,000 need not pay tax. Welsh landlords still pay 4 percent of extra Land Transaction Tax on top of the standard rates.

A positive outlook even though uncertainly looms As we enter 2021, we can say the outlook for the UK residential market is positive.

Last year, we witnessed the residential segment outperform other segments such as office and retail. In the third quarter of 2020, residential returns were up by 2.4 percent and the only segment to register a positive return. The same trend is expected to be carried forward in 2021 as

well. Investment in the residential segment was also strong in 2020.

According to a CBRE research report, investments in residentials is going to climb steadily for the next five years.

It further said in its report, “This momentum will continue into 2021, and we expect a surge of sales in Q1 before the SDLT holiday ends.

Revisions to the Government’s Help-to-Buy scheme also take effect from April 2021, meaning only firsttime buyers will be eligible for the scheme. The removal of these two support mechanisms will dampen activity as the year progresses.

“Some emerging trends seen in the wake of lockdown will continue in 2021. People reassessing their housing needs has led to decisions to move out of city centre apartments in favour of suburban homes. For example, Zoopla’s July 2020 report noted that 3-bed houses were the most in-demand property type, and 4-bed houses were selling faster than the average flat. However, we see this as a short-term reaction of certain buyers rather than a wholesale market shift. We speculate that this trend will subside as the year progresses.”

Thus, it can be inferred that the UK real estate sector is preparing for fresh ways to generate, collect and deploy income. It is difficult to claim a positive outlook with certainty because there are high levels of uncertainties associated with the real estate market, be it the Covid-19 pandemic or Brexit.

Stamp duty land tax receipts in the UK

2015-2016 £10.68 billion 2016-2017 £11.77 billion 2017-2018 £12.91 billion 2018-2019 £11.94 billion 2019-2020 £11.6 billion 2020-2021 £8.66 billion

Global Business Outlook | May 2021| 11

Industry Oil and Gas China Crude Venezuela

Feature

Crude from PDVSA continues to reach China ports with the help of countries like Russia, Switzerland, and Malaysia

China’s import of Venezuelan crude Ashley Samberg

12 | May 2021 | Global Business Outlook

A

midst the pre-existing rivalry between Washington and Beijing, China replaces the US to become highest importer of oil from Venezuela. Targeting to overthrow Nicolas Maduro, the socialist president of Venezuela, the US imposed sanctions on the state-owned oil company. As a result, the US refineries restricted the purchase of crude crude oil from Venezuela.

China is considered Caracas’ ally and a major customer for a long time now. After the sanctions of the US, China found itself to be the top purchaser of Venezuelan crude. Data show that in the first half of 2019, the country had imported an average of 350,000 barrels per day from Venezuela. Further, into the year, Washington tightened its sanctions on Venezuela and warned that foreign entities who wished to continue

business with the South American country may also find themselves subjected to sanctions.

After the warning from Washington, China’s state-owned China National Petroleum (CNPC) terminated importing oil from the ports of Venezuela in August 2019. Reports from the Asian country showed that purchase gradually declined and curbed in late 2019.

The US President Donald Trump’s threats seemed to have pressured customers from countries around the globe like China’s largest oil company.

An in-depth reporting of Reuters brought into light that China did not stop buying oil from Venezuela. Crude from Venezuelan state-owned oil and natural

Global Business Outlook | May 2021| 13

Industry Oil and Gas

China's Top Providers of Imported Crude Oil 2019 Saudi Arabia

16.8% Russia

15.3% Iraq

9.9% Angola

9.5% Brazil

7.8% Oman

6.9% Kuwait

4.5%

gas company Petróleos de Venezuela SA (PDVSA) continued to reach the ports of China with the help of other countries.

Firms that were involved include the Switzerland-based unit of Rosneft and Russia’s state-owned oil company. The dispatch has been made possible via a roundabout delivery method and it appears that the fuel’s origin was Malaysia.

From the start of July 2019 to the end of December, about 18 shipments worth 19.7 million barrels of rebranded Venezuelan crude oil reached the Chinese ports in tanker ships. These data are supported by the study of ship-tracking data along with internal documents from PDVSA. Additionally, interviews with petroleum analysts that kept track of the flow of Venezuelan oil around the world also supported the data.

CNPC unit had chartered a minimum of one of these tankers which only implies that it was responsible for the crude aboard. The Adventure, a tanker vessel from Venezuela is tracked down to have loaded crude on July 18 and discharged it on September 4 in China.

The 18 shipments that happened between July and December have factored to more than five percent of the South American country’s total exports in 2019. It is said to be worth $1 billion at Venezuela’s flagship crude grade - Merey according to figures presented

by OPEC. The said sales have provided crucial support to Maduro’s government. Despite the sales, there are minimal records about the status of it being added to the state’s coffers.

It is a known fact that Venezuela often sells its crude at steep discounts and most sales of it are set to pay down debt rather than generate cash. Amidst the accusations, the Venezuelan opposition disclosed that the Maduro government has also been transporting gold to Mali through Russian planes. The metal is then refined there and sold to the UAE. It is estimated that the earned profits were at the least $1 billion.

The morphed shipments were found to have continued into the current year.

14 | May 2021 | Global Business Outlook

The act was confirmed by the data collected from Refinitiv Eikon, a financial information provider along with satellite imagery and the Automatic Identification System (AIS) data transmitted by oil tankers. The Trump administration has been under scrutiny for months to figure out the shipping method that involves the transfer of crude oil from one tanker to another at the sea itself. After learning about the involvement of the Genevabased subsidiary of Rosneft ROSN.MM, Rosneft Trading SA, Washington slammed sanctions in February. It stated that it has been helping PDVSA to export oil using ship-to-ship (STS) transfers in order to mask the real origin. Reports from the internal PDVSA documents did show that the Rosneft unit was involved in moving the oil. However, Rosneft denied any wrongdoing and stated that the company has always been and is conducting its business in full compliance with applicable international legislation.

Peter Harrell, a sanctions expert at the Center for a New American Security think tank in Washington commented that the import of crude from Venezuela to China falls under a grey zone. The sanctions by the US provide authority to Washington to chastise foreign companies that purchase crude from PDVSA via a middleman particularly when the company knows or is supposed to know its origin. Yet this does not permit the US government to act upon as these sanctions are fundamentally policy calls. The collected data is said to have no proof to verify if China was aware of the origin of the crude that reached its shores through Rosneft Trading.

Views on US Sanctions Elliott Abrams, the US State Department’s special representative for Venezuela stated that the possible US sanctions against CNPC for purchasing masked crude oil from already sanctioned Venezuela was discussed. They are also said to have

Feature \ China Crude Venezuela

taken individual actions on STS transfers.

However, China’s foreign ministry stated that the harsh US sanctions had severely affected the relationship of Venezuela with the rest of the world yet Beijing aspires to continue trading with the country.

Additionally, Venezuelan officials continue to express their comments on the US Sanctions as illegal and unilateral. Oil analysts around the world stated in 2020 that crude from Venezuela has been making its way to the ports of China through the way of Ship-to-Ship (STS) transfers. The shipment of Venezuelan oil to China is however unusual for various reasons. STS is said to have been a systematically executed tactic that is generally used for legitimate purposes like offloading oil from deepwater drilling ships or pumping oil from large tankers to smaller vessels that could be easily navigated in shallow or narrow waterways. This particular technique has not been implemented when importing oil from

Venezuela to China up until the mid 2020.

It was proven that the loaded tankers that leave PDVSA did not travel directly to China like in the past. Rather, about 15 loaded tankers with PDVSA crude were found to be first headed to the coast of Malaysia. In the Malacca Strait, a few miles offshore, each of the tankers met with another empty tanker that had already pulled alongside. The full tankers then pump their load into the waiting vessel or multiple smaller vessels. After the STS transfer, 18 of these tankers headed to the ports of China where the crude originally from Venezuela was unloaded and recorded as an issue from Malaysia. As the imports

As the imports continued from Venezuela, China’s total imports for the year 2019 averaged

280,000

barrels a day while the customs of China reported 229,000 barrels a day

Global Business Outlook | May 2021| 15

Industry Oil and Gas

continued from Venezuela, China’s total imports for the year 2019 averaged 280,000 barrels a day while the customs of China reported 229,000 barrels a day, this was 24 percent less according to the estimated calculations with the collected data.

Effect on Venezuela The amount of transhipped crude is said to be not sufficient to offset the impact of the US sanctions had on PDVSA. In January 2019, when the sanction was imposed, US refiners were importing 500,000 barrels of crude on average. This came to the aid of the Venezuela oil industry to stay alive when

Effects of the sanction on vaccine rollout Towards the end of March, Venezuelan President Nicolas Maduro proposed paying for vaccines against Covid-19 with oil. He did not give details on the possibility of the scheme working. As Covid-19 cases surged, by midApril, the country received a shipment of 80,000 doses of Russia’s Sputnik V Covid-19 vaccine and also the opposition criticised the rollout.

Health Minister Carlos Alvarado addressed the media and said the total number of shipments received 880,000.

With the new shipments, the government was focusing on vaccinating healthcare workers and the elderly. It is to note that the country has already inoculated public officials, firefighters, civil protection personnel and oxygen distributors.

Earlier 300,000 Sputnik V doses and 500,000 doses of China’s Sinopharm were shipped to vaccinate 25 million of the population. The second wave of the virus has also added pressure to the economy as the lockdown measures were extended. Towards the end of April, the country reported 189,381 infections of Covid-19 and 2,009 deaths.

The export of crude from the country plummeted to the lowest level in the last decades after Washington sanctioned PDVSA in 2019. This cut off Venezuela’s exports to the US and discouraged customers from other countries from buying oil from Venezuela.

16 | May 2021 | Global Business Outlook

the demand from foreign buyers dropped creating a superabundance onshore that forced PDVSA to nearly stop the production in its key oil fields.

Due to the US sanctions, crude has been stored in various floating facilities on the Venezuela coast. In early April, operations were carried out to remove the stored crude from Nabarima floating storage, an offloading facility (FSO). It was anchored in the eastern Gulf of Paria near the maritime border of Trinidad and Tobago. The crude has been in store since 2019 when the US imposed sanctions on the country. The facility is a part of the Petrosucre joint venture between PDVSA and Italy’s Eni that operated the offshore oil field in Corocoro. Both the firms were selling crude produced by Petrosucre to Citgo, the Venezuelan-owned refining company. The sanctions halted the contract with the firm and left the project inactive and crude stranded in Nabarima.

Iran is yet another country that is under US sanctions that had previously used STS transfers to ship oil to China under the name of its neighbouring country Iraq. In 2019, one of the Chinese terminal operator’s representative however denied Iran as the origin of the oil. The spokesman of Iran’s mission to the UN in New York then stated how the country decides to export or sell its oil is no one’s business and the US sanctions on the export of the same is illegal. With the exception of Iran, the changing of the identity of the crude is considered to be highly uncommon. China for all the STS transfers it has done in the past from Brazil and Russia holds recorded statements of the true origin of the product the country received.

Malaysia’s vital role Malaysia is a mid-sized producer of oil that so far has not shipped crude to China in volumes recorded by the customs in China in 2020. China also said that in 2019 the crude imports from the country were 400 percent more than the figures recorded three years earlier. This morphed trade involving

Feature \ China Crude Venezuela

the three countries has put Venezuela in a difficult position during the Trump administration.

Reports identified that it was Rosneft Trading that lifted the oil from PDVSA for shipping to China. It has deployed one ship to draw oil out of the country and another to reach the ports of China, trading in an attempt to blur the true origin and morph the crude’s root. Towards the end of March 2020, Rosneft terminated its ties with Venezuela and all operations along with it. Later it sold all its assets in the country to an unnamed Russian state-owned firm.

Malaysia is considered a popular location for STS transfers because of its proximity to Singapore, one of the largest oil trading and storage hubs in the world. The media stated that one such transfer with regards to the Venezuelan crude reaching China happened close to Malaysia’s Kuala Linggi port and the rest took place in exteriors of Tanjung Bruas port of the country. The draft is calculated as the gap from the waterline and the bottom of the vessel hull. This indicates the weight of the load it is carrying. Refinitiv Eikon’s ship-tracking data gives the location of ships and indicates how full they are. It helped to reveal that the draft of each ship modified drastically while in the same location off Malaysia’s coast at the same time.

On a similar report, it was stated that the draft measurements indicated that the Delta Aigaion, a Liberia-flagged vessel arrived full in Malaysia left empty unlike Lipari, a Maltaflagged vessel. This states that the oil transfer has taken place between the two because the crude it carried is known as Merey 16, a heavy blend that is quite unique to PDVSA and the documents also support the fact that it was Rosneft Trading addressed as its customer. Later with an STS transfer near the port of Tanjung Bruas, it reached Zhanjiang port in China.

When this transhipped crude reached China the customs officials of the country labelled the oil as Sigma Blend which is said be a grade of crude oil that did not exist

until 2019. It also labelled it to be originated from Malaysia.

The rivalry between Bejing and Washington China is seen as undermining the US foreign policy by continuing its trade of buying oil from Venezuela, thereby violating the US sanctions. After the Trump administration, under US President Biden, China still continues the trading via phantom companies.

These are Chinese entities that do not have a track record of oil trading. In February 2021, China had bought about three-quarters of the oil exported by Venezuela. This resulted in PDVSA’s oil export increasing to 700,000 barrels per day in that month which is the highest in the current year and bifold of the figures from June 2020. It is also to note that the state-owned oil industry, China Petroleum has reported zero purchase from Venezuela as the purchase was all executed under phantom companies that serve as an intermediary for trading with sanctioned companies.

China’s act of lawbreaking against the US sanctions imposed on Venezuela has also seemed to have reached Iran where a media report stated that the country is importing oil from China. Iran is one of the heavily sanctioned nations around the globe where China has so far imported 900,000 barrels of oil. Yet Biden’s administration is reluctant to take action against China for violations of its sanctions on Venezuela and Iran is because the country might retaliate if being hit hard. Recently, China had agreed to invest about $400 billion in Iran over the next quarter decade in exchange for oil from the country. The investment is said to cover various sectors like banking, telecommunications, ports, railways, healthcare and information technology.

Top 5 Crude oil importers in 2019

China

$238.7 billion United States

$132.4 billion India

$102.3 billion Japan

$73.1 billion South Korea

$70.2 billion

Global Business Outlook | May 2021| 17

Coverstory Qatar’s future iconic destination Qetaifan Projects

Redefining real estate luxury

18 | May 2021 | Global Business Outlook

Qetaifan Projects has set an exemplary commercial landmark that will create a window of opportunity for the tourism industry GBO Correspondent

Global Business Outlook | May 2021| 19

Coverstory Qatar’s future iconic destination Qetaifan Projects

Q Qetaifan Projects believed that its most important asset is the team.

Thus, promotions and bonuses were distributed normally and no cutting measures or salary reductions took place.

Qetaifan Projects has also managed to retain all of its employees with no terminations. With that, the company achieved a cost saving of 30 percent through other channels.

etaifan Projects is a real estate development company that was founded in October 2017.

It is fully owned by Katara Hospitality, a leading global hotel owner, developer and operator based in Qatar. The foremost objective of Qetaifan Projects is to build cities of sustainable and intelligent infrastructure to support Qatar’s long-term economic vision. Qetaifan Projects’ first and main development is Qetaifan Island North, which is a distinct island featuring a state-of-theart waterpark, luxurious hotels, unrivalled accommodation and world class facilities that make it a modern, globally-competitive community with a unique design inspired by the rich culture of the region. This thriving waterfront hub represents a thrilling new way of life. It aspires to develop into an internationally recognised landmark location and Qatar’s future iconic destination. Phase one of the project is planned for completion by November 2021.

Managing Director of Qetaifan Projects and one of the main ideological inspirations of Qetaifan Island North, H.E Sheikh Nasser bin Abdul Rahman Al-Thani, in an interview with Global Business Outlook, gives an insight into the company and its impressive development.

Q. Can you shed light on your work portfolio and specialisation?

In 2017, I was appointed as the Managing Director of Qetaifan Projects. I have over 10 years of experience ranging across various sectors at executive management level including but not limited to real estate development, hospitality, investments specialising in mergers and acquisitions, Islamic finance and financial advisory.

I was also involved in setting up several government founded companies including Aspire Katara Investments. I hold a bachelor’s degree in finance and economy

20 | May 2021 | Global Business Outlook

from King Fahd University of Petroleum and Minerals in the Kingdom of Saudi Arabia. I started my career in investment banking and then entered the real estate field.

In your view, how is Qetaifan Projects positioned in the market?

I see Qetaifan Projects as a challenger in the market. A real estate development company that had secured a very strong position in the market in a short time. It is also worth mentioning that we are a very lean team working on a huge project comprising only 25 employees. Our vision is to be one of the world’s leading real estate development companies. We are redefining real estate

Coverstory \ Al Safat Investment Company

development through our commitment to good living, diversity, life-long experiences and sustainability.

What was the pandemic’s impact on Qetaifan Projects and how were the challenges addressed at the time?

Of course, just like any other company, we have been affected by the coronavirus pandemic. However, Qetaifan Projects was proactive in developing a mitigation plan across all its divisions. The plan was implemented using various approaches: Due to impressive sales achieved in December 2019, we were in a position to deferthe land sales payments of those investors that were in financial crisis. The support offered by Qetaifan to investors is one example of its social responsibility.

During the pandemic, the majority of companies resorted to cost cutting through salary cuts and layoffs, but Qetaifan Projects believed that its most important asset is the team. Thus, promotions and bonuses were distributed normally and no cutting measures or salary reductions took place. Qetaifan Projects has also managed to retain all of its employees with no terminations. With that, the company achieved a cost saving of 30 percent through other channels.

Qetaifan Projects has also managed to keep its employees engaged during the remote working period, by the following means: Keep employees active with challenging games and brain teasers were sent on weekly

Global Business Outlook | May 2021| 21

Coverstory Qatar’s future iconic destination Qetaifan Projects

basis on WhatsApp Stay fit home challenge to achieve an ideal weight through diet and exercise Send daily positive quotes Development Initiative: Reading club and take up a hobby Self-Development: Continuing education and free online courses It is also worth mentioning that during the pandemic, Qetaifan Projects won the Best Place to Work in Qatar 2020 Award Corporate Social Responsibility was planned as part of managing the crisis Direct Marketing: A bimonthly newsletter was created to highlight updates, spread positivity and build best practice during working from home Marketing Campaigns Positive quotes Announcing the employees shifts showcasing H&S comes first Announcing winners during weekly HR activities Stay home, stay positive campaign, mind teasers, quiz and so on Market updates and articles Maintaining relationships with investors: During the first 3 months of the coronavirus outbreak, Qetaifan Projects signed 6 NDA’s with 1 school, 4 entertainment providers and 1 investment holding group.

Due to the coronavirus outbreak and as part of risk management, the company took the decision to reshuffle its sales strategy in terms of timing and products. We also controlled our supply in times when everyone was dumping their products in the market. We sold the right product with the highest demand at the right time which enabled us to sell 100 percent of the products offered.

How did the idea of developing a massive Qetaifan Island North project come about?

The idea was stemmed based on a need for an internationally renowned entertainment landmark in Qatar that is to be inaugurated at the FIFA World Cup 2022.

What are the factors that played a role in the fact that this particular island has 22 | May 2021 | Global Business Outlook

become a location for the development?

Qetaifan Island North, the first entertainment island in Qatar, is the closest to the Lusail stadium where the inauguration of the FIFA World Cup 2022 will take place.

It will serve as a touristic destination and attract tourists or fans to the Water Park that will be operating during the world cup.

Qetaifan Island North is an ambitious development featuring different elements. How would you briefly describe it to those who hear about it for the first time?

Qetaifan Island North is the first family-oriented master-planned community entertainment island in Qatar where the concept of live and play is intertwined.

The entertainment aspect is reflected around the island

The entertainment aspect is reflected around the island through the waterpark, linear park and 6 beaches backed by hospitality comprising a beachfront hotel operated by Rixos and a leisure component resembling the beach club. As for the live concept, the residents have 360 waterfront views and are surrounded by necessary amenities such as k-12 school, medical center, mosque, and various retail outlets.

Can you elaborate on the uniqueness of the development for Qatar in terms of energy efficiency and environmental protection?

through the waterpark, linear park and 6 beaches backed by hospitality comprising a beachfront hotel operated by Rixos and a leisure component resembling the beach club. As for the live concept, the residents have 360 waterfront views and are surrounded by necessary amenities such as k-12 school, medical center, mosque, and various retail outlets.

The project’s description says that its design is inspired by the rich culture and nature of Qatar.

What are the elements that will allow visitors to experience this?

The water park themed rides are inspired by the discovery of oil and gas in Qatar. One of the main attractions is the iconic island inspired by the oil rig featuring the tallest water slide that is 80 metres high.

Qetaifan Island North is GSAS certified, with a walkable island.

During construction, it took into account the effect of the development on marine life. Also some of the sustainability grades being addressed as a result of the development are: Poverty: Qetaifan Island North will provide new employment opportunities for migrant workers from less developed countries as a result of the facilities such as hospitality, retail, park and food and beverage that will be created.

Good Health and well-being: Qetaifan Island North aims to cater for a healthy community because we are providing a second-to-none medical centre facility, a state-of-the-art linear park, beaches and open areas for the island and external clients or visitors to exercise, which in turn would lead to a healthier lifestyle.

Quality Education: Qetaifan Island North aims to have one of the industry leaders offering quality educational services through the school. We are currently in discussion with the best international school in the Middle East which has a local presence to operate the Qetaifan Island North school. In addition, the

Global Business Outlook | May 2021| 23

Coverstory Qatar’s future iconic destination Qetaifan Projects

waterpark offers an educational theme through the edutainment facilities. It also aims to educate visitors about Qatar’s history in the hydrocarbon industry and the process of discovering and extracting oil and gas through entertainment products.

Affordable and Clean Energy: GSAS mandates a minimum performance for the building's energy systems in their rating system. The GSAS minimum performance is more stringent than the ASHRAE 90.1, thus ensuring that asset energy efficiencies are better than current standards.

Decent Work and Economic Growth: Qetaifan Island North development will open opportunities for local and international investors in the assets of the island. In addition, Qetaifan Island North is designed to be a tourist destination. In our efforts to support the tourism industry in Qatar, Qetaifan Projects has signed 17 MoUs with international tour operators and brought a new flagship to Qatar. With that, Rixos Hotels will be operating the waterpark, hotel, beach club and retail area.

These partnerships will pave the way for long-term collaboration through the sharing of knowledge and expertise in relation to tourism planning and development, as well as promoting safe, honorable and sustainable tourism.

Sustainable Cities and Communities: The Linear Park which runs across the development serves as a green and public space, and is designed to be safe, inclusive and accessible.

Climate Action: By targeting the GSAS rating

24 | May 2021 | Global Business Outlook

system, the development and its assets ensure that the carbon footprint is reduced below the business-as-usual.

Life on Land: Qetaifan Island North development being a reclaimed land will provide an opportunity for mangrove establishment and botanical garden education. In addition to the above, it is worth noting that Qetaifan Projects is sponsoring the Lean Construction Institute in Qatar and it is currently at the early stages of implementing lean construction methods and ways which can enhance sustainability by reducing waste and maximising value.

2022 is going to be a highlight year for Qatar with the country hosting the FIFA World Cup, which is the largest international event in the region’s history. What is the role played by Qetaifan Island North in ensuring to provide proper accommodation for tourists and fans?

We will provide permanent as well as temporary accommodation during the World Cup. In terms of permanent accommodation, the Luxury Beach Resort hotel is designed with 350 keys and chalets operated by Rixos International, for the first time in Qatar. Temporary accommodation will be provided in floating hotels and fan villages with a capacity to house 5,000 residents.

Qetaifan Island North is directly linked to Qatar’s future and Qatar National Vision 2030. Could you elaborate on how the company is in line with this plan?

One of the main economic contributors in Qatar National Vision 2030 is the tourism industry.

Qatar Island North is positioned to be a local and regional destination contributing to the economy during and after the FIFA World Cup 2022.

Qetaifan Island North has won The Global Business Outlook Award in the category of The Best Real Estate Development Company in Qatar. How do you feel about this success?

The year 2020 has witnessed many challenges that may appear to be an obstacle, but we at Qetaifan Projects have succeeded in overcoming that obstacle and turned challenges into opportunities. I believe our efforts have paid off by obtaining this award. Qetaifan Projects looks for more than just a development. The company offers a win-win situation to all its stakeholders, establishing trust and transparency. From the project viewpoint, Qetaifan Island North is a well thought of project that would serve the nation and fulfil the needs of the enduser beyond 2022. It is a development that

has intertwined the luxury with entertainment, striking a good balance between living and playing.

This project has faced all possible foreseen and unforeseen challenges from tight deadlines, resources and budget, topped with blockade and the coronavirus pandemic. It is a welldeserved victory and we are happy to be recognised by Global Business Outlook.

In this context, how do you see the future of Qetaifan Projects and Qetaifan Island North?

Our vision for Qetaifan Projects is to become one of the world’s leading real estate development companies. I see Qetaifan Island North as a renowned local and regional destination that contributes to the nation’s economy.

Qetaifan Projects is sponsoring the Lean Construction Institute in Qatar and it is implementing lean construction methods and ways which can enhance sustainability by reducing waste and maximising value.

Global Business Outlook | May 2021| 25

Industry Telecom

Analysis

Philippines telecom: No longer a duopoly Tom Hardy Dito Telecommunity's entry into the market ends Globe Telecom and PLDT’s duopolistic holds in the market

26 | May 2021 | Global Business Outlook

The telecom sector in the Philippines was heavily dominated by two telcos- Globe Telecom and Philippine Long-Distance Telephone Company (PLDT). However, in 2021, we witnessed a new telco enter the market and end the long-standing duopoly in the Philippines telecom market.

The new player- Dito Telecommunity is a consortium of Davao businessman Dennis Uy’s Udenna Corporation, it's subsidiary Chelsea Logistics Corporation and Chinese stateowned China Telecommunications Corporation. The telco was challenged by the President of the Philippines Rodrigo Duterte to become the third major telecommunications player in the Philippines and bring an end to the duopoly of PLDT and Globe Telecom. Earlier known as Misatel, the company rebranded to Dito after being granted a licence to operate in the Philippines.

Until last year, the telecom market in the Philippines was split between the two players that offered similar pricing. In 2020, Globe Telecom had around 97 million mobile service subscribers and around 2 million broadband subscribers, whereas, PLDT had around 72 million mobile subscribers and 2 million broadband subscribers. While PLDT is backed by Japan's NTT Group and Hong Kong-listed First Pacific, Globe Telecom, on the other hand, is a joint venture between the Philippines' Ayala and Singapore-based telecom giant Singtel.

Given the dominance of the two telco giants, new entrants did not dare enter the market and challenge

Globe Telecom and PLDT. Foreign telco giants too were hesitant due to restrictions on foreign ownership.

Due to the lack of competition in the sector, Filipinos have often suffered from disruptive networks and slow internet connections. It is also worth mentioning that the Philippines has the highest number of social media users in the world. Hence, moderate internet speed is sought after by the tech-savvy Philippine population. In terms of internet speed, the Philippines ranked 107 with an average mobile internet speed of around 15 Mbps. This is significantly slower than the global average.

The entry of Dito Telecommunity into the Philippines telecom sector is expected to help better the telecom services in the country. Both Globe Telecom and PDLT will ramp up their services to stay competitive and not lose customers to the new entrant.

Also, the introduction of 5G in the Philippines is a welcoming news

for Filipinos, however, accessibility is going to be an issue, given the country’s geography.

The new player in town Dito Telecommunity was set to launch its services last year, however, the launch was delayed due to the coronavirus pandemic. The telco passed the technical audit in February 2021, which was also scheduled to take last year but was postponed due to the pandemic. The telco finally launched on March 8, 2021, and initially, its services were available in 17 cities across the country. While Dito initially vowed to provide an average broadband speed of 27 megabits per second, the technical audit, which was conducted by independent auditor R.G. Manabat and Co., revealed that Dito’s average broadband speed hit 507.5 Mbps for 5G, and 85.9 Mbps for 4G. With regard to Dito’s launch, Commissioner Johannes Bernabe of

Global Business Outlook | May 2021| 27

Industry Telecom

the Philippine Competition Commission said, “That, of course, will also require our close monitoring to ensure the allocation of a significant amount of 5G frequency given to it will also redound to the benefit of consumers, such as their commitments under the terms of reference to ensure a timely and speedy implementation of the roll-out of the telecoms services that they undertook to provide will be again complied with.”

According to state regulator National Telecommunications Commission, Dito's network covered 37.48 percent of the national population. That slightly exceeds the 37.03 percent that Dito promised in 2018. Recently, it was reported that the telco is planning to grow its subscriber base to nearly 2 million by the end of this year.

In April, it expanded its services to 21 more cities, including 18 in Luzon. In a statement, Dito said that its services were available in Lipa City (Batangas), Malvar (Batangas), Santo Tomas (Batangas), Tanauan (Batangas) and Silang among others.

Dito’s ambitious 5-year plan Dito Telecommunity recently launched its services in Manilla and has already covered 100 cities in the Philippines. The telco’s services will be accessible to 51 percent of the million Filipino population, which stands nearly around 198 million, by end-July. The telco’s ambitious 5-year plan includes capturing 30 percent of the Philippines telco market. The company expects to have around 40 to 50 million unique mobile subscribers by the end of that period. Capturing a market share which is dominated by Globe Telecom and PLDT is not going to be an easy task. The company also plans to hit profitability by the end of its 5-year plan.

To achieve the ambitious targets, Dito Telecommunity needs to overcome a few challenges. One big challenge is that of compatibility. According to Rodolfo Santiago, chief technology officer at Dito, the telco has established a new technology and some brands are not compatible with its services. Even though there is active

Dito launches in Metro Manilla Dito Telecommunity, which launched earlier this year, has announced that its services are now available in Metro Manila. The telco announced that it went live in the national capital region on May 17. So far, the telco has reached over 100 cities and municipalities in the Philippines.

The telco has been expanding extensively across islands as the telco looks to ramp up in order to take on Globe Telecom and PLDT. Even though the telco has entered the market as the third player and is a relatively new company, it has high ambitions and plans to become the biggest telecom in the Philippines.

Dito is offering a plan for P199 to its customers in Metro Manilla which gives them 25 gigabytes

28 | May 2021 | Global Business Outlook

of data, unlimited texts to all networks, unlimited Dito-to-Dito calls, and 300 minutes' worth of calls to other networks as well. Customers have time till June 30 to opt for this promotional offer and once bought, it will be valid for the next 30 days.

During the first two months after its launch, Dito’s subscriber count reached 500,000 in 54 cities and municipalities. The telco aims to have around 2.5 million subscribers by the end of 2021.

However, Dito SIM cards are not compatible with every handsets, unlike PLDT and Globe Telecom.

According to the telco, it also plans to expand into the fixed broadband business in 2022, however, there are a few challenges it has to overcome before venturing into the new segment.

Industry \ Philippines telecom

Dito signal, the network tends to be weak, Santiago revealed. However, they tend to overcome this constraint soon.

Most recently, the President of the Philippines signed on Republic Act No. 11537, This means the telco can now operate its network until 2046. Previously, it had permission to operate until April 2023. According to the telco, now it will be able to undertake construction activities, install devices, establish, operate and maintain for commercial purposes and in the public interest, radio or television broadcasting stations in the Philippines for another 25 years.

Why Dito is important for the Philippines?

Prior to the arrival of Dito Telecommunity, both Globe Telecom and PLDT were running a form of duopoly in the market.

As a result, there was a lack of competition in the market. This means there was no open market dictating the terms and Filipinos were paying expensive prices for services that were not up to the desired standards. In a duopolistic market, the two players often co-decide on the prices and products and public opinion often takes a back seat. Compared to its neighbouring countries in the Southeast Asian region, Filipinos were paying much higher prices for the services rendered.

Competition brings out the best among the players in an industry and due to the lack of it, Globe Telecom and PLDT were largely unresponsive to the country’s need for improved internet service. As both the telecom giants seek to launch 5G technology, scalability and timeframe of the launch might be longer than expected. However, the arrival of Dito Telecommunity will change all that. Clearly, the new telco will play an important role in the Philippines’ telecom sector, 5G deployment and improving internet service. This is because the arrival

of Dito means competition in the market, and this will force the other two telcos in the country to up their game and offer competitive prices and improved services.

Many in the Filipinos expect the third telco in the country to play a key role in improving the poor internet connectivity. If Dito Telecommunity proves to be a reliable internet service provider, then it can emerge as a challenger in a market that is dominated by Globe Telecom and PLDT. Dito could also take advantage of the National ICT Ecosystem Framework (NICTEF) which outlines the country’s ICT agenda in the next five years. In essence, NICTEF replaces the Philippine Digital Strategy Initiative 2011-2016, identifies trends in the ICT industry, strategic thrusts and indicators that the government will be looking out for.

5G in the Philippines Experts believe the introduction of a third telco in the Philippines will play a key role in improving the poor internet connectivity in the country.

Dito Telecommunity can prove to be a disruptive force in the market.

However, currently, we are in the age of 5G. Both Globe Telecom and PLDT have moved ahead with their 5G plans.

Globe Telecom, which is the biggest telco in the Philippines, has already launched its 5G services in the country. It launched its 5G services in June last year by utilising the new 3.5GHz spectrum. Earlier this year, the telco announced that it plans to expand the 5G network at over 1,000 sites in the Philippines.

Services will be available during

5G vs 4G download speed improvement (ratio)

1 Thailand 2 Philippines 3 Saudi Arabia 4 Taiwan 5 Ireland

13.4 10.1 8.8 7.7 7.3

Source: opensignal.com

Many Filipinos also expect the third telco in the Philippines to play a key role in improving the poor internet connectivity in the country

Global Business Outlook | May 2021| 29

Industry Telecom

Even though 5G speed is expected to be super-fast, much of it will depend on external factors such as location and network traffic

the second quarter of 2021 in Mindanao and Visayas, the second and third largest islands in the Philippines.

For this, Globe has signed a contract with Finnish multinational telecommunications, information technology, and consumer electronics company, Nokia. According to the deal, Nokia will provide Globe Telecom with equipment and services from its comprehensive 5G AirScale portfolio to build out the Radio Access Network (RAN), including base stations and other radio access products.

Globe’s competitor PDLT’s wireless arm, Smart Communications also announced earlier this year that it has installed more than 1,400 5G sites in the country, which is ‘by far the most extensive in the country', according to the company. Its 5G service is now accessible in areas such as Benguet, Misamis Oriental and Zamboanga Sibugay among others. It also has sites in Pampanga’s New Clark City, Cavite, Laguna and Rizal. While Globe has joined hands with Nokia, Smart Communications have reportedly partnered with the likes of Huawei and Samsung for its 5G deployment in the Philippines.

Last month, PLDT again announced that it expanded its 5G network to over

30 | May 2021 | Global Business Outlook

2,600 sites in the Philippines. The company said in a statement, "This comes as Smart unveils its most powerful 5G offering dubbed 'Unli 5G' and ramps up its 5G outdoor coverage in the National Capital Region to more than 90 percent. Based on consumer-initiated tests taken using Speedtest by Ookla, Smart has consistently posted the fastest 5G speeds for Q1 2021, with median download speeds of 190 Mbps, more than double the competition's speeds for the same period."

Exploring 5G potential 5G is the technology of the future and currently, it is perceived as something that can revolutionise the global economy.

Researches are funding across the globe how 5G can help improve different sectors be it oil and gas or fintech. For a layman, 5G could mean improved internet speed. GSMA revealed that the fastest 5G networks are expected to be at least 10 times faster than 4G LTE. Even though 5G speed is expected to be super-fast, much of it will depend on external factors such as location and network traffic. 5G does

Industry \ Telecom

have the potential to meet the demands of the Filipinos who have been calling out for improved connectivity and better internet speed. However, since the Philippines is an archipelagic country with nearly 7,640 islands, much will depend on scalability.

Data shows by May 2019, 4G was accessible by 72 percent of the population.

However, the benefits of 5G are not limited to just internet speed. A fullfledged 5G network would mean improved connectivity which will contribute to the economic development of the Philippines.

To give you a better perspective, we can say that 5G will not only improve the Philippines’ internet speed, but it can also improve its gross domestic product (GDP). No doubt a nationwide rollout of 5G will allow more Filipinos to enjoy higher internet speed on their devices.

An increase in speeds will also empower people and increase productivity, which will boost the economy.

Said that, a full-fledged nationwide 5G deployment is challenging and will take time. Globe Telecom 4G deployment took around three to four years. Given the population is scattered across more than 7500 islands, it is not an easy task.

While a full-fledged 5G deployment might take about the same, if not longer. Also, now the whole world is dealing with the coronavirus pandemic, which only adds to the difficulty.

Could global disruptions and Covid-19 disrupt sector growth?

Even though the global recession and the coronavirus pandemic have slowed down 5G deployment in the Philippines, the outlook of the industry is still positive.

The pandemic has heightened the need for digitisation, automation, and a cloud-first type of IT infrastructure for businesses, all of which are services that telcos are providing.

As a result of the lockdown measures and stay-home policies adopted to curb the spread of the Covid-19, many telecom players in the Philippines, especially internet service providers have benefitted from a surging demand. This means the telecom sector in the Philippines is performing well compared to other sectors such as aviation, tourism and hospitality and oil and gas, which have been battered by the pandemic. In short, Covid-19 restrictions have not hindered the telecom sector in any disruptive way. The increasing demand for voice or data has strengthened the financial conditions of many internet service providers.

Given the Philippines has the highest number of social media users in the world, it also means more and more data are going to be consumed amid the pandemic as people will spend additional time on their devices surfing the net, socialising online or streaming videos. So, in 2021, telcos across the world are going to fare very well given there are not going to be any negative disruptions to demand this year. As long as the telcos have the balance sheet strength to be able to continue rolling out their services, they should do fine.

The pandemic has stopped construction activities within the sector last year. Even though Covid-19 restrictions were lifted eventually, the sector still faced problems due to limited or no supply of materials and construction equipment, particularly those imported from China. The construction delays are going to impact businesses, but they are expected to be short term and activities are expected to pick up this year.

Fastest growing market in terms of mobile service revenue

1 India 2 Australia 3 Japan 4 Singapore 5 South Korea

9.1 8.2 7.1 6.0 4.9

Source: Globaldata

Given the Philippines has the highest number of social media users in the world, it means more and more data are going to be consumed amid the pandemic

Global Business Outlook | May 2021| 31

Industry Insight Energy

Vietnam’s economic growth rate is a major driver for the renewable energy boom

Vietnam’s renewable energy growth Vietnam planned installed capacity 2020 Biomass 500MW Wind 1000MW Others 2700MW

2030 Biomass 2000MW Wind 6200MW Others 5620 MW Source: nergypedia.info

32 | May 2021 | Global Business Outlook

TOM HARDY Vietnam’s energy demand has been rapidly increasing over the last couple of years. This increase in demand has also resulted in a renewable energy boom in the Southeast Asian country. But what’s driving the increasing demand for electricity or energy in Vietnam? The country is among those Southeast Asian countries which have successfully exploited all major sources of renewables be it hydroelectricity, wind power, solar power or biomass. In 2018, hydropower was the largest source of renewable energy in Vietnam accounting for 40 percent of the total national electricity capacity.

Vietnam’s electricity demand is expected to increase by an average of 10 percent for the next five years. The Electricity of Vietnam (EVN’s) estimates that Vietnam will need around $150 billion in capital investments for generation and grid upgrades. Vietnam also has the potential to meet these growing demands through the help of renewables.

According to McKinsey & Company, Vietnam has four to five kilowatthours per square meter for solar and 3,000 kilometers of coastlines with consistent winds in the range of 5.5 to 7.3 meters per second. Vietnam is yet to tap into its full renewable energy potential.

However, a lot of its potential has been explored by Vietnam, most

Insight Vietnam renewable energy

Top ten countries with the highest proportion of renewable energy 1 Germany

12.74

2 UK

11.95

3 Sweden 10.96 4 Spain 5 Italy

10.17

6 Brazil

8.8 7.35

7 Japan 5.3 8 Turkey 5.25 notably in the last six years. In 2014, the installed capacity for renewables in Vietnam stood at 109 megawatts, about one-third of one percent of the country’s total installed capacity of 34,079 MW. However, by the end of 2019, wind and solar accounted for 5,700 MW of installed capacity. The exploration of wind and solar in Vietnam went up exponentially during those five years. The country also overtook Thailand as the largest solar market in Southeast Asia after it witnessed a surge in installed capacity over the past four years. This is mainly attributed to the Vietnamese government’s decision to issue the first feed-in-tariff (FIT) policy for solar projects.

According to the International Energy Agency (IEA), Vietnam is the second-largest electricity consumer in the Southeast Asian region. It’s important to note that the region has one of the fastest-growing levels of energy demand in the world. In the last two decades, demand for electricity in Vietnam has grown 6 percent every year on average. Vietnam also ranked 65th out of 115 countries in the World Economic Forum’s 2020 Energy Transition Index, behind Namibia and ahead of Ghana.

What’s driving Vietnam’s renewable energy boom?

The primary reason for the renewable energy boom in Vietnam is its explosive economic growth. Vietnam’s rapid growth is driving up energy consumption in the country significantly. According to reports, Vietnam was the top-performing Asian economy in 2020. While the coronavirus pushed the global economy into a recession in 2020, Vietnam did not witness a single quarterly contraction, which is a remarkable feat. According to government estimates released in December, the Vietnamese economy grew 2.9 percent year-on-year in 2020. In 2019, Vietnam’s GDP expanded by 6.8 percent.

According to state-owned utility company Vietnam Electricity (EVN), energy supplied by the company in Vietnam has increased

9 Australia 4.75 10 USA

4.32

Source: Smart-energy.com

Vietnam rooftop solar capacity growth Dec 2019

378 MWp June 2020

764 MWp Dec 2020

9296 MWp Source: weforum.org

Global Business Outlook | May 2021| 33

Industry Insight Energy

Total Renewable energy capacity 2019 MW (Southeast Asia) Vietnam 24519 Thailand

11860

Indonesia

9861

Malaysia

8046

Philippines

6695

Myanmar

3397

Cambodia

1479

Singapore

467

Source: International Energy Agency

ASEAN renewable energy target Singapore 1GW solar beyond 2020

Malaysia 20% of electricity by 2030

Indonesia 2.3% of energy supply by 2025

Vietnam 12GW solar and 6GW wind by 2030

Thailand 30% of energy by 2036 Source: KPMG

34 | May 2021 | Global Business Outlook

from 128.6 terawatt hours (TWh) in 2014 to 209.4 TWh in 2019. The consumption rate of electricity in Vietnam is reportedly higher than its GDP growth rate. This points out that there is an insatiable demand for more electricity generation and investment in Vietnam.

Vietnam’s geographical positioning also gives it a big advantage over other countries when it comes to renewables, especially solar energy. On average, Vietnam has a Direct Normal Irradiation (DNI) of 2.67 KWh/m2 and receives more than 2,000 hours of sunshine every year. Southern provinces are hotspots when it comes to solar projects. Some provinces in Vietnam receive over 2,450 hours of sunshine yearly and a DNI of over 3.5 KWh/m2, it was reported.

Vietnam to double use of renewables by 2030 Vietnam also announced that it wants to double the use of renewable energy and slash its carbon emissions by 15 percent by the end of 2030.

It means Vietnam will reduce its reliance on coal for electricity, which is often seen as an unclean source of energy and contributes to climate change. According to the Vietnamese government, solar, wind and other alternative energy will comprise 15 percent to 20 percent of the power supply in the next 10 years.

Renewables made up just 13 percent of Vietnam's energy mix in 2020. While the plan is ambitious, it does reflect the government’s push to transition towards renewables.

The government plans to further cut emissions by 20 percent by 2045.

Increasing renewable energy capacity will also help Vietnam meet its pledge to cut carbon emission by 8 percent or 25 percent with the help of foreign aid, as per the 2015 Paris climate accord.

The government has also

incentivised renewable investments, including attractive prices to attract private investors. There is a growing demand for electricity in Vietnam as many manufacturers are shifting their manufacturing hub from China to Vietnam. It also considers itself as one of the five countries that faces the greatest threat from climate change as it has a long coastline. Hence, by doubling renewable usage, Vietnam expects to reduce the threat.

Solar success in Vietnam: Bright prospects for investors In 2017, solar energy's contribution to Vietnam’s energy mix was so small that it was almost negligible. However, in the next two years, Vietnam overtook Southeast Asian countries such as Malaysia and Thailand to reach the largest installed capacity of solar panels in the region. By 2019, Vietnam had 5 gigawatts (GW) of photovoltaic projects, exceeding the 1 GW by 2020 target. The government also announced the revised feed-inTariffs (FiT) that came shortly after it announced to double its renewable power generation capacity over the next decade.

Vietnam’s Draft Master Plan VIII The Ministry of Industry and Trade of Vietnam (MOIT) released the draft proposal for the national power development plan for the period of 2021-2030 on 22 February 2021. The updated draft consists of an 843 page long main explanatory report with an addition of 174 pages long appendices.

It provides a blueprint of sort for energy projects in Vietnam and the planned total capacity through to 2045.

Through the draft, MOIT has revealed that it is preparing short-tomedium term plans annually or every other year, which would set out the plans for developing power sources and the grid in that period. It was

Insight Vietnam renewable energy

also revealed that the government is contemplating establishing bidding authorities to oversee the whole process. Bidding will be of three different types: project-based bidding for large-scale projects; public bidding for wind and solar projects and substation-based bidding.

Vietnam’s solar capacity grows exponentially Vietnam provided households and businesses with incentives to install rooftop solar panels. This scheme resulted in 9.3 gigawatts of energy being added to Vietnam’s energy mix, which is equivalent to six coalfired plants. Vietnam added more than 101,000 rooftop installations on homes, offices and factories. This resulted in a 25x increase in its solar generating capacity in just 12 months, which is a remarkable feat.

The significant growth of solar in Vietnam means it will further attract investors from across the globe to invest in the solar market in the country. According to the Ministry of Industry and Trade, Vietnam will need investments of around $320.6 billion for the development of its power network between now and 2045. As per the ministry, Vietnam will need investments of around $128.3 billion between 2021 and2030. This includes investments of around $95.4 billion for generation and $32.9 billion for the country’s grid. Similarly, between the period 2031 and 2045, Vietnam will need investments worth $192.3 billion, $140.2 billion for generation and $52.1 billion for the grid.

Deputy Minister Hoang Quoc Vuong also announced that by the end of 2030, Vietnam will need around $7 to $8 billion investments to develop 7,500MW of power capacity each year, indicating the large potential of the power industry.

Over the years, Vietnam has attracted

foreign investments when it comes to renewable energy.

Renewables to revive Southeast Asian economy Even before the Covid-19 pandemic hit the world, energy transition in the Association of Southeast Asian Nations (ASEAN) countries was already happening. The demand for the transition to renewable energy was gaining prominence throughout Southeast Asia. Even though the region has a long way to go to match Europe or the US, renewable energy infrastructure investment in the region had been strong before Covid-19.

Due to the pandemic, most of the construction activities related to renewable energy were halted across the region. However, now the government in the region is banking on renewables to drive economic growth in the region. Governments in the region plan to improve the renewable energy capacity and at the same time revive the pandemic-hit economies.

Top ASEAN leaders have set up a five-year sustainability plan under the second phase of ASEAN Plan of Action for Energy Cooperation (APAEC) 2021-2025. They agreed to set a target of 23 percent share of renewable energy in total primary energy supply in the region and 35 percent in ASEAN installed power capacity by 2025. To achieve the goal, the region would need 35GW-40GW of renewable energy capacity to be added by 2025.

Four countries in the region account for 84 percent of the total installed renewable energy capacity.

Vietnam leads the sustainability change with a 34 percent share, followed by Thailand with 17 percent.

Indonesia with 13 percent, Malaysia with 10 percent and the Philippines also with 10 percent.

Vietnam’s solar power plans 2020

850 MW 2025

4000 MW 2030

12000 MW Source: Vietnam electricity

Total wind energy capacity in Vietnam 2015

136 MW

2016

160 MW

2017

205 MW

2018

237 MW

2019

375 MW

Source: Statista.com

Global Business Outlook | May 2021| 35

Industry

Interview Gregory Schmidt Chief executive officer, KiwiGo

Are super apps the future?

GBO correspondent

S

ince its inception, fintech has revolutionised how we manage our finances. Be it purchasing coffee from your local shop or managing your finances, fintech is all around us. The global fintech market’s incredible growth saw it reach $111,240.5 million in 2019, having grown at a compound annual growth rate (CAGR) of 7.9 percent since 2015, according to a research report. The sector is further expected to grow at a CAGR of 9.2 percent to nearly $158,014.3 million by 2023.

Due to its popularity among the mass, fintech has become popular amongst a lot

specifically to back-end systems of banks or other financial institutions. Since then, it has grown and now it encompasses a plethora of other consumer-oriented applications. Fintech has made it possible to manage funds, trade stocks, pay for food, or manage insurance with the tip of our fingers.

KiwiGo is the first cryptocurrency and decentralized mobile payment system to be part of the African financial ecosystem

of applications and has also changed the way people access their finances. From mobile payments app to insurance and investment companies, fintech has brought in a wave of change in the financial and banking sectors, and experts say that it poses a potential threat to the traditional brick-and-mortar banks and financial institutions.

During its inception, fintech was referred to as technology that was applied

36 | May 2021 | Global Business Outlook

Coming to its most popular application, mobile payments with the aid of fintech has surpassed $1 trillion in 2019 alone. With the help of increasingly sophisticated technology, these services allow customers to exchange money and payments online or on mobile devices.

While it was fintech that dominated in the last decade, this decade could be for super apps. The very term ‘super app’ was coined just a decade ago, which tells us that it is still a relatively fresh concept. The purpose of super apps is to serve as a sin-

Industy | Super app

KiwiPay plans to bring its super app KiwiGo in 6 African countries

gle portal to a wide range of virtual products and services in banking, digital payments, bill payments, shopping online, or even booking a cab.

The concept of super apps is an intriguing one and we already have a number of big players dominating the segment in their regional markets, Be it WeChat and AliPay in China, Paytm in India, or Grab in Singapore. Super apps are game changers and they are here to stay. Fintech boomed along with the smartphone market. According to the Mary Meeker Internet trends report, around 3.8 billion people across the globe had access to internet in 2019. That is more than half of the world’s population. Amid the pandemic, the internet has emerged as an avenue for socialisation and helped the global cycle to continue even though people were forced to stay indoors to combat the spread of Covid-19. In future, the number is only going to increase and more and more people are going to be drawn into the ecosystem.

That is nothing but good news for fintech firms as well as super apps.

What these super apps in emerging markets have managed to create is an ecosystem where the user’s time is monopolised. Super app users do not need to have multiple apps for multiple purposes on their mobile phone. They just need one which solves all their problems. Super apps model are not only growing in emerging markets in Asia but other parts of the world like Latam. There is a possibility that super apps will become the new mode of communication. In the current age, more and more people are using social media to communicate with the world, to amplify their message.

We have also seen social media giants such as Facebook and Twitter making strides to the super app landscape.

If a super app already provides multiple services to its users like online payments, digital wallets, ride-hailing, or online shopping, the possibility of these apps provid-

In the last decade, nearly

$257 billion was invested by China in super apps, compared to just $43 billion by its Southeast Asian counterparts

ing social media services isn’t thin.

The concept of super apps first gained popularity in China. Both AliPay and WeChat dominate the market, nearly with a combined market share of almost 90 percent. In the last decade, nearly $257 billion was invested

by China in super apps, compared to just $43 billion by its Southeast Asian counterparts.

However, things are expected to change in this decade, with investments in super app to increase in other markets or regions as well, starting from Southeast Asia. KiwiPay, a Southeast Asian fintech has launched its super app KiwiGo which offers services such as grocery delivery, ride-hailing, food delivery, taxi, last-mile logistics, e-commerce, hotel,

Global Business Outlook | May 2021| 37

Industry

Interview KiwiGo Supper app

international remittances, e-wallet, and other activity booking services.

KiwiGo aims to breach the gap between the founder markets and the rest of the western world with the use of technologies and services that aim to improve our lives and create new opportunities. Founded by Gregory Schmidt, the company has been operating since the early 2010s and has legal offices in more than 20 countries, and partners in more than 40.

Their KiwiPay app enables payments to be done between payees and recipients from different countries, where they activate it through more than 20 emerging markets from all over the world and connecting them with the biggest financial markets. Chief executive officer Gregory Schmidt, while in conversation with Global Business Outlook shares his insights about the future of super apps.

This is a winner-takeall market and in my personal opinion cryptocurrencies will become the defacto global means of value exchange instead of the fiat currencies we see today

GBO Can you tell us a bit more about your partnership with GIMAC ?

Gregory Schmidt: Our partnership with the Groupement Interbancaire Monétique de l’Afrique Centrale (GIMAC) is more than simple cooperation; it puts KiwiGo as a member of the financial community and allows us to interconnect with other members of the banks’ group. This creates a unique position for KiwiGo to become the first cryptocurrency and decentralized mobile payment system to be part of the African financial ecosystem. The GIMAC gives us the ability, both legal and structural, to deploy our mobile payment network using, and partner services (such as WeChat and Alipay to name a few) using our all-in-one QR code technology in Central Africa.

What value proposition KiwiGo has to offer that differentiates it from its competitors?

Beyond the financial services, online payment gateways, and mobile payment network, KiwiGo is a full-fledged super app; it has a complete ecosystem of services ranging from food and grocery delivery, ride-hailing, last-mile logistics, online classifieds, and e-commerce. This is both our strength and our core differentiation; we are part of all the levels of services within our markets.

Is it true that you are planning to expand into 20 countries by the end of 2021? If yes, which regions are you branching out to, and why?

Yes, in fact, we are already present in other regions such

38 | May 2021 | Global Business Outlook

as Southeast Asia and Europe. Our core focus in the second and third quarter this year is to deepen our presence in Central Africa, West Africa and also Kenya, Uganda and Tanzania to name a few. As we grow, our appetite increases and we expect to be in many more countries by the end of 2021 and early 2022.

Are Super Apps the future? Can you share your thoughts?

Not only do we believe it is the future, we already see that future being built in other markets; to provide ease of access to a wide range of services in a unique, integrated and simple app is a major benefit. Our belief is that we can make it even simpler, and create a positive ecosystem which will also help financial inclusion and job creation in frontier markets. Those are big dreams but the team is driven by values and guided by principles; we are the ones willing to move forward and we obviously believe in our ability to make it a reality.

Can you tell us a bit about the company’s vision?

Obviously, we want things to succeed for us and our partner and become a major leader in frontier markets, and a major participant in their economic growth. As we

Industry | Super app

Can you tell us a bit about KGO token and the thought process behind its launch?

are developing and the team grows, we have created a principle to guide our thought and establish a vision that can be shared and understood without losing meaning. At KiwiGo we call it the T.E.S principle; that every single project we do should fulfill 3 criterias: To be technologically feasible and realistic, accessible and rooted in the local use and practice, no false premises and promises, To be economically viable; for both the company and our user base, as no project will survive if the users do not get an economical benefit from it, Finally, it has to be part of the society where it operates; to be part of an economy is to be part of it’s society and that comes with inclusion, and understanding.

How has the company improved financial inclusion in the countries it currently operates in?

To date, we are establishing collaboration frameworks with local governments (Ministries of Finance), Central Banks and a large variety of the local institutions in every country we operate. We do not pretend to be able to change the world overnight; it is going to be a long time ahead and we are fully dedicated to take it; it all starts by working together with existing local structures.

Originally, KGO was conceived as a real-life facilitator within the KiwiGo app ecosystem. We aimed at creating a bridge between users and businesses in each country where we operate; and this will be included within a few weeks in our current app.

KGO has now taken a bigger part and identity, especially in the last couple of months, as the community that started to emerge around it made us realise that it could be a unique way of increasing awareness and financial inclusion in frontier markets; we are fully committed in expanding the range of the currency’s application and we believe that it also makes that currency unique. It was first conceived as real-life currency - not an abstract idea - a tangible tool for everyday payments and interactions.

Moving forward, we will implement payment gateways and exchange within our operating countries to allow access to other currencies for the users: opening a whole new range of possibilities for frontier markets.

How has Covid-19 changed the fintech landscape? What’s the outlook in the next five years?

We noticed a dramatic increase in the need for mobile payments, the use of delivery and e-commerce. This is a global trend, of course, but it also happened in frontier markets where the mobile ecosystem is much stronger than some western countries as they leapfrogged directly to it. We do not see this decreasing, quite the opposite; cashless services will only increase in the next 5 years, and we will certainly be doing our best to create a network where it is easier for every business and individual to access.

Global Business Outlook | May 2021| 39

Industry Aviation

SAA is solvent and needs to return to the sky Feature

Despite being solvent, the carrier’s future still hangs in the balance

40 | May 2021 | Global Business Outlook

Feature \ South African Airways

Impact of Covid-19 on African aviation

International passengers 2019

74 million 34 million 2020

Domestic passengers 2019

41 million 15 million 2020

Source: ICAO

GBO correspondent

S

outh African Airways has been plagued by financial difficulties and mismanagement, so much so, it was on the verge of bankruptcy.

According to the carrier, it has not made any profits since 2011. South African President Cyril Ramaphosa told at the Financial Times Africa Summit in London, “South African Airways is one of those stateowned enterprises that has relied on lots of state bailouts. We are on record as saying we are open to the participation of the private sector. As we speak now, we’re talking to a few interested parties when it comes to South African Airways.”

South African Airways was established in 1934 after the South African apartheid government acquired Union Airways. Its primary purpose was to connect South Africa to the outside world during a time when the country was isolated because of Apartheid sanctions. Fast forward to 2017, the carrier announced it would reduce its fleet by 23 percent to deal with the increasing debt and losses. Given its poor books, banks started refusing to forward

Global Business Outlook | May 2021| 41

Industry Aviation

In its quest to survive, the carrier had cut almost 80 percent of its workforce and reduced its liabilities to $177 million after deals with creditors and lessors.

loans to the beleaguered carrier.

Standard Chartered was the first bank to call out its loan followed by the likes of Citi Group which refused to extend its loan facility to the carrier. On May 2, 2020, South African Airways ceased all operations after being in service for 86 years. The carrier also laid off most of its employees.

SAA needs to return to the sky In the month of October last year, the government announced that it is seeking investors that can help to bail out the airline. During the same month, the South African government bailed the carrier out with R10.5 billion in order to implement the turnaround strategy. This resulted in the carrier returning 4 Airbus A319s, all of its 10 A320s, all of its 6 A330-200s,

42 | May 2021 | Global Business Outlook

4 A330-300s, 3 A340-300s, 3 A340-600s, and all 4 new A350-900s to their respective lessors. Currently, South African Airways’ fleet consists of just under a dozen planes, including some A319s and A340s. However, the carrier is finally solvent as is seeking help.

It is not going to be easy to attract investors to the project. It is a difficult task, given how the carrier was managed over the years. With the carrier’s poor track record, it is very difficult to see why investors would want to come in and put their money on it. Even though the administrators have handed over operations back to its board and executive team, there are many issues that still need resolving, as clearing payments owed to previous employees.

In its quest to survive, the carrier had cut almost 80 percent of its workforce and reduced its liabilities to $177 million after deals with creditors and lessors. As the world is still in the middle of a pandemic and global air traffic is expected to remain depressed for years, it's very unlikely that the carrier will return to the sky anytime soon.

Feature \ South African Airways

Ethiopian Airlines, another state-owned African carrier seemed to be interested in South African Airways. Last year, it was reported by media houses that Ethiopian Airlines has shown interest in South African Airways (SAA) as the embattled state-owned carrier has opened up to the possibility of outside investment. Ethiopian Airlines has offered to loan aircraft and pilots to the South African carrier. However, there has not been much development.

SAA is ready to fly but needs help As long as the pandemic continues, finding investors to help South African Airways get back to the sky is going to be difficult. South African Finance Minister Tito Mboweni agreed to free up R10.5 billion last year, but even he remains skeptical when it comes to the future of the carrier. The biggest challenge in front of the South African government is funding because the carrier will still incur losses during the first three to five years. This means state

support is a must. The government must continue to release funding for South African Airways, which many feel is a burden to the state finance.

While the government is keen on finding a private-sector partner for South African Airways, it seemed an impossible task given the condition of the aviation sector. However, Public Enterprises Minister Pravin Gordhan did reveal that there are three potential candidates who have been identified by the government.

It was reported recently that South Africa’s Department of Public Enterprises revealed that South African Airways was in the final stage of negotiations with an investor. This could be a significant boost for the carrier in its quest to return to the skies of Africa. While it is still unclear, who the potential investor is, the recent development could possibly open up a new chapter for the carrier.

While the last couple of years, it has been only gloomy news when it comes this is indeed a positive development.

While the government is keen on finding a private sector partner for South African Airways, it seemed an impossible task given the current condition of the aviation sector.

However, Public Enterprises Minister Pravin Gordhan did reveal that there are three potential candidates who have been identified by the government.

South African Airways names new interim chief As a part of the process to resume operations and return to the skies of Africa once again, South African Airways is also restructuring its top hierarchy. The change began at the top as the carrier has named Thomas Kgokolo as the new interim chief executive officer. He is South African Airways’ third interim chief in three years and is the fifth CEO to take office in the last five years.

Thomas Kgokolo, who has replaced outgoing CEO Zukisa Ramasia, is a certified chartered accountant. He has made a name for himself with his stellar performance in the public sector in South Africa.

With over 15 years of public sector

Global Business Outlook | May 2021| 43

Industry Aviation

The Best Airlines in Africa 2019

1 Ethiopian Airlines 2

South African Airways

3 Air Mauritius 4 Air Seychelles 5 Kenya Airways

experience and more than 10 years of experience at a non-executive director level, his main role as the new interim CEO of South African Airways will be to oversee a smooth transition out of the airline’s business rescue proceedings. Under Kgokolo, the carrier will seek investors and partners and prepare to re-enter the African aviation market.

South African Airways vs Ethiopian Airways During the last decade, South African Airways has been in the decline, but during the same period, Ethiopian Airways had a contrasting story to tell.

Over the years, Ethiopian Airlines has established itself as the most successful carrier in Africa, a tag earlier often associated with South African Airways.

Ethiopian Airlines dominates the African skies because of its efficient management and robust vision.

However, South Africa is still the largest aviation market on the continent. Its domestic market is big and is a popular destination for

44 | May 2021 | Global Business Outlook

tourism. Addis Ababa, the capital of Ethiopia and where Ethiopian Airlines is based, on the other hand, is more of a transfer hub. This could be one reason for Ethiopian Airlines’ interest in the South African carrier.

The success of Ethiopian Airlines can be attributed to the clarity of vision and independence from the government in dayto-day operations, the very factors which were lacking when it comes to South African Airways. Over the years, Ethiopian Airlines has been so efficient that it achieved its Vision 2025 targets in 2018 itself. It tells quite a lot about the carrier and how well managed it is. Ethiopian Airlines is further helped by competent leadership and well-trained staff.

Ethiopia’s geographical location also allows the carrier to operate as a hub connecting Africa with the Middle East, Asia, and Europe. Addis Ababa now attracts and transfers much more traffic from Asia to the American continents. However, much of the credit for its stellar success goes towards the government policies that enabled a coordinated aviation sector while allowing the airways to focus on commercial operations on a day-to-day basis. Over the years, the carrier has also partnered with other African airlines to create a feeder network serving their hub in Addis Ababa.

Another contrasting distinction between Ethiopian and South African Airways is

Feature \ South African Airways

that the Ethiopian government has provided protection to its own airline. It is extremely difficult for other carriers to get landing rights in Addis Ababa.

Covid-19 and African aviation The aviation sector is one of the worst affected sectors by the Covid-19 pandemic. Last year, many countries across the globe introduced lockdown measures and sealed borders to curb the spread of the virus. This forced carriers to ground their flights and cancel operations for many months. It took a heavy toll on most of the carriers in Africa as well as in other parts of the world. Even though restrictions were lifted during the second half of 2020, many destinations to Europe, or Asia-Pacific were still not operational. Also, there was a significant drop in passenger demand and according to many experts, it will take another couple of years for normalcy to return.

While it is difficult to assume whether the fate of South African Airways would have been different if there was no pandemic. The carrier was bound to collapse at some point in time.

Mostly Covid-19 expedited the process. Another notable African carrier Kenya Airways also trimmed its operations significantly due to the pandemic. Namibia’s national carrier Air Namibia filed for bankruptcy as a result of the pandemic after being operational for over 70 years. Another South African carrier Mango Airlines is also facing bankruptcy after running out of money and is looking up to the state to bail it out.

According to a report by the International Air Transport Association (IATA) published in March 2020, airlines in Africa lost around $4.4 billion in revenue till then, due to the Covid-19 pandemic. Another report in November said that the global aviation sector could see a net loss of $118.5 billion in 2020 and around $38.7 billion in 2021. Passenger demand also dropped to almost half in Africa. Around 54 million passengers flew by plane within Africa in 2020, more than 50 percent drop when compared to the previous year.

According to figures from the African Airlines Association (AFRAA), African carrier’s turnover declined by around $8 billion.

In its report, IATA also said, “African airlines have also received little government support and there have been a number of failures. The relative lack of cold chain facilities in the region may delay the distribution of vaccines and this region is expected to experience a delayed recovery in financial performance.”

Many experts predict 2021 to also be a challenging year for the African aviation industry. Four African carriers so far have ceased operations due to the impact of the Covid-19 pandemic, while two others are in voluntary administration. “In absolute numbers, the region is expected to see around 45 million travelers in 2020 rising to 70 million travelers in 2021.

A full return to 2019 levels (155 million travelers) is not expected until late 2023,” IATA said.

In its November report, former IATA director general and CEO, Alexandre de Juniac, said, “The numbers couldn’t get much worse.

But there is a way forward. With the continued financial support of governments to keep airlines financially viable and the use of Covid-19 testing to enable travel without quarantine, we have a plan to overcome the worst immediately. In a longer-term the progress on vaccines is encouraging.

Most importantly, people have not lost their desire to travel.

“The market response to even small measures to lift quarantine is immediate and strong. Where barriers have been removed and travel rebounded. The thirst for the freedom to fly has not been overcome by the crisis. There is every reason for optimism when governments use testing to open borders. And we need to make that happen fast.”

Many experts predict 2021 to also be a challenging year for the African aviation industry.

Four African carriers so far have ceased operations due to the impact of the Covid-19 pandemic, while two others are in voluntary administration.

Decrease in profits in 2021

World

$38.7 billion Africa

$1.7 billion Europe

$11.9 billion Asia-Pacific

$.7.5 billion Middle East

$3.3 billion Latin America

$3.3 billion

Global Business Outlook | May 2021| 45

Industry Fintech

46 | May 2021 | Global Business Outlook

Analysis \ Kenya mobile money

Analysis

Mobile money revolutionises Kenyan fintech

M-Pesa paved the way for the fintech revolution in Kenya

GBO correspondent

O

ver the last couple of years, we have witnessed a tremendous change when it comes to the fintech landscape in Africa and Kenya is among the top African countries leading the change. Along with Nigeria and South Africa, Kenya is among the top innovators of fintech in Africa. According to the Communications Authority of Kenya, mobile phone penetration had almost reached 120 percent in the country by June 2020, with subscriptions increasing by 10 percent year-on-year. In the last decade, we have also witnessed the number of fintech businesses in Kenya grow significantly.

Fintech startups in Kenya have multiplied at a very fast rate.

Now, Kenyan fintech startups are securing funds from all across the globe. This points to the fact that global investors are noticing the growth of the Kenyan fintech sector in financial innovation. Mobile money has been a success story in Kenya and the same has helped the country to improve its financial inclusion rate tremendously.

Around 82.9 percent of Kenya’s adult population has access to at least one financial product, according to the 2019 FinAccess Household Survey, carried out by the Central Bank of Kenya, Kenyan National Bureau of Statistics and FSD Kenya.

M-Pesa, a mobile phone-based money transfer payments and micro-financing service launched in 2007, has contributed immensely to the country's fintech landscape. M-Pesa has improved financial inclusion in Kenya besides acting as a catalyst for the fintech boom.

Kenyans use M-Pesa to deposit, withdraw, transfer their money as well as pay for goods and services using their mobile phones.

Mobile money ignites fintech fire in Kenya Fintech in Kenya has thrived because of M-Pesa. Since its launch, many fintech startups have popped up in the country offering services

Financial inclusion in 2019 Kenya South Africa Rwanda Nigeria Uganda

82.9% 80% 68% 63.2% 58%

Source: Cytonnreport.com

such as mobile lending, mobile banking, fundraising applications, mobile payment, insurtech, peer-to-peer lending applications, business-to-business lending, digital payment, online trade, international money transfer, online foreign exchange, online procurement and online betting among others.

M-Pesa also led to many telcos and other financial institutions to get into the mobile money business. Nairobi-based Equity Bank launched its mobile money service Equitel back in 2015. Airtel Kenya and Telkom Kenya are other telcos that operate mobile money services in the country.

After the mobile money boom in Kenya, we have seen digital platforms being launched to enable small and mediumsized enterprises (SMEs) in the nation

Global Business Outlook | May 2021| 47

Industry Fintech

to accept digital payments, primarily for M-Pesa, before expanding to other products such as unsecured cash advances and loyalty programmes among others.

Pezesha, launched in 2017, provides a digital platform where micro, small and medium-sized enterprises (MSMEs) are matched with potential investors. Pezesha is in partnership with giants such as MasterCard and Google.

Some startups are following the emerging global trends which include cryptocurrencies and digital banking.

When it comes to insurance, we have

Fintech companies in Kenya raised around $198 million in funding in 2019, according to Partech Partners. However, the figure was relatively low in 2020, mostly due to the coronavirus pandemic. seen many insurtech startups securing funding from notable investors to provide affordable health and life insurance products online. Nairobi-based Turaco is a micro-insurtech company changing healthcare financing in emerging markets.

Founded in 2018, the insurtech partners with local businesses and mobile lending organisations in Kenya to distribute its products. Turaco claims it has insured over 70,000 people in Sub-Saharan Africa.

Kenyan fintech sector is one of the biggest and most developed fintech ecosystems in the African continent with more than 150 fintech companies. Kenyan fintech companies raised around $198 million in funding in 2019, according to Partech Partners. However, the figure was relatively low in 2020, mostly due to the coronavirus pandemic. It is estimated that Kenyan fintechs raised around $7 million in 2020.

48 | May 2021 | Global Business Outlook

M-Pesa is a success story Telecommunication giant Safaricom launched M-Pesa in 2007. It initially was established as a microfinance loan platform. It has since evolved into a means by which users can deposit and withdraw cash into their mobile wallets through a network of agents located ubiquitously around the country. Users can then transfer from one mobile wallet to another through even the most basic of mobile phones using an SMS text message and personal pin number.

The telco understood the potential of mobile phones and its ability to deliver banking and financial services. M-Pesa, which is a SIM-based mobile banking service, requires no internet connection.

M-Pesa users can deposit, withdraw, transfer money, pay for goods and services, access credit and savings, all with a mobile device.

So, what made M-Pesa a success story?

Safaricom smartly utilises its mobile infrastructure and has adopted an agent model. Since its launch, M-Pesa has spread quickly and expanded to seven countries.

By 2010, it had become the most successful mobile-phone-based financial service in the developing world, and as of June 2020, it had more than 30 million active users in Kenya out of a total population of 52 million, according to data from the Communications Authority of Kenya.

According to data released by the Kenyan central bank, in 2016, 71.4 percent of Kenyans regularly used their mobile money accounts. During the period, the number of M-Pesa agents had also grown significantly to 130,000. Last year, African telcos Safaricom and Vodacom completed the acquisition of the M-Pesa brand from Vodafone Group. Both Safaricom and Vodacom completed the acquisition of the M-Pesa brand, along with its product development and support services.

Analysis \ Kenya mobile money

Safaricom and Vodacom started negotiation for the M-Pesa brand with Vodafone in 2018.

the creation of various jobs within the sector.

Mobile money surge amid Covid-19 The use of mobile money has surged in Africa significantly in the last couple of months as Africa along with the rest of the world fights to stop the spread of the Covid-19 virus. The widespread use of mobile money has stopped the use of cash in African countries such as Kenya.

Safaricom waived all service fees related to its mobile money platform M-Pesa last year. Safaricom also made all person-toperson transactions under Sh1,000 would be free for a period of 90 days. M-Pesa further allowed small and medium-sized enterprises (SMEs) to increase their daily M-Pesa transaction limits from Sh70,000 to Sh150,000.

After Kenya entered a state of lockdown in the month of March, M-Pesa saw a surge in the number of subscribers. Around a million new users joined M-Pesa last year taking its total subscribers count to 25 million. According to many experts, mobile money has also played a big role in curbing the spread of the Covid-19 virus in Africa. Not only that, it also facilitated the continued functioning of the African retail sector by allowing its citizens to shop digitally. As mobile money provides an easy way of completing a financial transaction, it also led to a rise in online shopping in Africa amid the lockdown.

Mobile money also has the potential to accelerate financial inclusion in African nations. What mobile money can do is tap into those underbanked or unbanked Africans which the banking sector failed to bring under their financial umbrella.

The growth of mobile money in Africa is also expected to help the continent tackle its unemployment problem. With the issue of more licences, more players will enter the mobile money market and will lead to

Challenges for Africa’s financial industry Even though fintech is booming in Kenya, there are still few challenges ahead that the sector needs to overcome in order to maintain its growth trajectory. The overall finance sector in not only Kenya but throughout Africa needs to speed up convergence between the various stakeholders in the industry to stimulate financial inclusion.

The dream is a fully banked Africa and a possible way to achieve this feat is through mobile money and the fintech firms operating in the continent. Converging the efforts of different stakeholders such as the mobile phone operators, the fintech firms and traditional banks or financial institutions in Africa has the potential to fulfil that dream. Other factors will play an important role like government policies or regulatory approval.

Besides supporting a common work frame, they also must continue to promote innovation and at the same time continue to prioritise customer protection.

The success of M-Pesa in Kenya also provides an example of how regulations lag behind the development of technology. When M-Pesa was launched in Kenya back in 2007, Kenya’s apex bank issued a ‘Letter of No Objection’ to Safaricom.

In fact, regulations were put in place much later along with the adoption of the National Payment System Act in 2011 and the National Payment System Regulations in 2014. Fintech boomed in Kenya exponentially

Increase in number of deposit holders (Mn) 2007 – 2.1 mn 2010 - 11.8 mn 2015 - 35.2 mn 2017 - 37.7 mn Source: nairobibusinessmonthly.com

Global Business Outlook | May 2021| 49

Industry Fintech

which also led to technological innovation in this field. This challenged the regulators’ ability to respond to the change within the sector in a timely fashion. One can argue that Kenya has been too successful when it comes to mobile money. Fintech startups are growing exponentially in the marketplace and at a very fast pace.

However, we are yet to see a proactive approach from the regulators in Kenya.

This often means that some firms are under very little scrutiny which is bad when it comes to consumer protection.

Another challenge in front of the fintech sector in Kenya is government intervention

We are now seeing the emergence of digital lenders in the form of neobanks or challenger banks. These companies are not bound by the limitation of traditional banks. when it comes to sustainable borrowing.

Now, there is a large number of lenders in the market, offering cheap loans which have led to an increase in the number of small businesses, however, at the same time, it has pushed many in Kenya into debt distress. Kenya’s Credit Reference Bureau (CRB) has blacklisted 2.7 million people for being unable to repay loans as little as $2.

This proves the point that an unregulated or remotely regulated market is often not a good thing.

Mobile money helps improve financial inclusion Financial inclusion is an economic tool as it measures the population that is under the financial blanket of a particular country.

While financial inclusion is a major step towards inclusive growth, it strengthens the availability of economic resources and builds the concept of savings among the

50 | May 2021 | Global Business Outlook

poor. In most countries, digital payment services or fintechs are evolving at a very fast pace. We are now seeing the emergence of digital lenders in the form of neobanks or challenger banks. These companies are not bound by the limitation of traditional banks. While these digital lenders are so far concentrated in China, Europe, US and some parts of Asia, they are gaining prominence in other parts of the world, such as in Kenya.

These digital lenders, along with other fintech service providers play an important role in driving financial inclusion.

Financial inclusion benefits economies and societies as a whole. It is evident that extending traditional financial services to low-income earning population of a country helps increase economic growth and reduce income inequality. Financial inclusion is also associated with higher GDP growth.

Amid the Covid-19 pandemic, and the lockdown measures introduced worldwide to curb the spread of the virus, digital financial services are enabling governments to provide quick and secure financial support to the under privileged or the most economically fragile section of the society.

Today, Kenya has the highest rates in sub-Saharan Africa with 82.9 percent of the adult population having access to at least one financial product, an improvement from 26.7 percent in a decade, according to the central bank estimates. In 2019, South Africa’s financial inclusion rate was at 80 percent, Nigeria 63.2 percent and Uganda 58 percent. The rise of mobile money in Kenya has been rightfully credited for numerous advancements in key metrics used to measure economic development.

In 2006, formal financial inclusion stood at just 26 percent in Kenya. Mobile money penetration in Kenya is also above 100 percent as many Kenyans hold multiple SIM cards.

Our Vision: To be a distinguished financial services provider in the region while providing excellent customer services for retail, SMEs and corporate.

Our Mission: Provide innovative financial solutions that are compliant with shari’a and contribute to growing and achieving success for small and medium-sized enterprises as well as corporates. Furthermore, we provide financing for individuals comprising lease financing, Murabaha and personal finance. We are committed towards a unique customer experience by concentrating in providing services with swiftness, trust, transparency and convenience, which lead us to become a trusted partner and gain the mutual confidence of our shareholders, employees and community.

Financing SMEs and Corporates - Automotive & Heavy Equipment - Production Lines - Medical Equipment - Restaurant Equipment - Sale and Lease Back - Working Capital

Financing of Individuals - Finance Lease - Morabaha - Tawarruq /Personal Finance

News Industry

European banks to take on US payment giants

M

ore than 30 largest banks and card processors in Europe have come together trying to create funds large enough to shatter the US-dominated ‘oligopoly’. The venture based out of Brussels currently employees 40 fee specialists and

has time till September to come up with a blueprint for a panEuropean funds service that can be used to pay online.

Joachim Schmalzl, the chair of the European Fee Initiative said in a statement, “The thought is to construct a European fee champion that may tackle PayPal, Mastercard, Visa, Google, and Apple.” The venture has acquired

the backing of the European Commission along with Euro space’s monetary regulators.

Till now, EPI has acquired €30 million from its backers that includes the likes of Deutsche Bank, UniCredit and BNP Paribas among others. The system for digital real-time funds between customers is expected to launch by 2022, while a broader funds device might be rolled out within the second half of 2023.

Burkhard Balz, a Bundesbank board member noted that since the EPI is backed by Germany’s central financial institution, it would help strengthen “the strategic autonomy of the EU within the funds market, improve competitors and thus enhance shopper alternative”.

Chinese crackdown on fintech giants

China widens crack down on fintech Chinese financial watchdogs recently summoned 13 financial platforms engaged in the finance business, including big names like Tencent and ByteDance, and ordered them to tighten their regulatory compliance. The move is said to be a result of a part of widening efforts by Beijing to control the country’s

52 | May 2021 | Global Business Outlook

internet ‘platform economy’, which also includes an ongoing antitrust clampdown backed by President Xi Jinping.

The 13 companies that were summoned will have to set up financial holding companies if they meet the required parameters, similar to Alibaba’s fintech affiliate Ant Group had to do recently. The move also requires companies to draft a ‘business rectification plan’ where they will mention to comply with regulations, cut "improper" links between their payment tools and other financial products.

Additionally, the plan will also mention monopolies in holding data is said to prevent risk in internet mutual aid businesses.

Authorities feared fintech giants are taking a monopolistic approach and curtailing true competition and innovation.

Airtel Africa's new CEO

Airtel appoints new CEO for Africa Unit

Photo: www.telecomlead.com

Airtel Africa, a leading provider of telecommunications and mobile money services, with a presence in 14 countries across Africa, announced Olusegun Segun Ogunsanya as managing director and chief executive officer (CEO).

Ogunsanya’s tenure as MD and CEO will be effective from October 1, 2021. He presents an impressive 25 years of business management experience in sectors such as banking, telecom, and consumer goods.

Before Ogunsanya became a part of the Airtel family in 2012, he held important leadership positions at Coca-Cola in Ghana, Nigeria, and Kenya.

He has also worked as the managing director of Nigerian Bottling Company and has worked as group head of

retail banking operations at Ecobank Transnational covering 28 countries in Africa. Impressively enough, Ogunsanya is also an electrical engineer and chartered accountant.

Sunil Bharti Mittal, Chairman, said in a statement that ogunsanya displayed significant drive and energy in turning around the Nigeria business by focusing on network modernisation, distribution, and operational efficiency. It is this commitment, together with his industry experience, strategic vision, constant customer focus, and proven record of delivery that will enable him to continue to deliver our strategic objectives and to lead the Group in the next stages of its development.

Ethiopia receives bids from Vodafone and MTN Group QED Naval, a Scottish marine renewables specialist has taken over the Dutch Oosterschelde Tidal Power (OTP) project. The project is considered the largest tidal array in the world. The deal was secured in the final quarter of last year following the buyout of Tocardo, a Dutch turbine developer and has formed a joint venture with Hyrowing.

QED Naval has secured funds worth €3.5 million from the European Union earlier this month and has also secured a place on Interreg’s €46 million Tidal Stream Industry Energiser Project (TIGER). The company has launched its own first-ever crowdfunding campaign on the Seedrs platform. The funds are expected to be used for the development of the existing sites and acquiring fresh locations for its tidal platform.

The company has also rolled out a self-deploying foundation system called Subhub. The system has the capability to cut down 60 percent of the cost used for activities such as maintenance, deployment and de-risk offshore operations.The Tiger project has paved the path for QED Naval to launch the next generation Subhub.

Global Business Outlook | May 2021| 53

Economy Startups

Analysis

Dubai Startup Hub attracts global attention Ashley Samberg The ease of doing business in Dubai is coupled with the relatively safe environment of the UAE and tax-free system

Dubai Startup Hub is the entrepreneurial initiative of the Dubai Chamber of Commerce and Industry. Earlier in January 2021, it launched eight specialised sector guides to benefit entrepreneurs by launching their startups help them pursue business in the UAE. Established in 2016 by the Dubai Chamber, the startup hub is said to be the first of its kind initiative in the Middle East and North Africa (MENA) region that aims to emphasise the value of the collaboration between the public and private sector. It also fosters innovation and entrepreneurship as the key drivers to the economy in Dubai and UAE. It has helped provide a multi-programme platform for startups worldwide to explore business opportunities in Dubai. Additionally, it enables them to benefit from initiatives and services like the Market Access Programme, Emirati Development Programme, Dubai Smartpreneur Competition and the Co-Founder Dubai Programme, among others.

Dubai is considered to be one of the leading global leaders in innovation and technology that benefits businesses seeking efficient operational solutions. The city is said to provide a conducive environment for entrepreneurs and stands out as an attractive hub globally where they develop, create and succeed. A recent media report revealed that the Saeed Khalifa Mohammed Al Fuqaei, chairman of Dubaibased Shuraa Business Setup, is helping 60 businesses per month on average to relocate to the emirate and expand operations. It is expected that these numbers will continue to grow as the country cements its position as a significant location for entrepreneurs.

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Economy \ Dubai Startup Hub

Dubai: The commercial hub of the Middle East The growth was made possible by placing itself as the commercial hub of the Middle East and holds simple company formation processes. It also helped reduce setup costs compared to the rest of the world. In the last 20 years, Shuraa Business Setup has helped establish 35,000 entrepreneurs in Dubai, including multinational companies like Dabur, OYO and NAS Daily. Founded in 2001, the enterprise has an employee strength of 150.

They are dedicated to support the

government’s mission to position the UAE as a growth-centric economic hub of the Middle East.

Dubai Economic Department issued 42,640 new business licenses despite the country’s economic turmoil during the Covid-19 pandemic throughout 2020. It witnessed a four percent increase over the amount granted in 2019. Along with the excitement of startups that they would have a branch in Dubai, the ease of doing business in the country is coupled with the relatively safe environment of the UAE and tax-free system.

It is said that when compared to countries like India or Pakistan, where the laws are unclear, the Dubai government has made things easy to set up companies and immediate availability of investment visa.

World Bank ranked the UAE as the 11th country in its latest Ease of Doing Business report out of 190 countries. Noteably, Dubai was rated top ten among the safest cities in the world to live in.

Across the fields of manufacturing, agriculture, construction, renewable energy, space, hospitality and

Global Business Outlook | May 2021| 55

Economy Startups

food services, ICT and art, healthcare, and entertainment, there has been a considerable increase in foreign direct investment (FDI) offers which include 100 percent foreign ownership for 122 economic activities across these 13 sectors.

The three main innovations hubs in the MENA region are the UAE, Egypt, and Saudi Arabia which accounts for 68 percent of the total deals disclosed in 2020.

The UAE had ranked first and made the maximum total funding and the highest number of contracts. It has declared 129 deals worth $579 million in 2020.

Effects of Covid-19 pandemic on the startup ecosystem Dubai Startup Hub recorded a 236 percent year-on-year growth rate in the membership during the first two quarters of 2020. It attracted a large volume of highly potential startups specialising in fintech, healthtech, education, sustainability, ecommerce, wellness and supply chain that came from changing market conditions due to the Covid-19 pandemic. The growth signals the upturn in entrepreneurial activity as startups in the UAE and across the world look into capitalising on emerging markets and

The growth signals the upturn in entrepreneurial activity as startups in the UAE and across the world look into capitalising on emerging markets and provide new solutions to the emirate amid the accelerated digital transformation.

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Economy \ Dubai Startup Hub

provide new solutions to the emirate amid the accelerated digital transformation.

Members of the Dubai Startup Hub reached 1,568 in the first half of 2020, compared to 466 in the same periods in 2019. A 13 percent of average monthly growth in applications was registered.

Half of it was for core programmes from outside the UAE that affirms Dubai’s positions as an attractive market for startups worldwide. It collaborated with 70 business incubators during the first and second quarters of 2020, including India, UK, USA, Hungary, Russia, Germany and China. It had received 50 percent of the international startup applications for its core programmes.

The outbreak of Covid-19 impacted businesses all around the globe. Dubai Startup Hub realigned its offerings and resources to satisfy the changing needs of startups and SMEs in Dubai. It also organised about 23 virtual events that supported 1,200 entrepreneurs as it addressed key challenges such as funding, global expansion, banking, market research and data and digital innovation.

Launch of 8 sector guides The sector guides launched earlier this year cover fintech, healthcare, education, transportation, food and beverage, social impact, sustainability, travel, tourism, and hospitality. The Hub planned the guides to provide a comprehensive list of business incubators and conferences that concentrates on specific industries. It is considered an innovative new tool that could help startups.

They also form part of the Dubai Chamber’s plan that will address the repercussions of the pandemic. A considerable amount from the Dubai Chamber was said to have been earmarked for knowledge-building and providing information for entrepreneurs during crucial times.

Before the launch of the guides,

Dubai Chamber introduced the Networking Series that ran from the mid-October to mid-December 2020. The launch was implemented in collaboration with Virtuzone, a business setup company. The fifth edition drew more than 360 participants, of which 22 percent were entrepreneurs from Emirates in addition to business owners tuning in from all over the world.

The Dubai Startup Hub aims to support the emerging companies and help them understand and navigate the procedures to establish a business in Dubai. It helps facilitate the exchange of information and knowledge and lays a strong foundation for partnership and cooperation. This initiative will eventually boost Dubai’s entrepreneurial ecosystem and strengthens its position as a global destination for new entrepreneurs.

Around 1,650 participants were attracted to the Networking Series of Dubai Chamber throughout the five editions that included seasoned entrepreneurs, new startup founders and investors. 48 meetings were held and the atendees came forward to share their success stories, explore the ways to overcome barriers, highlight the necessary tools for the development of their businesses, and help create an environment to network and build new relationships.

The three main innovations hubs in the MENA region are the UAE, Egypt, and Saudi Arabia. It accounted for about 68 percent of the total deals disclosed in 2020.

Arab Entrepreneurship Maturity Index 2020

UAE 3.6 Qatar 3.4 Kingdom of Saudi Arabia 3.2 Bahrain 3.1 Oman 3.0

The second cycle of finding cofounders During mid-March this year, Dubai Startup Hub launched the second cycle of its co-founder programme to find potential co-founders.

Eleven startups were selected

Global Business Outlook | May 2021| 57

Economy Startups

Number of deals closed in MENAbased Startups

2016 201 2017 333 2018 442 2019 573 2020 496

and will receive training support, legal and human resource advice, and digital tools that can help entrepreneurs pitch with investors and industry experts. The programme opened and started accepting applications in February and received over 60 applications coming in from Canada, Brazil, India, Africa and Russia, and MENA-based startups.

These selected startups will be able to access the industry-specific networking session with founders with successful stories. The training workshops can be personalised to the needs of the company and get the much-required media exposure.

The 11 selected startups The 11 selected startups are Hamples, a digital sampling platform that lets customers receive samples from the desired brands, Gigthree, a technologyenabled platform that helps match experts with jobs on-demand. Hikayati, an online website that allows children to create their personalised storybooks; Storically, another platform that offers customised books for the younger generation, Parfumery, an e-commerce site that sells bespoke perfumes. Parma Global is another selected startup which is an online healthcare education provider.

Viugo, a media company that helps to deliver content using a combination of immersive technology and CGI. Believe Nutrition, a business-to-business foodtech firm that provides online nutritional coaching and Braidboxx, a hair-braiding on-demand platform that provides its services at home. Dubai Startup Hub has thus far received 140 enquiries from startups that are searching for business partners. Among the selected, eleven more than half of the businesses are led by females. In the 2021 cycle, over 60 applications turned in.

Dubai Startup Report 2021

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In early January this year, Dubai Startup Hub and Dubai Technology Entrepreneur Campus (Dtec), a tech co-working space wholly owned by Dubai Silicon Oasis Authority (DSOA), released the Dubai Startup Report 2021. It guides Dubai’s startup ecosystem and what it can offer to international investors and entrepreneurs, along with business-friendly incentives and measures. Both the entities’ collective experience has jointly helped over 10,000 founders and investors in the Emirate. It is focused on boosting foreign investment and attracting global startups. The report also attributes the level of economic competitiveness in Dubai and a guide to locate its free zones, other government initiatives that will potentially ease the process of setting up a business in the Emirate. It also holds the details on the venture capital ecosystem and additional financial accesses.

The business-friendly incentives mentioned in the report include the UAE golden card permanent residency system for expat investors, a five-year visa for entrepreneurs and a procedure that could grant UAE citizenship to certain foreigners. The Dubai Startup Report was released when startups drove the country’s digital transformation, fostering innovation and playing a crucial role in building the economy post-Covid-19. It also supports Dubai Chamber’s comprehensive entrepreneurship strategy and the current efforts to promote the country as a market for high-potential startups globally.

Transition to a digitally-driven economy The Hub is expected to play a much more significant role in supporting the country’s transition to a digitally-driven economy.

It has had successful collaborations with entrepreneurship ecosystem partners that helped the initiative in order to serve a vast network of startups in 2020. In

Economy \ Dubai Startup Hub

the post-pandemic period, these tech startups can accelerate Dubai’s transition.

The benefits offered to SMEs and startups through stimulus packages and business-friendly measures introduced by the UAE and Dubai governments have also positively impacted the local entrepreneurial ecosystem.

In early April 2021, the UAE and Saudi Arabia saw startup sectors booming in the region as young entrepreneurs navigated for futuristic and innovative platforms and were to drive regional growth for the startup sector. In terms of total capital investment by value and the number of deals, the UAE emerged as a tech startup nation in the MENA region. It also acted as a magnet that attracted talents globally with its welldeveloped infrastructure, leading the innovation hub for accelerators and incubators in the region. Similarly, Saudi Arabia is developing its ecosystem for innovation and venture capital. Opening up its economy in the recent reforms has provided immense opportunities to bring in disruptive technology applications.

Also, the favourable demographics offer a significant marketplace for technology adoption. The Kingdom provides a ready pool of tech talent to address homegrown possibilities.

In order to facilitate innovation and investment in new startups, accelerators like Techstars are playing a vital role with tech hubs like Hub71. Apart from aiming at attracting startups to the MENA region, it paves the way for future innovations in the digital economy. TheTechstars Startup Weekend Covid-19 KSA was conducted in July 2020 and was attended by more than 550 entrepreneurs from Saudi, out of which two two-thirds were women. Virtual panels, workshops and networking events addressed the challenges created due to the Covid-19 pandemic.

New leap in healthtech Recently Dubai launched a new incubator, Ztartup, in the emirate that will focus on developing health technology businesses. It is located in the city’s dedicated health care zone. It will help businesses in digital media, augmented and virtual reality, and digital emergency and safety technology. It is expected to connect the entrepreneurs to the investors to a network of specialists and mentors to enable them to develop ideas. The project is also to house specialised laboratories that could help entrepreneurs to design prototypes of their projects. Dubai SME is a unit of the city’s economic department that takes care of small and medium-sized businesses. It stated that incubators play a crucial role in ensuring that startups can maximise their potential that will eventually lead to contributing to the economy.

There should be balanced support from the public and private sectors that could create new market opportunities for startups to enhance the role of SMEs in the economy. It will open diverse financing channels for entrepreneurs with innovative ideas and draw systems and laws for crowdfunding. It is known that UAE is keen on harnessing the startup community’s power to drive its growth further, given a challenging year for the global economy.

Top UAE-headquartered startups and total funding

Careem $772 million Souq $425 million EMPG $160 million Property Finder $142 million Starzplay Arabia $125 million

Global Business Outlook | May 2021| 59

Post-Brexit trade deal with Africa Feature

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Economy UK Africa trade Feature \ Post–Brexit trade deal

GBO Correspondent

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Experts predict that UK might face major trade deficits that might have a direct impact on the economy

o doubt Brexit will go down as one of the historical events of the 21st Century. As the clock struck 12 on January 1, the UK officially left the European Union (EU). While Brexit is resulting in numerous changes, especially the way business were previously done in the UK, we are also seeing reforms in the aspect of trade.

After four years of prolonged negotiations, on December 24, 2020, Prime Minister Boris Johnson announced that the UK has agreed to a trade deal with the EU, where it will get tariff and quota-free access for exported goods.

But it looks like the new trade agreement is not working out well for the UK, what Brexit hoped it would do. As previously stated by policy experts and economists, the UK will keep facing major deficits that could very well have serious repercussions on the economic growth of the country. In 2019, it was reported that 71 percent of the UK’s GDP was generated by the service sector. Now after Brexit, UK companies that had a much larger EU market are suddenly unavailable.

This has forced the UK to reform its trade policies as well as its trade partners. Also, the global slowdown and the economic distress caused by the Covid-19 pandemic are only adding to the UK’s woes. One region the UK has its eyes on is Africa. The region is not only attracting the UK, but many other nations such as other European countries, China and the US. Before the pandemic hit the world, Africa was prospering. The world’s five fastest-growing economies were all African. Soon it will be the most populous region in the world. China

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Economy UK Africa trade

already has a huge presence in Africa and the US is bolstering its ties with many African nations.

UK to explore Africa’s potential

England’s Prime Minister Boris Johnson during a virus-quietened second edition of the UK-Africa Investment Summit in January 2021 said, “One thing that absolutely has not changed is my ambition for the UK to be Africa’s investment partner of choice.”

After finally exiting the EU, the UK has started negotiations on several free trade agreements. By establishing these new free trade agreements, the UK wants to remove or reduce tariff and nontariff barriers to trade. In order to make up for the huge deficit, UK has been looking towards new trade agreements and partners in an effort to boost its economy. The Boris Johnson-led government has signed a trade deal with Japan in October 2020, which was its first major postBrexit trade deal.

Additionally, UK is also having discussions with Australia and New Zealand on a trade deal. However,

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farmers in the UK have recently come out against the trade deal with Australia. They fear it could prove to be a threat to UK agriculture if Australian beef and lamb producers are granted tariff-free access to the UK because of the new trade deal. The National Farmers’ Union (NFU) voiced its concerns in this regard. This has also resulted in a split in the cabinet over whether or not to approve a wide-ranging free trade deal with Australia.

All in all, going by the trend, it looks like the UK is eyeing all its former colonies and the Commonwealth as its trade partners, especially in Africa. At its zenith, the British Empire housed 23 percent of the world’s entire population. Standing in the 21st Century, it looks like a renewed trade license with those colonies are the only way to make the UK a definite winner after Brexit. Helen Grant, trade envoy to Nigeria revealed that the UK was on the verge of striking an ambitious trade agreement with Nigeria, one of Africa's largest and fastestgrowing economies. According to her, the new trade deal with Nigeria could easily surpass the current £3.4 billion in trade with the UK. England’s Prime Minister Boris Johnson during a virus-quietened second edition of the UK-Africa Investment Summit in January 2021 said, “One thing that absolutely has not changed is my ambition for the UK to be Africa’s investment partner of choice.”

If all goes well, the new trade agreements

Feature \ Post–Brexit trade deal

can start without any interference or objection from the EU. Some optimists in London believe that these new deals might lead to a second and renewed Commonwealth. Talking about African nations, in particular, these agreements can create relationships where both the parties have an equal partnership, something that has been complained about by the African leaders when it comes to their relationship with the EU.

UK to enhance trade with Africa Currently, Africa accounts for just 2.5 percent of UK’s trade. There are more than 50 nations in Africa but Nigeria and South Africa, which are the continent’s two largest economies, accounts for nearly 60 percent of the trade. Recently, UK inked post-Brexit trade deals with 13 African countries. Earlier this year, during the UKAfrica investment summit, Boris Johnson hosted 16 African heads of state. The leaders signed trade deals which are estimated to be worth £15 billion. The UK has enhanced its trade deal not only with Nigeria, but it has bolstered trade relationships with Egypt, Ethiopia and Kenya.

Even before the UK was officially out of the EU, trade between UK and sub-Saharan Africa was growing by over seven percent in the past two years. The UK-Africa trade relationship was valued at £35 billion in 2019, with around £54 billion of bilateral investment stock on top of that, according to media reports.

EU-UK post-Brexit trade The EU is the UK’s biggest global trading partner. Trade with EU accounts for 47 percent of the country’s total trade. To put things into perspective, around 42.6 percent of the UK’s total exports go to the EU. Also, around 51.8 percent of UK’s total imports are from the EU. However, exports to the EU fell 40.7 percent in March from a month earlier and imports dropped 28.8 percent, according to figures released by the Office for National Statistics.

Many businesses in the UK, especially the small scaled ones, have halted sales with the EU because of the changes brought in after Brexit.

Post-Brexit, the UK’s overall exports dropped 19.3 percent and imports fell 21.6 percent, the

biggest monthly declines since 1997.

Data released by Ireland's Central Statistics Office stated that imports from Great Britain dropped by 65 percent in January year-on-year. UK’s exports to Germany also dropped by nearly 56 percent, according to data released by German authorities. As a result of Brexit, trade between Great Britain and Northern Ireland has entered controversial ground with the EU taking legal action against the UK after it unilaterally extended a grace period on food checks.

In its report, the Office for National Statistics said, “With only one quarter of data available, and the ongoing pandemic and recession, it is too early to assess the extent to which this reflects short-term trade disruption or longer-term supply chain adjustments.”

Many businesses in the UK are struggling to adapt to the new rules introduced after or as a result of Brexit, especially manufacturers.

Brexit has resulted in these businesses dealing with issues such as border delays, customs costs and regulatory checks. Many businesses are on the verge of shutting down as a result. A survey done by the ONS revealed that businesses with a workforce of less than 50 employees are facing a higher risk of shutting down permanently.

Exports of live animals, meat and dairy products fell 5.8 percent compared to a year earlier because of the same limitations. Exports of pharmaceutical and medicinal products were also down three percent.

UK trade after Brexit

European Union -28.8%

Import

-40.7%

Export

Non-European Union -12.7% +1.7% Source: Office of National Statistics

UK’s top three goods imports from the EU 2019

Motor vehicles

18% Pharmaceuticals

7% Electric machinery and appliances

4% Source: visualcapitalist.com

Global Business Outlook | May 2021| 63

Economy Oman VAT

VAT in Oman and its economic implications Feature

64 | May 2021 | Global Business Outlook

Feature \ Oman economy

Oman recently introduced a 5% value-added tax (VAT), becoming the fourth Gulf Cooperation Council (GCC) nation to do so Tom Hardy

O

man recently introduced a 5 percent value-added tax (VAT), becoming the fourth Gulf Cooperation Council (GCC) nation to do so, and also the largest to freshly implement the consumption tax into its taxation system. Oman has followed the footsteps of the Kingdom of Saudi Arabia, Bahrain and the UAE. The Sultanate’s government signed the Gulf Council Cooperation (GCC) VAT Framework or the Common VAT agreement in 2017 and back then, it was decided that VAT will be introduced in 2019. However, the process was postponed and Oman decided to introduce VAT in 2021. Oman’s decision to delay the process of introducing VAT has to do with its slow economic growth. Back then, the world was dealing with unstable oil prices and a global economic slowdown. The government in Oman feared that the addition of a new tax such as VAT to its taxation system could prove to be complicated.

However, in 2020, the coronavirus pandemic battered the global economy and also oil demand took a hit. According to the International Monetary Fund (IMF), Oman’s economy contracted by 6.4 percent in 2020. In its report, IMF said that sectors such as construction, hospitality, and wholesale and retail trade sectors experienced the heaviest toll. Even inflation turned slightly negative due to contraction in demand. Oman’s fiscal deficit rose to 17.3

percent of GDP, and central government debt increased to 81 percent of GDP. Reportedly, nonhydrocarbon GDP took a hit of about 10 percent during the period. Despite the economic distress and limitations, Oman finally introduced VAT in April 2021.

By introducing VAT, the Sultanate expects to raise around $1.04 billion each year. This is equal to around 1.5 percent of gross domestic product (GDP). The introduction of VAT will also help Oman successfully fulfil Saudi Vision 2040, which aims to diversify the economy and increase revenue from non-oil sectors such as logistics, construction and tourism. Oman is in need of new revenue streams and VAT is possibly one of them.

Why Oman levied VAT? The major reason that Oman has levied a 5 percent VAT is to add to their revenue streams.

An estimated $1.04 billion is expected to be added to the government’s chest from VAT and with time, the figure is expected to increase.

Similar to other GCC economies, Oman is looking to diversify its economy and reduce its dependence on oil.

The diversification ambitions of Oman are also being driven by a slump in hydrocarbon reserves and revenues. The private segment activity in the economies still depends on government-backed projects and its consumption is backed by the revenues generated from the oil and gas sector. The policymakers in the Sultanate were under immense pressure to float alternate ideas.

VAT can also be considered a part of its diversification process since it adds another revenue stream for the government.

VAT is also expected to impact Oman’s development and international competitiveness in a positive manner. A timely rollout of VAT is crucial for the Sultanate to maintain investor’s confidence. S&P Global Ratings affirmed its B+/B long- and short-term foreign and local currency sovereign credit ratings on Oman and also maintained its stable outlook. Further

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Economy Oman VAT

VAT in Middle East

Oman

UAE

5%

5%

Saudi Arabia

Bahrain

15% 5%

delays or any changes whatsoever would surely inflict only more economic damage for the Sultanate.

New rules require businesses to display their VAT registration numbers on business documents.

This will add to the credibility of businesses in the Sultanate.

Considering the registration threshold and with proper documentation in place, businesses appear well established. Also, auditing is an integral part of any business be it in the Sultanate or any other part of the world.

Now, businesses will require to ensure proper documentation for a period of at least 5 years and such documentation should be easily available upon the request of the FTA. This would lead to compliance and transparency and at the same time give shareholders the actual

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picture of the company’s financial condition.

Compliance and transparency mean businesses in the Sultanate will be able to attract investors, both domestic and foreign. Investors often prefer transparency as it gives them the confidence to put their money into the firm. VAT could possibly lead to an increase in foreign direct investments (FDI) into the Sultanate.

What’s taxable, what’s not After various considerations and delays, Oman finally levied VAT in April 2021. So, the next question that arises is which products and services will be taxable and which will be exempted? A standard rate of 5 percent will be levied on most goods and services bought within the country, mostly FMCG products. There are also exceptions for products and services which include essential food items, medical care, education and financial services.

The Oman Tax Authority has revealed that 94 food items are exempted from VAT. The exempted food items include meat, fish, poultry, fresh eggs, milk, vegetables and fruits. Coffee and tea, olive oil, sugar, nutritional products for children, bread, bottled drinking water and salt are also exempted. The Sultanate has also exempted some domains like education, healthcare and financial services from VAT by adding them to the zero-list.

Besides basic food items, other categories upon which VAT is not levied include financial

Feature \ Oman economy

services, healthcare services, healthcareassociated goods, education and related goods, the supply of peer land, resale of residential buildings, local transportation and supply of residential buildings by renting. Here, it is important to note that in order to consider a supply as exempted from the VAT, the specific conditions mentioned in the Oman VAT Act and Executive Regulations needs to be met.

Some imported goods are also exempted from VAT. Imported goods which are in favor of diplomatic and consular bodies, goods imported for the armed forces such as ammunition and weapon supplies, goods included in the zerorated list are also exempted. Personal effects and used household appliances brought to the country either by a citizen or a foreigner are also exempted from VAT.

Is Oman prepared for VAT? VAT is still something relatively new in the Middle East and only four nations out of the 22 in the region have introduced it. Oman is bound to face various challenges as it tries to integrate VAT into its taxation system. The very process of dealing with the new tax system could prove too chaotic in the beginning. Another problem that could arise in the beginning is that the database or filing system adopted by businesses or authorities in Oman could prove to be inefficient, after the introduction of VAT. More so in the case of businesses dealing in items that will be taxed under VAT. This could prompt tax authorities or even businesses to upgrade their filing system in accordance with VAT, which is an additional cost.

Filing tax manually is not a preferred option, as it will take much greater effort and time.

There will be multiple other complications that governments and authorities in the Sultanate have to overcome. Oman can learn a lot by studying how their neighbours implemented VAT. In the UAE and the Kingdom of Saudi Arabia, many local businesses initially did not have the proper filing systems. Even multinational companies operating in the Kingdom or the UAE had to alter their ERP systems when VAT was introduced. Another major problem faced by the two nations was

delays and disputes with regard to pricing and invoicing. This was mainly due to their failure to print invoices on time, which often impacted their working capital.

With time, we would be able to draw parallels between the problems faced by Oman and those by the Kingdom and the UAE. Of course, they won’t be identical, however, the challenges will depend on Oman’s taxation system and how responsive Omanis are to VAT. It is important to note that the Sultanate already has a corporate tax system in place and previously had no indirect taxes until the introduction of excise tax in 2019 on selective goods which are considered harmful for human consumption.

Oman levying VAT means it will only expand the consumption tax base in the Sultanate to include taxation on the supply and import of all goods and services. Not so, in the case, the goods and services are zero-rated under the VAT legislation.

VAT feature by region Average rate (%)

VAT revenue (% of GDP)

Sub-Saharan Africa

16%

3.9%

Asia-Pacific

10.4% 3.3% European Union

18.8% 7% MENA

VAT implementation in Saudi Arabia and the UAE Both the Kingdom of Saudi Arabia and the UAE introduced VAT during 2018, almost at the same time. Even the rate was set at 5 percent by both the Gulf nations. However, the standard VAT rate in the Kingdom was increased by the government to 15 percent effective 1 July 2020. In the UAE, only businesses that report annual revenue of over Dh3.75 million are required to register for VAT. After the implementation of the VAT system, authorities made it mandatory for businesses in the UAE to register, issue valid tax invoices, maintain records and file a periodic VAT return which can be done either monthly or on a quarterly basis.

Similar to Oman, the government

15.7% 5.7% Americas

13.5% 4.9% Source: International Monetary Fund

The standard VAT rate in Saudi Arabia was increased by the government to 15 percent effective 1 July 2020. In the UAE, only businesses that report annual revenue of over Dh3.75 million are required to register for VAT

Global Business Outlook | May 2021| 67

Economy Oman VAT

It’s been nearly three years since both the UAE and Saudi Arabia successfully levied VAT. But everything would depend on Oman’s capability and its preparedness to levy VAT.

in the UAE also exempted basic food items, healthcare, education and social services from VAT. This was done so VAT does not become a burden for the weaker sections of the society in the emirate. Items that are taxed in the UAE include electronic goods such as smart phones, laptops, cars, jewelry and watches.

Saudi Arabia too, zero-rated and exempted basic food items, healthcare, education and social services from VAT, whereas Bahrain zero-rated and exempted a number of additional supplies. Authorities in the UAE, Saudi Arabia and Bahrain have spent a good amount of their resources to create awareness and educating businesses about VAT. Interestingly, a report by PwC Middle East Economy Watch revealed that revenues from VAT have exceeded expectations, which is welcoming news for the Omani government.

There is a great deal Oman can learn from how Saudi Arabia, the UAE and Bahrain introduced VAT. Oman can learn a great deal from the challenges faced by these nations.

What the Sultanate can also do is research on the implementation process of VAT both in the UAE and Saudi Arabia and make amendments when it comes to implementing VAT in their own nation.

It’s been nearly three years since both the UAE and Saudi Arabia successfully levied VAT. But everything would depend on Oman’s capability and its preparedness to levy VAT.

Is the current level of VAT enough for Oman?

The current level of VAT was predetermined by the Common VAT agreement, by the six GCC nations in 2017. The standard rate decided back then was 5 percent, however, Saudi Arabia has increased it to 15 percent in 2020. According to estimates made by the IMF, VAT is expected to account for around 1.5 percent to 2 percent of Oman’s GDP. Even though the Sultanate expects to raise around $1.04 billion through the introduction of VAT and diversify its revenue stream, VAT alone will not be sufficient to cover the Sultanate’s deficits in revenue in the future.

The Sultanate’s oil revenues represent roughly two-fifths of its GDP. Oil revenue also makes up

68 | May 2021 | Global Business Outlook

to three-fourths of the government's income.

Compared to this, VAT is expected to collect a rather small sum, however, not insignificant.

The revenue generated for the government be it in Oman or the UAE, is relatively small. Hence, similar to Saudi Arabia, there is a possibility that Oman too might increase the standard rate in the future. The sultanate might also levy additional indirect taxes, however, very unlikely in the near future. In short, it can be said that VAT is one of the many fiscal strategies that the Omani government has or will introduce to reduce the economy’s dependence on oil.

VAT and its economic implications So far it has been established that VAT will add more than $1 billion to the government’s revenue chest. Besides that, VAT is expected to bring in greater transparency and accountability.

The implementation process for VAT is not complicated when compared to other indirect taxes. Transparency will come from the fact that VAT is levied on each level of the supply chain. This will lead to compliance and will allow authorities to track businesses and effectively monitor them. Also, VAT is collected at every level throughout the supply chain until the product reaches the final consumer. This creates a series of transactions that can be easily revisited in case of any discrepancies.

Oman has also made it mandatory for businesses to follow due diligence and make sure their transactions are compliant. This will lead to accountability. From an administrative point of view, VAT will facilitate the reduction in tax evasion, even though its implementation can prove to be expensive.

VAT is a consumption tax which means the revenue generated from it will not be fluctuating but constant to a certain degree. This will facilitate better planning when it comes to government spending. For VAT to be successful in Oman, it will need smooth implementation.

News

Economy

Global economy to grow by 5.4% in 2021

T

he United Nation in its latest forecast said that the global economy will grow by 5.4 percent in 2021.

But, the UN also added that it’s important to keep in mind that the sudden surge of Covid-19 cases and the inadequacy of vaccines in many countries might slow down the progress.

UN’s mid-2021 World Economic Situation and Prospects report has also revealed that the immediate availability of vaccines in few large economies led by the US and China, and an increase in global trade in merchandise and manufactured goods has already reached to a pre-pandemic

level. Additionally, the UN also cautioned saying, “this will unlikely be sufficient to lift the rest of the world’s economies," and “the economic outlook for the countries in South Asia, subSaharan Africa, and Latin America and the Caribbean remains fragile and uncertain."

Experts mentioned that one of the key components of GDP for any country is investment.

While some countries like the US have seen only a 1.7 percent drop in investment last year, some other developed countries saw investment sector suffer a loss of 4 percent of GDP and more.

The Organisation of the Petroleum Exporting Countries Jarring and unsettling visuals of India reeling under a brutal second wave of the Covid-19 pandemic has shocked the world.

So far, India has reported more than 25 million cases and more than 283,000 deaths.

OPEC hopes for higher oil demand from India OPEC predicted that they are expecting a strong recovery in oil demands in 2021 since the US and China will make up for the demand slump from India.

The organisation also published a report stating that the demand will rise by 5.95 million barrels per day, or by 6.6 percent.

While this number or prediction might certainly seem too good to be true, the Organisation has also mentioned ‘significant uncertainties’ revolving around the pandemic, especially after concerns surrounding India’s situation has affected oil pricing. Crude oil prices saw a decline after the report was

70 | May 2021 | Global Business Outlook

released but even then it was $68/barrel.

OPEC mentioned in its monthly report, “India is currently facing severe Covid19-related challenges and will therefore face a negative impact on its recovery in the second quarter, but it is expected to continue improving its momentum again in the second half of 2021.”

Sub-Saharan economy to rebound

Covid-19 pandemic

US comes to India’s aid as Covid-19 cases rise By now, the entire world has come across the unsettling pictures from India and just how terrifying the country is battling the second wave of Covid-19 pandemic. Not only every day the number of cases being recorded are touching an all-time high, but the mortality rate is also increasing.

At the peak of its second wave, India was reporting nearly 400,000 new Covid-19 cases each day. Amid such a trying time, the US has been extremely concerned with the massive surge in coronavirus cases in India and has promised additional support to the Indian government and healthcare workers.

Currently, Washington is under immense pressure to increase aid to India, as the world’s largest democracy is still trying to provide basic healthcare to patients as

infrastructures are stressed and hospitals are running short of supplies. The Indian government has also deployed military planes and trains to provide oxygen to Delhi, where hundreds of patients have lost their lives because of the shortage. The country of 1.3 billion people is facing a global catastrophe and we all collectively hope that things will start looking better for India.

The Sub-Saharan economy is expected to rebound this year as economic activities in the region are finally picking pace, according to a Reuters poll. The poll revealed that the Sub-Saharan economy will grow by 3.3 percent in 2021 after contracting by two percent last year due to the Coronavirus pandemic. According to the poll, Angola is expected to grow by 1.6 percent in 2021, Ghana to grow by 4.9 percent, Kenya to grow by 5.1 percent, Nigeria to grow by two percent, South Africa by 3.7 percent, and Zambia by two percent.

However, a slow vaccination programme and surge in Covid-19 cases in the Sub-Saharan countries could hinder the predicted growth.

According to the World Health Organisation (WHO), Africa had given fewer than two percent of vaccinations administered globally. This could be a worry given Africa is the second most populous continent with a population of around 1.3 billion, which is 16 percent of the total population on earth.

The US State Department is working to finalise options for contracting oxygen, including cylinders Global Business Outlook | May 2021| 71

GBO Advertorial Mueen Human Resources

Mueen Human Resources Company of Saudi Arabia has big plans for the future

The Saudi market is an attractive opportunity for them to grow especially after the 2030 vision Mueen Human Resources Company of Saudi Arabia plans to provide the highest level of recruitment services across various specialisations like medical, technical and engineering. In order to meet this need, the company has aimed for a strategic partnership with overseas agencies around the globe to ensure better sourcing criteria for their clients. The company is known for its understanding of its clients’ needs. With the help of the partners abroad, it is able to provide the best manpower solutions.

Mueen’s business leaders in each department also work closely with their professional team members to ensure the best level of service to their clients The company is soon to be certified with ISO 9001 and is strictly following the required protocols to achieve its goals. The international quality standards applied in the training and qualifying human cadres to clients is also to be certified by the training centre in KSA with the British Institute of Cleaning Services (BICS). The license from the Ministry of Trade and Investment and the Ministry of Labor No. (24) has enabled Mueen to strengthen its market position and transform the recruitment sector in the Kingdom of Saudi Arabia. With the help of this license, the company is also recognised as a Mega Recruitment Company that gives it the ability to handle mass recruitment orders along with multiple requests from one order.

In Saudi Arabia, the first recruitment forum for exploring opportunities was launched in the year 2018. This was significant to the recruitment sector because the industry of recruitment companies is still newly rising in the Saudi market. This kind of forum has also added great value to Mueen’s process. It shed light on the features and added values that the recruitment companies can provide to the corporate and an individual’s needs. Additionally, the trust in recruitment companies has exceptionally increased with the forum. Thus Mueen also supports increased investment in the branding and awareness of recruitment companies in the market of Saudi Arabia.

Post-pandemic plans and strategies

Due to potential economic recovery and vaccination after the outbreak of the coronavirus, it was reported that the employment trend in the Kingdom was likely to improve in 2021. Accordingly, seasonal employment opportunities are also expected to rise.

Mueen is said to believe that the Saudi market is an attractive opportunity for them to grow especially after the 2030 vision. The government led by Prince Mohammed Bin Salman is shifting the country to be one of the leaders in the world economically. This has led to demand in the corporate sector to consider

the urgent need for seasonal employees by the activities of the General Entertainment Authority and the international occasions like Formula E and Saudi Cup Horse race. As the country is recovering from Covid-19 along with the rest of the world, the recruitment companies can also be ready for a huge manpower demand.

Leadership, plans and rewards

Under the leadership of Abdul Aziz Al Othaim, chairman of Mueen, the company has set longterm strategies to achieve its goals. The PMO of the company works closely with all company departments and also ensures the company’s vision is achieved and observes the results. Mueen’s business leaders in each department also work closely with their professional team members to ensure the best level of service to their clients. Omar Al Juraifani, a member of the professional team in Mueen is said to have a clear company strategy for the next five years and provide manpower solutions with high-end technology and business engagement with the client and the company. This has helped the company to win the Global Business Outlook Awards for the Fastest Growing Human Resources Company - Saudi Arabia 2020. It is to note that Omar Al Juraifani also won the Global Business Outlook Awards for the Best Human Resources CEO - Saudi Arabia 2020.

Mueen covers almost all the main regions of Saudi Arabia. With the global businesses slowly re-emerging from the Covid-19 pandemic, the company also plans to expand in other markets outside the country. The company is said to observe and analyse the needs of different countries and in the next two years, it is planning to have a presence outside of Saudi Arabia.

Technology

Interview Sean Andrew Sanders Chief executive officer, Revix

Are crypto-bundles going to be a game changer?

GBO correspondent

C

ryptos are becoming increasingly popular and at a faster rate in the last couple of years. In the last one year or so, the value of cryptocurrencies such as bitcoin have surged by a considerable amount. Cryptos’ popularity has

ious factors, be it its surging popularity or the Covid-19 pandemic. Even the old players or the matured investors are adding cryptos to their baskets.

Now, investment banks are also encouraging their clients to put their money on cryptocurrencies.

It was reported by CoinDesk that New York-based investment bank and financial services holding company JP Morgan is setting up an actively managed bitcoin fund for its wealthy customers. The bitcoin fund could be rolled out in mid-2021 and the New York Digital Investment Group would serve as JP Morgan’s custody provider. Similarly, another investment giant Goldman Sachs is expected to start offering bitcoin exposure to its wealthy clients.

Revix’s crypto bundles offer investors a broader basket of cryptocurrencies that passively track the growth of the broader crypto market

exploded in the last couple of months with bitcoin rising 66 percent in 2021 alone, while ether, has rallied over 200 percent, according to CNBC. Bitcoin, which is probably the most popular cryptocurrency at present, reached a peak of around $63,000 in mid-April.

Cryptos has also become a hot trend in the investment world. More and more investors across the globe are now being lured into the crypto investment realm due to var-

74 | May 2021 | Global Business Outlook

While it is possible to make money from crypto investment, one must also understand their volatile nature. South Africa-based digital crypto broker Revix offers crypto bundles that provides its users the ability to invest in more than one crypto and at the same time mitigate the specific risk associated with any single cryptocurrency. Revix recently raised $4 million in funding to help it launch a mobile app and expand in Europe. Sean Andrew Sanders, chief executive officer at Revix, in an interview with Global Business Outlook shares his

Technology | Cryptocurrencies

Bitcoin will overtake gold in value in the next five years

insights with regards to the startup, its crypto bundles, the crypto ecosystem and its outlook.

GBO Can you tell us a bit more about Revix’s new mobile app?

Sean Andrew Sanders: Yes, we’re very excited to announce that we’ll be launching our mobile app later this year which will include all the latest technologies and security features. Revix stands for revolutionary investment experience and we want our app to offer just that – an investment experience unlike any other investment platform. This starts with a customer centric approach, an obsession about the smaller details and, thanks to our skilled UX team, investing will become easier than ever before with our mobile app. Our mobile app will be both iOS and Android compatible and will enable our customers to manage their investments on the go.

What value proposition Revix has to offer that sets it apart from its competitors?

There are several areas that set us apart from other crypto investment platforms. We offer crypto bundles that operate as the S&P500 or JSE Top 40 for crypto for effortless low-cost diversification. Soon we’ll be blurring the lines between crypto and traditional investing as we’ll enable everyday people to invest in both cryptocurrencies and theme-based ETFs on the same investment platform.

We aren’t a crypto exchange, we’re more like a digital crypto broker which means we can trade across multiple exchanges and trading desks to get the best prices for our customers. Our customer support is hands down the best in the industry so when you have a query it gets answered within minutes or at worst, hours – not days or weeks.

Revix Rewards loyalty programme is the first behavioural driven investment rewards program in South Africa that pays out points to customers for performing

specific actions. These include growing the Revix community, diversifying an investment portfolio, making regular investments, etc. Revix points can then be directly converted into Bitcoin and reinvested or withdrawn.

What are the ways a stock investor can diversify their stock portfolio with respect to cryptocurrencies? Can you tell us a bit more about Revix’s crypto bundles?

Buying a single cryptocurrency can be easy if you know which one to buy but many people are not confident enough to know which cryptocurrency to back, and even the pros only get it right about 50 percent of the time, so buying a Bundle – rather like an EFT [exchange-traded fund] or unit trust – takes the guesswork out of it.

Unlike the pure plays on the rise of Bitcoin or any other single cryptocurrency, Revix’s crypto bundles offer investors a broader basket of cryptocurrencies that passively track the growth of the broader crypto market.

The concept has merit for investors as a unique way to profit from the next Bitcoin while significantly reducing the concentration risk (the specific risk associated with any single cryptocurrency).

Just as you would diversify your stock portfolio to reduce the risks of exposure to a single stock or industry, we do the same with cryptocurrencies.

Global Business Outlook | May 2021| 75

Technology

Interview Revix cryptocurrencies

What are considered to be the smart ways to invest in cryptocurrencies?

There are 3 main rules.

1. Don’t invest more than you can afford to lose. A smart amount to invest would be to put no more than 1 to 10 percent of your total net worth into the crypto market.

This is obviously heavily dependent on your own personal circumstances.

2. Rather dollar-cost-average (DCA) into the crypto market. This means investing a small amount over a fixed time period – i.e. $100 every 2-weeks. This means you get the average price over the long-term and if the market is going up you’ll benefit from the growth in the market over time while significantly reducing your risk if you were to invest at a point in time before the crypto market sharply declines for whatever reason. The wisdom here is that you should not try time the market – you will get it wrong as often as you get it right, and 3. Don’t bet on a single cryptocurrency. Rather own a diversified basket of cryptocurrencies like what we offer at Revix through our Bundles. This approach allows you to spread your risk as well as have a crypto investment portfolio that automatically updates every month with our automated rebalancing.

How will CBDC impact the market? Can cryptos and CBDCs co-exist?

Money used with a credit or debit card is, in fact, bank money and it is one step removed from the issuing authority. Bank money is often the place where fees are levied, which means CBDC would offer the fee-free cost of sovereign money with the convenience of digital money.

The benefits of a CBDC are obvious – lower fees, near instant clearing and settlement, improved AML tracking, etc, - but launching these would fundamentally impact the banking industry in a very negative way, as fees would be taken directly from banking and payment service provider's pocket - and likely put hundreds of thousands of jobs at risk which is a high-risk strategy with little upside potential for massive downside risk (from a political standpoint that is).

Can cryptos and CBDCs co-exist?

Yes, they can co-exist but I suspect one will truly succeed if the other one fails. Technically cryptos and CBDCs are completely different assets even though they can both be used for payments. They’re like comparing gold to property, both store wealth but are very different assets.

CBDCs will have their long-term values pegged to

76 | May 2021 | Global Business Outlook

This is a winner-takeall market and in my personal opinion cryptocurrencies will become the defacto global means of value exchange instead of the fiat currencies we see today

several factors including the confidence people have in national economic policies, the long-term growth rate of the money supply (i.e. inflation), economic growth and several other factors. Cryptos on the other hand are non-sovereign and see increased long-term adoption when nations default on debt repayments or perform excessive quantitative easing (printing of money) causing a loss of confidence and value of fiat currencies.

For the foreseeable future crypto and CBDC will co-exist, however, over the very long-term I don’t think the system will permit both to compete for market share.

This is a winner-take-all market and in my personal opinion cryptocurrencies will become the defacto global means of value exchange instead of the fiat currencies we see today.

Do elaborate about the technology Revix uses and ways to reduce risk or fraud when dealing with an exchange platform.

First, we only use trading partners that are regulated and/or perform AMLD5 KYC and AML checks.

Secondly, we make use of professional custody partners and Know-Your-Transaction (KYT) partners. This ensures that our customers’ assets are secure and that any incoming our outgoing crypto is coming from or going to a crypto address that has not been black listed or associated with nefarious activities.

Technology | Cryptocurrencies

Cardano, Polkadot, Ethereum and Chainlink have all shown spectacular growth over the last 12 months. In some cases, like Cardano, growth is over 2,000 percent. If you look at how the total value of Bitcoin relative to the rest of the crypto market has changed you’ll see a clear trend of what’s going on: 5-years ago Bitcoin made up 90 percent of the total crypto market’s value but today it makes up just 50 percent. The longer-term trend of altcoins outperforming Bitcoin is likely going to continue as new cryptocurrencies are created and developed to tackle real-world problems in a more scalable, efficient and environment friendly fashion.

What is your outlook for the crypto market in the next five years?

Thirdly, we monitor all transactions – both crypto and fiat currency transactions – and automatically flag any transactions or set of transactions that seem suspicious. We can then request additional information from the customer.

We also only enable customers to deposit fiat currency from a bank account registered in their own name and we only permit withdrawals into an account registered in their own name. This lowers the risk of anyone making payments and/or withdrawals to 3rd parties which prevents anyone from using Revix for nefarious activities.

Lastly, before any cryptocurrency enters one of our crypto bundles, we independently evaluate it for security, liquidity, regulatory status and other factors. This ensures it can be held in a safe, secure, and regulatory-compliant manner.

While bitcoin grabs all the headlines, which are the top-performing cryptocurrencies according to you? Also, the altcoin market has seen tremendous growth over the past five years.

What are your views on this?

There are more than 4,500 cryptocurrencies as of March 2021, up from just a handful in 2013. This shows the amount of development and energy being ploughed into this new technology built around the blockchain, allowing for transactions to occur and be permanently recorded without an intermediary or centralised database.

I’m very bullish on the outlook of the crypto market over the next 5-years. In my opinion, the following will occur: • Bitcoin will overtake gold in terms of market value • Ethereum (or one of Ethereum’s competitors like Cardano or Polkadot) will overtake Bitcoin in terms of the number one most valuable cryptocurrency.

• Most central banks will have launched a digital currency representing a digital version of their sovereign currencies. China will likely take the lead given their large head start today.

• Many emerging market currencies will have failed and entered a period of hyper-inflation. This will lead to increased dollarization and a greater demand for fixed supply cryptocurrencies like Bitcoin and Litecoin. We may even see the first country to turn to Bitcoin as their primary currency.

• The crypto market will undoubtedly become fully regulated and in 5-years’ time there won’t be any major crypto platform that is operating outside of a strict regulatory structure.

• Lastly, I see traditional banks being disintermediated.

There’s a quote that says “Banking is essential, banks are not” and I can’t see a future where these slow-moving outdated banking systems exist in the new world of peer-to-peer and automated finance. Banks will look very different in 5 years compared to today.

Global Business Outlook | May 2021| 77

News

Technology

Ethereum hits a record high

R

egarded as world’s secondbiggest cryptocurrency by market capitalisation, ethereum touched the total market capitalisation of a little less than $500 billion and since January, it has shown a gain of almost 500 percent. Recently, the cryptocurrency maintained its climb on the charts for three days straight.

Ethereum achieved new heights this year after the boom in decentralised finance, which are platforms that facilitate cryptodenominated lending outside traditional banking. Experts say that many such applications are embedded in the ethereum blockchain.

So why all of a sudden Ethereum saw such a great jump? Experts say that the rise is a result of increased institutional investor interest in cryptocurrencies after bitcoin

became a mainstream form of payment.

Additionally, retail investors suffering from FOMO is also an added blessing for the rise of this cryptocurrency. Apart from that, celebrities and influencers like Tesla and SpaceX chief Elon Musk hyped bitcoin and other cryptocurrencies on their social feeds.

Oneflow CEO plans to rival Google OneFlow Technology founder and chief executive officer Yuan Jinhui believes his company will one day give a head-to-head fight to Google’s TensorFlow and Facebook’s Pytorch.

The 40-year-old believes that his company will become the mainstream AI computing framework of choice

78 | May 2021 | Global Business Outlook

and one day, hopefully soon enough, he will be able to rival Jeff Dean, head of Google’s artificial intelligence research.

In an interview, he mentioned his efforts of always trying to achieve it and having an inkling that his work is lagging far behind Dean’s

Ethereum touched the total market capitalisation of a little less than $500 billion and since January, it has shown a gain of almost 500 percent

accomplishments. But Jinhui also mentioned that the framework of OneFlow is much faster than that of Google’s and he believes its ecosystem can eventually compete with theirs.

Oneflow is comparatively new in the open-source AI machine learning, which is similar to the OS of our personal computers. Beijing also said that AI is the key technology to develop in the 14th five-year plan. When he was working as an AI scientist at Microsoft Research Asia, he was creating a large-scale machine learning platform.

While building this project, he came up with a light-training algorithm system that uses only a dozen of servers while processing highly complex calculations.

Beijing’s primary vision is for OneFlow to become the most popular AI framework company in the world.

DBS Bank goes live on blockchain DBS bank is set to start offering digital Letter of Credit transactions on the Contour blockchain platform in Australia, China, Hong Kong, and Singapore, which are considered to be the four key markets. According to reports, DBS is the second bank to go live, the first one being HSBC, which went live in December.

Other 17 member banks are still said to be in the beta phase. The Contour trade finance platform also claims efficiency gains, stating that they save as much as 90 percent processing time for a

The Contour trade finance platform also claims efficiency gains to 90 percent processing time for a Letter of Credit compared to manual processes.

Letter of Credit compared to manual processes.

Sriram Muthukrishnan, DBS Bank Group Head of Trade products said that their company recognised that digitisation is a powerful tool that will help simplify the highly complex nature of trade finance, especially for the processes related to Letter of Credit. Once the trade process is digitised, it will also become highly relevant and a heightened sense of priority will prevail among the corporates to survive and thrive in what we now come to accept as the new normal, which in turn, will form an integral component of the resilient trade ecosystems of the future.

The company also highlighted the sustainability angle while addressing their move and highlighted the aspect of reducing the need to send documents around the world via courier.

Logistics

UK regulators agree to drone trials The UK Civil Aviation Authority has given a green signal to a trial where the drone company, Sees.ai will operate regular drone flights beyond the pilot's line of sight in three remote industrial sites.

Pilots will remotely operate and fly a drone using only cameras and sensors.

If the trial is found to be successful, the drone flights could be rolled on a large scale throughout the logistics sector.

At present, flying behind the pilot’s field of vision is not allowed, which means it is difficult to deploy the technology on a larger scale and will create a lot of hindrance for bigger tasks such as inspection of critical infrastructure and flight delivery in urban areas. Giving a thumbs-up to this experiment, regulators added that by removing the restrictions, they are hoping to launch “a starter pistol for the next stage of growth in the drone industry.”

Sees.ai CEO, John McKenna said that this experiment was a step to operate a drone on a regular basis where they would combine sensors and cameras to fly autonomously, without the interference of a human pilot. Eventually, they hope to adopt this technology in a self-driving car that has been previously tested on the public roads of UK. Global Business Outlook | May 2021| 79

Singapore insurance market sees growth amid pandemic Feature

The sector grew by 3% during the fourth quarter of 2020

GBO Correspondent

W

hile many sectors suffered a huge setback due to the Covid-19 pandemic, the insurance sector gained a lot of popularity. Recently, the Life Insurance Association, Singapore (LIA Singapore) announced that the sector has seen an increase of 3 percent during the fourth quarter of 2020, when compared to the same period in 2019. A total of SG$4.38 billion was accounted for business premiums for the fourth quarter of 2020.

80 | May 2021 | Global Business Outlook

According to LIA Singapore, the sector witnessed a rebound in the second half after the initial fallout when the Covid-19 virus started spreading. Since most of the movement was restricted during the height of the pandemic, the number of new insurance policies that people bought online rose to 206,679 in 2020 compared to 9,971 in 2019. Most of these policies were single premium products such as short-term non-par endowment plans, par whole life plans, and

Banking Insurance

universal life plans. The sale of the same was recorded at a 47 percent increase, amounting to SG$1.84 billion for the fourth quarter of 2020.

This amount helped a lot to match with the low numbers of annual premium policies, which recorded a 15 percent decrease for the quarter.

Additionally, employment in the life insurance sector rose by 4 percent compared to 2019 with 320 new hires, which brought Singapore’s life insurance industry’s workforce to 8,768

employees on December 31, 2020. A large number of these new hires took place because the insurers expanded their IT and operations team so that they can provide support and have a smooth transition to the digital-focused business. It can be expected that the demands for digital specialists will continue to rise, reported LIA. Compared to this, Singapore’s life insurance market recorded a total earning of SG$4.3 billion in new business premium in 2019 and showed a 0.4

Global Business Outlook | May 2021| 81

Banking Insurance

percent increase compared to 2018.

Additionally, the total sum assured by new businesses continued to increase, and a 7 growth year-on-year.

Singapore’s insurance market and the impact of Covid-19 “Deductibles are increasing, particularly for a business interruption for Singapore risk locations. Insurers continue to reduce capacity as they focus on diversification of risk, and a further reduction in capacity is expected as reinsurance rates continue to increase.”

Recently, a report by London-based insurer Aon noted that there has been an increase in shorter-term and micro-insurance products in the market, as a response current environment. Aon, in its Q4 2020 Global Market Insights Report mentioned that reopening the businesses and the current ongoing vaccination programme in Singapore has boosted a lot of investor’s confidence. Apart from the price hike, the Singapore insurance market is not as severely challenged, as compared to the global market. Aon expects this

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upward trend to continue at least till the first half of 2021.

The pandemonium caused by the pandemic has also turned credit insurance more difficult to obtain. Additionally, it has also been observed that there has been a decrease in driving and road accidents during the first half of 2020 because of lockdown, and auto insurers took this opportunity as the performance of a favorable claim. The research report also mentioned there can be a modest increase in the market price because the return of a normal traffic pattern is expected. Real estate and the property was another sector that was badly affected by the pandemic.

The report mentioned, “Deductibles are increasing, particularly for a business interruption for Singapore risk locations.

Insurers continue to reduce capacity as they focus on diversification of risk, and a further reduction in capacity is expected as reinsurance rates continue to increase.”

The Work Injury Compensation act of 2019

Feature \ Singapore life insurance market

has also contributed to increasing the premium rates for employer’s liability and workers’ compensation. Following this, the insurers have become responsible for assessing permanent incapacities. Seeing this, certain insurers have already appointed third-party providers that will help them make correct assessments, thereby increasing costs for this class of insurance.

The market research also suggested that insurers have begun leveraging technical pricing approaches and rationalising capacity at the portfolio level, which, in turn, is leading to increased premium and decreased capacity.

Additionally, insurers are also taking a much conservative approach to scrutinise financial positions, operations controls, and governance. The companies that have been severely affected due to Covid-19 will likely see narrowing coverage with a very low chance of negotiation.

Brent Clawson, chief broking officer, commercial risk solutions, Asia Aon said that the claims related to the pandemic for businesses and insurers have not yet been fully determined. The fluidity of any business depends on regulation, litigation, and the macroeconomic environment, which will continue to bring forward complexities even in 2021. He also claimed that Covid-19 has also resulted in claims activity in other coverage lines and the number is only likely to increase.

As stated above, the insurance industry has generally responded well where they enabled remote work and addressed immediate capital questions. Presently, Singapore’s insurers current focus is now turning to what the competitive landscape will look like in the immediate future, what it means for their business, and how to emerge stronger.

The insurers have been resilient and have managed to effectively navigate the industry challenges over the years along with adopting new regulatory requirements. Additionally, it has also been observed the industry players reaching out to help the community through extended health coverage for those who have contracted Covid-19. This is a chance for the insurers to make the branding of the industry

better and show common people how they can help the community overcome some of the challenges they are experiencing.

Cross-sector alliance to drive sector growth In order to make the Singaporean insurance market and the healthcare industry of the nation more streamlined for the citizens, a cross-sector alliance is now reported to have been accepting proposals so that an end-to-end claims platform can be developed for those seeking the health insurance process.

The alliance happened between General Insurance Association Singapore (GIA Singapore), the Life Insurance Association, Singapore (LIA Singapore), and the Integrated Health Information Systems (IHiS), with the support of the Ministry of Health and the Monetary Authority of Singapore (MAS).

Ravi Menon, director of MAS revealed his ambitious plans to create such an innovative platform in his speech at the Singapore Fintech Festival last December. The call for the proposal period was open between March 15 and April 26 and interested people were required to express their interest through email by March 29 latest. According to a statement released by the alliance, the proposed platform aims to improve patient experience along with enhancing operational efficiency.

The vision of the platform is aligned with Singapore’s goal to transform itself into a more digital and innovation-driven economy that would bring a lot of wide benefits to its citizens. Another thing that the platform aims to do is to make it convenient to access patient’s insurance policy details, faster claims processing, seamless authorisation of data release, and timelier exchange of data.

Value of gross premiums written by insurance companies in Singapore from 2014 to 2020

2014 2015 2016 2017 2018 2019 2020

3.53 3.63 3.66 3.68 3.81 4.1 4.09

Source: Statistica 2021

Global Business Outlook | May 2021| 83

News Banking

Commission fines banks $453 mn over EU cartel scheme

T

he European Commission has found that Bank of America, Natixis, Nomura, UBS, UniCredit, and Portigon are guilty of breaching the antitrust law set by the EU, by participating with a group of traders in a cartel in the primary and secondary market for European Government Bonds. The investigating

team has found these seven banks guilty of breaching its antitrust rules during the 2008 global financial crisis, but only three banks have been penalised for the action, and they have to pay a fine of $453 million in total.

The commission also added that the traders used chatrooms to exchange commercially sensitive

information, along with discussing their bids in the run-up to debt auctions. Margrethe Vestager, the head of competition policy in the EU, said in a statement, “Our decision against Bank of America, Natixis, Nomura, RBS, UBS, UniCredit, and WestLB sends a clear message that the Commission will not tolerate any kind of collusive behavior.”

NatWest doesn’t have to pay a fine because it reported the wrongdoings to the commission. Bank of America and Natixis don’t have to pay a fine since their infringements have passed the time limit for sanctions. Portigon also didn’t receive a fine because it failed to report a net turnover in the last financial year.

Bank business

Deutsche Bank records best quarter in 7 years Deutsche Bank records best quarter performance in seven years. The bank also registered fewer loan losses in an economy that is still getting back on its feet after the damage suffered

by Covid-19. The business results also showed that a different narrative of the bank, which led it to suffer for years with high costs and low profits.

It resulted in paying heavy fines and prolonged trouble with regulators over issues like manipulating interest benchmarks, lax money-laundering protections, and selling mortgagebased bonds that went bad.

The CEO of the company, Christian

84 | May 2021 | Global Business Outlook

Sewing has spent two years trying to exit the riskier lines of businesses, cut costs, and restore the steady profit of the company.

All the hard work and effort was visible when the bank finally announced stronger profits and progress in shedding risky assets, especially at a time when its fellow competitors like Credit Suisse, UBS, and Nomura have to explain their losses.

When asked if the bank is now less risky and ‘boring’ during a media

“We don't shy away from your characterisation of ‘boring’ " conference, chief financial officer James von Moltke said, “We don't shy away from your characterisation of ‘boring’ as being a desirable thing for the company."

The central bank of Thailand

Thai banks can combat economic uncertainty

Nigeria’s central bank fires entire private bank board Nigeria’s Central Bank recently sacked the entire board of First Bank of Nigeria (FBN) and appointed new board members and directors. The regulators released a statement saying they were not aware of the ‘sweeping changes’.

Media houses reported that the First Bank of Nigeria declined calls that were related to this topic.

According to Central Bank, it was in grave financial condition when the regulator became involved in the management to bring financial stability, which gave them authority over FBN's operations. The regulator said that the sacking was primarily done to “preserve the stability of the bank, so as to protect minority shareholders and depositors.

The actions being taken are meant to strengthen the bank and position it as a banking industry giant.”

Nigeria’s Central Bank has the power to remove the upper management and they did the same during the 2008/2009 global financial crisis when they sacked nine CEOs at banks that were undercapitalised. Recently, in 2016, the regulators also sacked top executives of Skye Bank over capital adequacy issues.

Prior to this, in 2015, three commercial banks were given time to recapitalise after they failed to hit a minimum capital adequacy rate of 10 percent.

The central bank of Thailand said that the country's banking system is still going strong with high capital buffers and liquidity even during a period of economic uncertainty, as the country deals with the third wave of the coronavirus pandemic.

The present outbreak is regarded as Thailand’s biggest so far, and as a result of which, it has affected consumption and tourism.

In the first quarter, loans were expanded 3.8 percent compared to the earlier year, slowing down from a 5.1 percent rise in the previous quarter. Corporate loans grew 3 percent in the March quarter compared to the earlier year, while consumer loans

increased at a much faster pace of 5.3 percent.

Suwannee Jatsadasake, a senior director at the Bank of Thailand (BOT), told the media, “We are not complacent about NPLs that haven’t increased because of financial support. The BOT is monitoring the situation and is ready to induce measures if needed”. Keeping in mind the Covid-19 pandemic, last week, the Central bank extended debt relief measures for smaller debtors until the end of the year.

“We are not complacent about NPLs that haven’t increased because of financial support.’’

Global Business Outlook | May 2021| 85

News Banking

Philippines-based Tonik wins digital banking licence

the way for Tonik to scale and apply for a formal digital bank license.

An official bank licence will allow the neobank to give more products and services to bridge and narrow down the gap between the banked population and the underserved segment in the country.

Earlier this year, Tonik also acquired more than P1 billion in retail deposits following its public launch.

StanChart launches wealth management app in Singapore London-based banking giant Standard Chartered recently launched a digital wealth management app called ‘My RM’ in Singapore. The application will provide its affluent clients with the ability to communicate with their relationship managers directly from around the world.

Clients can schedule appointments to go through the latest market views and authorise secure investment transactions from wherever they are, along with the feature to share files and screens.

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Dwaipayan Sadhu, head of the consumer, private and business banking in Singapore at Standard

In 2020, the BSP produced Circular 1105 with the title, ‘The Guidelines on the Establishment of Digital Banks.’ It paved the way for Tonik to scale and apply for a formal digital bank license

Chartered said that staying close to its clients irrespective of distance and utilising technology to upscale their banking experience is a huge priority.

With the help of the My RM application, the firm holds a vital tool that intertwines with the high touch and high tech to effectively offer timely investment services to the users, most specifically to the ones based overseas. It is also an example of the kind of digital technology that has grown rapidly because of the Covid-19 pandemic and the global lockdowns. About 30 percent of Standard Chartered’s affluent clients based out of Singapore are international, so staying connected with them is crucial.

Photograph: digitallifeasia.com

Tonik, a digital-only neobank, recently acquired a digital banking licence from the Bangko Sentral ng Pilipinas (BSP). Greg Krasnov, the chief executive officer and founder of Tonik, said that securing a digital banking licence is one of the most anticipated milestones of the company. He further added that it would help the firm strengthen its foothold in the neobanking space by accelerating its additional digital lending and payments products.

Towards the end of 2019, Tonik secured its initial rural bank license from BSP. It allowed Tonik to offer retail banking services that were focused on retail deposits, card payments and consumer loans. In 2020, the BSP produced Circular 1105 with the title, ‘The Guidelines on the Establishment of Digital Banks.’ It paved