Global Business Outlook Issue 03 2021

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Volume 05 Issue 03 | 2021

FOSSIL FUEL USE ON THE

RISE SE Global temperatures could rise by more than 3°C and the world economy could shrink by 18% in the next 30 years

FINANCE | TECHNOLOGY | ENERGY | REALTY | BANKING | ECONOMY | GBO AWARDS

Editor's note September 2021

Fossil fuels and climate change Climate change is real and we are already witnessing some of the damages done. It is predicted that global temperatures could rise by more than 3°C and the world economy could shrink by 18 percent in the next 30 years.

This is a serious concern and fossil fuel is one of the largest contributors.

However, fossil fuels usage is only going to increase in the coming years.

On the bright side, renewable energy development is gaining momentum.

In 2020, in spite of the Covid-19 pandemic, more than 260GW of renewable energy capacity was added to the global energy mix.

In this edition of Global Business Outlook, we explore how the ongoing Dubai Expo 2020 will prove to be an economic driver for Dubai and the UAE. The mega event will lead to foreign investment opportunities, economic diversification and provide a timely boost to the tourism and hospitality sector. Aviation has also taken a severe hit in 2020 due to the pandemic. The same goes for the aviation sector in the Middle East and the UAE. Last year, global passenger traffic declined by 64.6 percent compared to 2019. The fact that we are witnessing a surge in traffic in the second half of 2021 comes as good news for the sector. `We also explore how a vaccine disparity can hinder a global economic recovery, China’s crackdown on cryptocurrency, the implications of blockchain in finance and banking in particular, and how satellite broadband is changing the $1 trillion space economy.

Thomas Kranjec Editor kimberly@gbomag.com

Global Business Outlook | September 2021| 3

Content September 2021

Global fossil fuel use on the rise

temperatures could rise 16 Global by more than 3°C and the world economy could shrink by 18% in the next 30 years

Features

Analysis

32

How can blockchain disrupt banking?

06 | Covid-19 and its effects on the aviation industry

26 | The secret behind Latin America’s fintech boom

12 | 5G is changing

54 | Satellite broadband is

Brazil’s telecom sector

the next big thing

32 | How can blockchain

72 | Vaccine inequality

66 | Expo 2020 Dubai a

disrupt banking?

hinders recovery

driver for UAE economy

4 | September 2021 | Global Business Outlook

48 | Why is China imposing ban on Bitcoin production

Director & Publisher Krushikesh Raju

Interview

Editor Thomas Kranjec

Banking

Zac Liew chief executive and co-founder,Curlec Covid-19 is changing how SMEs obtain finances in Malaysia

42

Technology

Editorial Stanley Rogers Rachel Taylor, Lucas Cooper Ashley Samberg, Tom Hardy

Victor Mapunga Chief executive officer, FlexFinTx Digital identity can transform Africa’s economic landscape

60

Business Analysts Avinash Nair, David Pereira, Nick Luis, Ron Athelstan Business Development Manager Benjamin Clive, Mike Lloyd

Insight

Marketing Danish Ali

Fintech

38

Production & Design Brian Williams David Brenton Ian Hutchinson Shankara Prasad

Digital payments are on the rise

Research Analysts Richard Sam, Sophia Keller Accounts Manager Edyth Taylor

Regulars Editors Note News

Press & Media Contact Craig Penn

03 24, 46, 64,78

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Global Business Outlook | September 2021| 5

Industry Aviation

Analysis

Covid-19 and its effects on the aviation industry Ashley Samberg

In 2020, we witnessed a 64.6% decline in global passenger traffic compared to 2019 with the Middle East and Europe being the two most affected regions

6 | September 2021 | Global Business Outlook

W

e all agree that 2020 was a significantly difficult year for everyone around the world to say the least, but there are some sectors that were hit harder than others. Out of all the hard-hit industrial and business sectors, the aviation industry took the hardest hit. With major airlines facing losses, a large number of employees were laid off, while others were asked to go home without pay and many faced salary cuts. In 2020, industry revenues totalled $328 billion, around 40 percent of the previous years. The sector is also projected to have slow growth and will only register 2019 numbers by 2024. Keeping the financial woes aside, the long-term effects of Covid-19 on the aviation industry is slowly emerging. The obvious ones being concerns regarding hygiene and safety, which will definitely become more strict.

Additionally, digitisation is also expected to continue to transform the travel experience. Mobile apps will be used to store travelers’ vaccine certificates and Covid-19 test results.

Some other effects that might be observed are going to be more profound. Unlike the 2008 global financial crisis, which was purely economic and weakened spending power, Covid-19 has left lasting effects and has irrevocable implications on consumer behaviour.

Practically all aspects of economic and social activity were, and are still, disrupted. The health, safety and well-being of passengers and staff is the aviation industry’s number one priority. In order to follow through, airports around the world have introduced many new health and biosafety measures to

Analysis \ Covid-19 aviation

Globally, domestic traffic volume for 2020 was recorded slightly above 2.4 billion passengers, a decline of

54.7 percent compared to 2019 volume. ensure the safety of the passengers and that their efforts directly reflect and match with the current consumer trend.

Airports and airlines along with the world have come together to resume global connectivity. At present, the rate of global vaccinations offers a beacon of hope that a return to normality is a possibility in the near future.

One of the most important points to keep in mind while supporting a sustainable recovery will be the establishment of an interoperable health data trust framework that will ensure a safe border reopening and cross-border travel.

But it is also important to remember that even though there are positive signs of recovery, Covid-19 still remains an existential crisis for airports, airlines and their commercial partners.

Covid-19 and its effect on air control traffic Last year marked the end of ten years worth of consistent growth in global passenger traffic. The ongoing pandemic managed to bring the airport around the world to a virtual halt in the second quarter of 2020, resulting in airport traffic

Global Business Outlook | September 2021| 7

Industry Aviation

Global air traffic (in millions)

2015 4224

2918

2016 4499

3122

2017 4812

3839

2018 5137

3632

2019 5304

3738

2020 2401

936

2021 3480

1644

Domestic International *ACI World

revenue losses across all regions. While many countries have since then started to gradually reopen many parts of their economy, many states were confronted with more brutal waves of infection and several states and countries decided to reimpose lockdown measures to control the spread of the virus.

Countries like France, Poland, Canada, India, and Chile had to increase or re-instate partial lockdowns in an effort to control the spread of a second, third or even fourth wave of infection. While most countries have moved away from complete lockdowns, and currently they are trying to limit the infections with targeted and less disruptive restrictions, there are a large number of states and countries that have retained either partially or totally restrictive regulations for international travel including self-quarantine on arrival. 2020 represented a 64.6 percent decline in global passenger traffic compared to 2019. Europe and the Middle East were the two most impacted regions with similar declines of 5 percent compared to the projected baseline.

The Asia-Pacific region started recovery earlier and faster than other regions, primarily being driven by and ended the year by registering a decline of 61.3 percent Asia-Pacific, however, recorded the highest traffic loss of all regions with a loss of 2.15 billion passengers in 2020. Comparatively, Latin America-Caribbean was the least impacted of all regions posting a decline of 61.1 percent. After the ‘great lockdown of 2020’, international passenger traffic was virtually non-existent in the second half of 2020 and international passenger volume ended with below 1 billion passengers, which is 75 percent less compared to 2019. Globally, domestic traffic volume for 2020 was recorded slightly above 2.4 billion passengers, a decline of 54.7 percent compared to 2019 volume.

Leisure trips will fuel recovery While it's a given that business trips will take longer than usual, and even then, it's estimated that it will only recover to around

8 | September 2021 | Global Business Outlook

80 percent of pre-pandemic levels by 2024. Factors like remote work and other flexible working arrangements are likely to remain in some form post pandemic and, because of that, people will take fewer corporate trips. Compared to previous crises, leisure trips or visits to friends and relatives recovers faster, as it has been observed before in the US following 9/11 and the global financial crisis.

Not only did business trips take four years to return to pre-crisis levels after the attacks, they also had not yet recovered to pre-financial-crisis levels when Covid-19 hit in 2020. Therefore, experts estimate that as the pandemic subsides, the rise in leisure trips will outpace the recovery of business travel. There are some air carriers that depend a lot on business travellers, both of whom book business class and economy class tickets before travelling. While leisure passengers fill up most of the seats on flights and help cover a portion of fixed

Analysis \ Covid-19 aviation

costs, their overall financial contributions in net marginal terms are negligible, if not negative. The majority of the profit earned during a long-haul flight are generated by a small group of high-yielding passengers, often traveling for business. But this has shrunk significantly due to Covid-19.

Air ticket prices are expected to increase As the pandemic hit, a lot of air carriers had to borrow money to stay afloat and cope with high daily cash burn rates. The airlines industry collectively amassed more than $180 billion worth of debt in 2020, which is ironically very close to the amount of revenue collected that year.

And with debt levels still rising, it has become even more difficult to repay those loans back. In order to recuperate these costs, ticket prices are going to get higher.

Experts estimate that ticket prices are going to rise by 3 percent and as air travel

slowly returns to normal, it will likely outpace supply initially. But it will also take time for airlines to restore capacity, and this will bring in delay in bringing aircraft back to service and crew retraining might result in a demand gap, resulting in higher short-term prices. For some other cases, airline rescue efforts provided by the country's government come with strings attached. We are already witnessing a reemergence of, or increase in, the level of state ownership and influence. For example, TAP Air Portugal, Lufthansa Group, and AirBaltic all received state aid along with an increase or reintroduction of government shareholdings.

Effect on airport revenues As mentioned above, air traffic is the lifeblood of the aviation industry. Airports generate more than 95 percent of all revenue from aeronautical and non-aeronautical services, and all aeronautical revenues are a direct function of traffic and include passengerrelated charges from passengers and aircraft-related charges from aircraft operators. Given the drastic decline in air traffic, the avenue to collect the above mentioned charges declined significantly.

In September 2020, the Air Transport Action Group (ATAG) estimated that Covid-19 crisis will result in the loss of 46 million aviation-supported jobs along with a reduction of $1.8 trillion USD in economic activity. The airport industry was expected to generate about $188 billion before Covid-19 outbreak happened. The second quarter of 2020 alone contributed to

While it's a given that business trips will take longer than usual, and even then, it's estimated that it will only recover to around 80 percent of prepandemic levels by 2024. Factors like remote work and other flexibilities are likely to remain in some form post pandemic and, because of that, people will take fewer corporate trips.

Unemployment impact of Covid-19 on industries supported by air transport worldwide (in millions) Middle East: 0.9 Africa: 2 North America: 2 Latin America: 2.9 Europe: 5.6 Asia Pacific: 11.2 Source: Statista

Global Business Outlook | September 2021| 9

Industry Aviation

a reduction of close to $43.5 billion in revenues.

The air traffic in the Middle East and Europe was affected the worst. Europe recorded an estimated revenue shortfall of 4 billion for 2020 and the Middle East recorded a reduction of 70.5 percent of their revenues.

Experts estimate that this shortfall is

Uncertainties faced by the aviation industry due to Covid-19 As one of the major effects of the Covid-19 on the airline industry is that operational costs are likely going to increase in the short run for both airlines and airports because of additional health and safety requirements. Moreover, social distancing measures could result in a reduced passenger load factor by up to 50 percent. Factors such as International travel restrictions, the contraction of economic activity and changes in transport behaviour as people become increasingly cautious of Covid-19 may prevent a return to pre-crisis demand levels. Data shows that commercial air traffic is slow to recover. As of September 2020, the number of flights remain more than 40 percent below pre-crisis level globally and the drop is even more pronounced when we take long-haul flights into account. In the longer run, changes in consumer behaviour may result in structural changes in air transport demand. Even though we have witnessed the rebound of domestic flights in China which suggests that traffic may revert to pre-crisis levels, a permanent drop in demand from pre-crisis levels cannot be excluded. With negative supply and demand shocks, coupled with the uncertainty for airline companies, it looks like the aviation industry has a long way to go until it reaches its pre-pandemic levels.

10 | September 2021 | Global Business Outlook

going to leave a lasting impact on airport revenues. Experts estimate that globally, airports will suffer the loss of more than $94 billion of revenues by year end of 2021 cutting in half airport revenue expectations. Additionally, it is expected that every quarter of 2021 will show improvements compared to the previous one, moving from a decline of 7 percent in the first quarter of 2021 to a decline of 35.2 percent in the fourth quarter. Europe is still estimated to remain affected with an estimated loss of revenues of more than $4 billion by the end of 2021. Asia-Pacific will record the strongest recovery, reaching 59.7 percent of the projected baseline.

Air freight is likely to witness undersupply for some time For the last decade, many airline carriers have scaled back their dedicated cargo freighter fleets because of low cargo rates and the unprofitability of the cargo business. But cargo became one of the most indispensable arms of the aviation industry during the Covid-19 crisis. Before the pandemic, cargo typically made up around 12 percent of the sector’s total revenue, but that number tripled last year. Based on data from the Airline Analyst, only 21 airlines around the world that disclosed their operating performance achieved positive operating profits for the third quarter of 2020 and they accounted for 49 percent of total revenues. During the pandemic, e-commerce sales shot up and because of this, cargo yields increased by about 30 percent last year. As commercial flights slowly return to their normal pace, the industry is expected to stay smaller than before the pandemic for several years.

Responding to high demand and low supply of air freight right now, carriers might look into short- to medium-term opportunities to boost their cargo services.

Airlines can become more flexible

Analysis \ Covid-19 aviation

through measures such as increasing the deployment of preighters or passenger airplanes that are used to transport cargo.

Airlines also have the option to explore freighter conversions, especially as their passenger fleets reduce in number. Experts advised airlines to be flexible as operating and maintaining a large freighter fleet again comes with risk. Airlines have to build up their cargo fleet strength in an agile way that allows for quick adjustments. This can be achieved by establishing a more flexible production setup.

The impact of Covid-19 on the aviation industry is far from over. While there is some improvement in the sector due to the vaccination programme, the road to recovery for air traffic will take several years. The picture of a pos-Covid-19 aviation sector is becoming clearer and holds lessons for airlines today. Digitisation and phasing out of less efficient aircraft will become more common. Additionally, a large number of airlines are burdened with debt and have depleted their cash reserves. But, on a positive note, air travel is expected to become greener and more efficient, and people are itching to travel again for holidays. If necessary steps are taken now, it will help airlines thrive in this transformed sector.

Surge in travel for the second half of 2021 Currently, we are undergoing the biggest vaccination campaign that we have ever witnessed and we are seeing some positive signs and prospects of recovery. With the Covid-19 pandemic slowly subsiding, travellers and industry stakeholders are eager to resume traveling. Additionally, industry experts have also forecast a surge in travel for the second half of 2021, with some terming the comeback of the aviation industry with a “post-war like surge” in travel.

Even then, there has been a lot of uncertainty surrounding the recovery of the aviation sector. It is imperative that governments around the world have to learn to strike the balance between supporting the airline industry and how to preserve conservation by taking firm-specific measures. But it is important to keep in mind that government interventions can have ambiguous effects on competition. With an effective vaccination campaign largely distributed in the second half of 2021, an added enthusiasm from passengers to start flying again in the second half of 2021, will also aid recovery. Third and fourth waves of infections are possible but rapidly contained and limited to specific regions. But, the fear to travel is still largely present among the population, along with prolonged economic downturn and slow airline fleet recovery. Third and fourth waves of infections are likely and could spread to multiple regions.

Based on these points, it is predicted that global passenger traffic is now expected to recover to 2019 levels in 2024 and ,most of it will be driven by the recovery of domestic passenger traffic. Globally, domestic traffic accounts for 58 percent of total passenger traffic as of 2019. If new variants of the virus are effectively contained, even then, it will take airlines at least 2023 to recover to the 2019 levels. The recovery of international passenger traffic will require one more year, thus getting back to 2019 levels only in 2024. In the long run, it is predicted that the global traffic may take up to two decades to return to previously projected levels.

In September 2020, the Air Transport Action Group (ATAG) estimated that Covid-19 crisis will result in the loss of 46 million aviationsupported jobs along with a reduction of $1.8 trillion in economic activity.

The airport industry was expected to generate about $188 billion before Covid-19 outbreak happened.

Global Business Outlook | September 2021| 11

Industry Telecom Brazil 5G race

The introduction of 5G in Brazil could help sectors like public health and education, which were deeply affected by the Covid-19 pandemic

5G is changing Brazil’s telecom sector

Feature

Rachel Taylor

O

ver the past few years, Brazil has become more and more reliable on the internet for banking, business, telecommunication and leisure, even more so during the Covid-19 pandemic. But surprisingly, the country ranked 49th in the world for fixed broadband speed and 74th for mobile speed according to April 2021 data from the Speedtest Global Index. Recently, Brazil made a lot of headlines over its introduction of 5G and it became one of the most talked-about pieces in the news.

The history of mobile telephones in Brazil began after the inauguration of the cellular mobile system on December 30, 1990, in the city of Rio De Janeiro. At that time, there were 667 devices

12 | September 2021 | Global Business Outlook

in the country. But that number quickly rose to 6,700 in the next year, to 30,000 in 1992. In November 2007 3G services were launched and increased rapidly to almost 90 percent of the population in 2012. The first LTE-compatible devices became available in the local market and LTE services were commercially launched in 2013. Under the terms for 4G use, operators were required to have commercial networks in all twelve state capitals which are acting as host cities for the 2014 FIFA World Cup. Due to the popularity of high-speed internet and the amenities from it, the use of the internet started dominating the telecom sector. In fact, Brazil’s fixed broadband speed has improved 69.2 percent year-on-year,

moving the country up seven places from 56th in April 2020 to 49th in the Speedtest Global Index in April 2021. The country is also at the brink of an internet revolution, with an upcoming 5G spectrum auction and future broadband investments becoming a priority. Currently, Brazil has more than 228.9 million active mobile connections, according to the national Telecommunications Agency (ANATEL).

However, little more than half uses 4G.

Clara, Vivo, TIM, and Oi fight for market presence During the first quarter of 2021, Claro had the fastest median mobile download and upload speeds in Brazil among top providers. Vivo stood second TIM third, and Oi secured fourth place. Experts believe that Brazil’s mobile speeds will continue to accelerate as 5G technology becomes more accessible and network

Global Business Outlook | September 2021| 13

Industry Telecom Brazil 5G race

Leading wireless operators in Brazil in Q4 2020 1. Vivo

34% 2. Claro

27% 3. TIM

23% 4. Oi

16% Source- Statista

Claro had the best NPS score in Brazil, closely followed by Vivo, with Tim trailing behind, and Oi at the fourth position.

Meanwhile, Brazil’s top fixed broadband providers had a competitive race for the fastest provider in Brazil during Q1 2021 where Vivo achieved the fastest median download and upload speeds in Brazil, followed by Claro, and Oi. Speedtest Consumer Sentiment data and NPS revealed that Vivo had the best score for fixed broadband among top providers during the first quarter of 2021, followed by Oi and Claro.

The 5G spectrum sale Brazil has one of the largest mobile markets in Latin America due to the sheer size of its population. Along with this, healthy competition in the mobile market has helped reduce the price of mobile services in Brazil in recent years. This has led mobile service providers to convert their customers from a prepaid to a contract plan. Additionally, mobile broadband has also picked up, registering about 213.7 million subscriptions as of March 2021, with the penetration rate staying just above an impressive 100 percent. The principal telcos include Telefônica Brasil that operates fixed-line and mobile services under the Vivo brand, along with América Móvil operating services under the Claro brand. Oi also offers a whole host of services, but the financial difficulty faced by the company recently forced them to sell its mobile, tower, and data centres units in an effort to ease their debt.

The multi-spectrum auction, intended to push the development of 5G, was scheduled for March 2020 but was delayed to mid2021 due to interference issues with satellite TV broadcasts and the Covid-19 pandemic.

Currently scheduled to be held in November, it is regarded as the largest auction in Brazil so far. Additionally, it was also revealed that given the underused capabilities of LTE it is unlikely that the licensees will provide commercial services before the end of 2021.

14 | September 2021 | Global Business Outlook

The country also has one of the largest fixed-line broadband markets in Latin America, though broadband penetration is only slightly above the regional average. It is closely followed by Chile, Argentina, and Uruguay. The fixed broadband market has seen rapid growth for a while and they are currently focusing on fibre broadband. In 2019 the number of fibre accesses overtook DSL connections. Vivo has the largest share of the fibre market, followed by Oi and Claro.

Brazil is also one of the key landing points for a number of important submarine cables connecting to the US, Central and South America, the Caribbean, Europe, and Africa. With a lot more cable connections due in 2022, there will be increased bandwidth and push down broadband prices for end-users. Investments have also been made into terrestrial fibre cables between Brazil, Argentina, and Chile. According to experts, the outbreak of the Covid-19 pandemic continues to have a significant impact on production and supply chains globally. Since 2020, the telecom sector has seen a decline in mobile device production.

It was also difficult for network operators to manage workflows when maintaining and upgrading existing infrastructure. Due to the aforementioned reasons, progress towards 5G has been postponed or slowed down in some countries.

From the consumer’s perspective, spending on telecoms services and devices is under pressure because of the financial effect of large-scale job losses, disposable incomes, and restrictions. Recently, the US national security adviser Jake Sullivan raised concerns about Huawei equipment in Brazil's 5G telecoms network during his visit to the country. The US officials have also been requested by Brazil's president, Jair Bolsonaro, where they questioned national integrity and other issues.

The National Security Council's senior director for the Western Hemisphere, Juan Gonzalez, denied reports that the US had offered support for a NATO partnership

Feature \ Brazil 5G race

with Brazil in exchange for cooperation over 5G equipment manufactured by Huawei.

Mulling the decision, Brazil decided to go with Huawei, even when US officials had urged both Brazil and Argentina to build native industries. The opposition was made on the grounds of Brazil's use of Huawei on security grounds, though Brazilian telecom companies have already built networks largely with Chinese components.

Effects of the introduction of 5G in Brazil The global infrastructure for 5G is provided primarily by three companies: Huawei, the Swedish company Ericsson, and the Finnish company Nokia. The implementation of 5G in Brazil depends on the bidding of radio frequency use authorizations in the 700 MHz, 2.3 GHz, 3.5 GHz and 26 GHz bands, popularly known as the 5G auction. The 5G technology will be explored mainly through the 3.5 GHz band and also through the 26 GHz band. The draft tender notice has already been approved by Anatel’s board of directors.

Regardless of the date of the auction, the draft notice establishes that the companies that win bids for the 3.5 GHz band will have to start 5G mobile service in the state capitals and Brasília by July 31, 2022.

Additionally, it also mentions that 5G coverage will be expanded gradually, reaching all Brazilian municipalities by December 31, 2029. Keeping aside the auction, the implementation of 5G in Brazil depends on municipal governments’ rules established in federal standards that deal with the implementation and sharing of telecommunications infrastructure that aims to expand the network. Due to features including high data transmission rates and low response time, 5G technology offers a wide range of possibilities for use by people and also by machines.

Additionally, the services provided by 5G networks will contribute to increasing the efficiency of various activities, which, in turn, will enable the digital transformation

of the Brazilian economy and benefit the entire society.

Once successfully implemented, the 5G technology is likely to have a significant impact on many areas of Brazil’s economy, including agriculture, and large farms are eager to utilize the new technology to enhance productivity. But, there is risk that the arrival of 5G will deepen the digital divide in the country, boosting innovation in rich urban areas while leaving less affluent rural regions behind.20 percent of the Brazilian population still lacks internet service, especially in remote areas, however, 5G also represents an opportunity for the government to provide better public services, ranging from public health to education, two areas severely affected by the pandemic.

In order to better expedite digital inclusion, Brazil’s communications minister, Fábio Faria, wants all state capitals to have 5G standalone working in a year.

Additionally, operators will also be obliged to cover the Amazon region with broadband and deploy a network for the federal government as well. The introduction of 5G in Brazil will have a great influence in improving Internet access and speed.

Bolsonaro wanted to allow Huawei to participate only in local 5G auctions, not national ones. Huawei arrived in Brazil more than 20 years ago and provides about 50 percent of the telecom equipment to the main Brazilian telecom operators, Telefónica (Vivo), América Móvil (Claro), Oi and Telecom Italia. Given the fact that China is Brazil’s largest trading partner, exports from Brazil to China have increased.

However, Anatel, the Brazilian telecom operator regulatory agency, has opened the 5G auction to all companies. Brazil is Latin America’s biggest economy, and this decision may influence the rest of the region, where Huawei is a major telecom equipment provider and, after this decision, will continue to be so.

Smartphone OEM market share in Brazil 1. Samsung

46% 2. Motorola

22% 3. Apple

14% 4. LG

7% 5. Xiaomi

5% 6. Others

6% Source- Al Jazeera

Global Business Outlook | September 2021| 15

Coverstory Oil and gas Global fossil fuel use

Amid climate change concerns,

global fossil fuel use accelerates Global temperatures could rise by more than 3°C and the world economy could shrink by 18% in the next 30 years Tom Hardy

16 | September 2021 | Global Business Outlook

Primary global energy consumption 2019

Oil

33% Natural Gas

24% Coal

27% Nuclear

4% Hydroelectric

6%

Renewables

5%

Source: BP Statistical Review 2020

Global Business Outlook | September 2021| 17

Coverstory Oil and gas

F

ossil fuel still plays a prominent part in today’s world, even though we are increasing our emphasis on alternative energy sources. The world’s dependency on fossil fuels is likely to get worse in the next decades. Even though global leaders acknowledge the need of transitioning to a lowcarbon society, the steps taken to ensure it are not adequate.

Fossil fuel usage has roughly doubled since 1980, however, in the present day, coal consumption is falling in many parts of the world. Oil and gas usage, on the other hand, is still growing. Data shows that despite alternative energy sources such as renewables have become cheaper compared to a decade ago, the share of fossil fuels in the world’s energy mix still remains high comparatively. According to a report by REN21, fossil fuels’ share in the global energy mix was 80.2 percent in 2019, compared to 80.3 percent in 2009. The report further revealed that renewable energy share in the energy mix has grown to 11.2 percent in 2019 from 8.7 percent in 2009.

Climate change will also have a disastrous impact on the global economy. In its new report, ‘The economics of climate change: no action not an option’, Switzerland-based insurance giant Swiss Re said, “Climate change poses the biggest

long-term threat to the global economy. If no mitigating action is taken, global temperatures could rise by more than 3°C and the world economy could shrink by 18 percent in the next 30 years. But the impact can be lessened if decisive action is taken to meet the targets set in the Paris Agreement.”

As a result of climate change, temperatures across the globe are rising due to greenhouse gases trapping more heat in the atmosphere.

We are also seeing longer and more prolonged droughts as a result of climate change. Tropical storms too are becoming more severe due to warmer ocean water temperatures. We have started witnessing the impact of climate change.

In July this year, intense rainfall and storms over Western and Central Europe led to severe floods in major European countries such as Austria, Belgium, Croatia, Italy, Germany, Switzerland, Luxembourg and the Netherlands.

Fossil fuels still a major source of global energy needs Energy consumed across the globe is only growing every year. As per data, primary energy consumption grew by 1.3 percent last year amid the pandemic. In 2018, primary energy consumption grew by nearly 2.8 percent. In fact, energy consumption has been growing for the

In 2019, fossil fuel accounted for 84 percent of the world’s primary energy consumption. Oil consumption rose to a record high in 2018 led by China 18 | September 2021 | Global Business Outlook

Coverstory \ Global fossil fuel use

Global greenhouse gas emission

Carbon di oxide (Fossil Fuel)

(Forestry & other Land use)

65%

11%

Methane

Nitrous oxide

Fluorinated gases

16%

6%

Carbon di oxide

2%

Source: BP Statistical Review 2020

last few years. Most of the energy is consumed in developing nations across the globe. China, which is one of the largest economies in the world, alone contributed to three-quarters of the world’s energy consumption growth. China was followed by its neighbour India in second and Indonesia in third. Developed nations, however, such as the US and Germany posted the largest declines.

In 2019, fossil fuel accounted for 84 percent of the world’s primary energy consumption. Oil consumption rose to a record high in 2018 led

by China. However, the pandemic struck in late 2019 and global oil production fell for the first time in a decade. Oil demand took a significant hit in 2020 as major economic activities across the globe were halted. This led to production cuts and as things stand, it will take another couple of years for the oil production to reach earlier heights.

As energy consumption across the globe slowed down in 2020, so did emissions. Global energy-related CO2 emissions fell by 5.8 percent, the largest annual percentage decline since World War II, according to the International Energy Agency. In its report, it said that “In absolute terms, the decline in emissions of almost 2 000 million tonnes of CO2 is without

precedent in human history – broadly speaking, this is the equivalent of removing all of the European Union’s emissions from the global total.”

In 2020, demand for oil plunged 8.6 percent and 4 percent for coal. The IEA report further revealed that global emissions from oil use plummeted by well over 1100 Mt CO2, down from around 11400 Mt in 2019. Around 50 percent of the decline is attributed to the drop in road transport activities across the globe, while the slump in aviation demand accounted for around 35 percent.

Global coal production increased by 1.5 percent led by increasing demand in Asia, especially in China and Indonesia. However, overall, coal consumption declined by 0.6 percent and coal’s share in primary energy fell to the lowest level in 16 years.

Meanwhile, alternate energy sources such as renewables reached their highest ever annual share of the global energy mix. Renewables continued their impressive growth with wind being the largest contributor followed but solar.

Much of the development with renewables is happening in China. Notably, it is also the largest market for renewable equipment manufacturing in the world. China was closely

Global Business Outlook | September 2021| 19

Coverstory Oil and gas

followed by the US in second and Japan in third. Interestingly, renewables surpassing nuclear power for the first time as their share in the power generation increased to 10.4 percent.

Fossil fuels and climate change Fossil fuel is the major cause of climate change. According to the Intergovernmental Panel on Climate Change (IPCC), fossil fuel is the dominant factor for global warming. In 2018, around 89 percent of global CO2 emissions came from fossil fuels directly or indirectly. Most of the damage is caused by coal, which is by far the dirtiest of fossil fuels. Coal alone is the single largest source for global temperature rise, responsible for over 0.3C of the 1C increase in global average temperatures.

The IPCC further warns that fossil fuel emissions must be halved within a decade or so if global warming is to be limited to 1.5°C above pre-industrial levels. A report by the UN revealed that we are on track to produce more than double the amount of coal, oil and gas by 2030 than we can burn. So, more needs to be done. This is shocking because global leaders signed up to the Paris Agreement committing to reduce carbon emissions in 2015.

IPCC further stresses the point that countries need to seriously tap into alternate or renewable energy sources. We have reached a point where merely reducing unsustainable and polluting power sources will no longer do the job. What we need to do is get rid of them altogether given the dire state of affairs. Governments are encouraged to take notice and

Russia

develop policies to reduce emissions and work closely with corporate leaders.

A report published in 2019 stated that by 2024, the oil and gas sector will invest around $1.4 trillion in new oil and gas extraction projects.

As per the report, this could push warming beyond the 2°C mark, let alone 1.5°C. Canada and the US alone will account for nearly 85 percent of the expanded production.

Some of the other countries are Argentina, China, Norway, Australia, Mexico, UK and Brazil among others. The corporate sector especially companies engaged in the oil and gas industry are some of the major contributors to climate change. Oil spills have a devastating impact on our ocean’s ecosystem.

Japan

Corporates and governments need to unite to tackle climate change

Per capita carbon emission in 2016 USA

14.95T Canada

14.91T South Korea

11.50T 9.97T 9.04T Germany

8.88T China

6.57T UK

5.65T Brazil

2.01T India

1.57T Source: IEA

20 | September 2021 | Global Business Outlook

Emissions (in metric tons)

A research report published by the University College London concluded that global oil and gas production will have to decline by 3 percent every year until 2050 if we are to keep global warming to below 1.5 degrees Celsius. Similarly, a Greenpeace report published last year estimated that the global cost of air pollution from fossil fuels was around $2.9 trillion per year. If we break it down further, it means the global cost of air pollution was $8 billion per day. It is without a doubt global usage of fossil fuels needs to be reduced.

The Intergovernmental Panel on Climate Change (IPCC) has literally rung the alarm bells. Climate change is an emergency and a pretty big one. However, it is not a problem that one single person, institution, or a country could solve alone. For

Coverstory \ Global fossil fuel use

humanity to fight climate change, it will need a unified response with all stakeholders involved be the companies, investors, bureaucrats or important position holders at all levels of government. All must come together and work towards one common goal, which is climate change.

Unfortunately, we often find that such a level of collaboration is lacking between corporations and governments. In the present time, more and more people are gaining awareness when it comes to climate change and how fossil fuel is a contributor. This has forced many governments to take climate change more seriously. We have seen big multinational companies also increasing their attention towards climate change. We have seen oil giants such as Exxon and BP set ambitious goals to reduce emissions recently. Suzanne M. McCarron, vice

president of Public and Government Affairs at ExxonMobil said, “ExxonMobil will continue to focus our efforts on providing the energy the world needs, while simultaneously addressing the risk of climate change by reducing our emissions, helping consumers reduce theirs, and advancing research to find new lowemissions technologies for the future.”

Last year, BP’s chief executive Bernard Looney announced the company’s plans to turn the company from a predominant oil and gas company to an integrated energy company. He and his new management team gave more than 10 hours of presentations over three days last week, in a bid to show the world that the oil and gas giant could adapt to a low-carbon future without sacrificing returns.

Bernard Looney said, “The world’s carbon budget is finite and running out fast; we need a

Global Business Outlook | September 2021| 21

Coverstory Oil and gas

rapid transition to net-zero. We all want energy that is reliable and affordable, but that is no longer enough. It must also be cleaner. To deliver that, trillions of dollars will need to be invested in replumbing and rewiring the world’s energy system. It will require nothing short of reimagining energy as we know it.

“This will certainly be a challenge, but also a tremendous opportunity. It is clear to me, and to our stakeholders, that for BP to play our part and serve our purpose, we have to change. And we want to change – this is the right thing for the world and for BP.” However, the question on everyone’s mind is ‘enough being done?’

Experts argue that most companies and investors need to take the next step which is lobbying for strong government policies. Stronger policies have the power to guide the global economy towards a sustainable future.

Fossil fuels costs UK £44 bn every year Fossil fuels have been powering economies for over a century now. The world acquires about 80 percent of its energy from fossil fuel sources. When we burn fossil fuels, greenhouse gases are released into the atmosphere and an excess buildup of greenhouse gases in the atmosphere leads to dramatic changes to Earth’s climate. According to a report released by Friends of the Earth, the UK coal, oil and gas industries cause £44 billion pounds of damage every year. While the damage caused is far beyond as the report only assesses the impact of fossil fuels on climate change. It does not include other damages such as death due to air, water pollution etc.

Mike Childs, Head of Policy for Friends of the Earth, said, “For decades the oil, coal and gas industry has extracted, processed, sold and profited from fossil fuels. We now know these fuels have to be kept in the ground if we are to mitigate the challenge of climate chaos.”

22 | September 2021 | Global Business Outlook

As things stand, we have seen a majority of multinational corporations drafting plans to cut down on emissions. Over the years, we have seen more and more corporations acknowledging climate science. There are many large corporations who now consider climate change to be a risk to their assets and many are now working towards mitigating it.

However, only a few of these companies are actively pushing for government climate action. There are also many companies that have lobbied against climate change, however, do plan to cut emissions in the near future. This proves that corporates and governments across the globe are not on the same page when it comes to climate change.

We have also seen many companies acknowledging the fact that they will have a hard time meeting their own climate goals without government policies. A shift to a clean-energy world without strong government support is just not possible.

Without support from the government or policies to promote clean or renewable energy, it will be difficult for companies to meet their climate goals. Even if they somehow manage to achieve those goals, they would have to take a huge financial hit, which could threaten their existence in the long run.

Climate change-led disasters are on the rise Some companies such as Apple are indeed pushing for robust government climate policies.

But it is not enough. Given the position we are currently in, corporates across the world need to unite to fight climate change. We are already seeing what climate change can do. Earlier this year, intense rainfall and storms over Western and Central Europe led to severe floods in major European countries such as Austria, Belgium, Croatia, Germany, Italy, Luxembourg, the Netherlands, and Switzerland. The floods led to the death of at least 242 people. Around 196 people lost their lives in Germany, 42 in Belgium, 2 in Romania, 1 each in Italy and Austria. According to Swiss Re, the widespread flood in Europe earlier this year due would cost

insurers in the region around $12 billion.

Last year, the US recorded losses of around $22 billion due to disasters that are believed to be a result of climate change. What is worrying is that the recorded losses are increasing every year. According to credit rating agency Moody’s, the US is the third most exposed country to climate risks, behind China and the Philippines, by 2040. According to a new report from the World Meteorological Organisation (WMO), a disaster related to a weather, climate or water hazard occurred every day on average over the past 50 years which has led to the death of 115 people and causing losses of around $202 million daily.

The report also notes that the number of disasters is increasing as time passes by. Such disasters have increased by a factor of five over the 50-year period mostly driven by extreme weather caused by climate change. The report said there were more than 11 000 reported disasters attributed to these hazards globally, with just over 2 million deaths and $3.64 trillion in losses.

WMO Secretary-General Prof. Petteri Taalas commented, “The number of weather, climate and water extremes are increasing and will become more frequent and severe in

many parts of the world as a result of climate change.

“That means more heatwaves, drought and forest fires such as those we have observed recently in Europe and North America. We have more water vapor in the atmosphere, which is exacerbating extreme rainfall and deadly flooding. The warming of the oceans has affected the frequency and area of existence of the most intense tropical storms.”

“Economic losses are mounting as exposure increases. But, behind the stark statistics, lies a message of hope.

Improved multi-hazard early warning systems have led to a significant reduction in mortality. Quite simply, we are better than ever before at saving lives,” he added.

Losses as a result of climate change are being recorded in almost every part of the country. Unless, different stakeholders unite to fight climate change collectively, the damages would be far too severe for humanity and as feared by many, irreversible.

According to a new report from the World Meteorological Organisation (WMO), a disaster related to a weather, climate or water hazard occurred every day on average over the past 50 years

which has led to the death of 115 people

and causing losses of around $202 million daily.

Global Business Outlook | September 2021| 23

News Industry

Oil prices at their highest since the 2014 peak Oil prices in the US rose for five days straight to reach their highest levels since 2014 amidst concern about energy supply in the crude, natural gas and coal market. The reason behind the jump is OPEC+’s decision to proceed to hike output gradually. This decision took some investors by surprise since they expected a bigger increase in the wake of a shortage of natural gas.

Brent crude oil prices also increased for the fourth day straight amid rising supply glut anxiety. Opec+ ratified the 400,000 barrela-day supply hike scheduled for November, according to a statement to the media. This decision comes after the world's biggest oil company, Saudi Aramco, said the global natural-gas crisis has boosted demand for crude by 500,000 barrels a day.

Brent crude was up 51 cents at $81.77 a barrel, rising 2.5 percent. West Texas Intermediate (WTI) oil rose 50 cents after gaining 2.3 percent in the previous season. Oil prices have already surged more than 50 percent this year that has added to inflationary pressures that crude-consuming nations such as the US and India.

Opec+ ratified the 400,000 barrel-a-day supply hike scheduled for November.

Chinese developer Fantasia fails to pay $206 mn debt Fantasia Holdings Group, a developer of luxury apartments in China announced that they were unable to pay the debt of $206 million bond payment that was due on October 4,

adding to the already piling worries of the country’s highly indebted property companies.

Earlier this week, Fitch Ratings downgraded Fantasia’s rating to

24 | September 2021 | Global Business Outlook

'CCC-' from 'B' after the news of failing a debt of $100 million bond issue due on September 28 started making headlines. The company has $1.9 billion of offshore bonds and 6.4 billion yuan of onshore debt due by the end of 2022.

With Evergrande’s decline, the tremors are being felt on the global market as well. Even if the debtladen company manages to ward off defaulting completely, the future is barely secure. Beijing is being clear that it wants to rein in debt and the implicit government promises that shielded highly leveraged firms are a thing of the past.

Aviation

Aviation to lose $201 mn between 2020-2022 The global aviation industry is projected to lose $201 billion between 2020 and 2022 due to the Covid-19 crisis before returning to profitability in 2023, according to a statement released by Willie Walsh, Director General of global airlines body International Air Transport Association (IATA).

The losses in 2021 are expected to be around $25 billion, which is a lot less than $138 billion incurred in 2020. Losses will continue to decrease in 2022. Travel is also being expected to get better, especially with the EU Digital Covid Certificate. It is a reliable and efficient way to record and test vaccination status. The demand for air cargo is expected to continue in 2021, which started peaking during 2020 as more people started getting

their items delivered to avoid catching the virus.

Overall demand in 2021 is also expected to reach 40 percent of the pre-crisis (2019) levels. Capacity is expected to increase faster than demand. In 2022, overall demand is expected to reach 61 percent of the pre-crisis (2019) levels and capacity is expected to continue to increase faster than demand, reaching 67 percent of precrisis levels in 2022.

Overall demand in 2021 is also expected to reach 40

percent of the pre-crisis (2019) levels.

5G auction to be held in November in Brazil The long-awaited Brazilian 5G spectrum auction is set to go ahead on November 4, 2021. Up until now, there have been numerous delays, but finally, it seems like regulator Anatel is finally ready to carry out what will be the largest spectrum auction it has ever managed.

Needless to say, the expectations from the spectrum sale are really high and the government officials have suggested that the companies involved could pay up to $8.5 billion for the operating licences for the four different frequencies to be auctioned.

Additionally, they should also bring high-speed internet to thousands of schools to build 4G infrastructure along roadways.

Winning bidders also have to invest $7.48 billion in 5G infrastructure and the level of capital expenditures will also be a part of it. Communications Minister Fabio Faria announced the date on Friday and mentioned that Sao Paulo and other large Brazilian cities will have 5G networks working by the end of the year and all-state capitals will have the technology by July 2022.

Global Business Outlook | September 2021| 25

Banking and Finance LATAM fintech

Analysis

The secret behind Latin America’s fintech boom Ashley Samberg

Countries like Mexico and Brazil are leading the way and an increase interest by venture capitalists is helping the economy grow

Fintech or financial technology has been a gamechanger for the payment industry. Over the years, it has successfully transformed the landscape of the payments industry and customer experience for good. Fintech has turned out to be one of the most popular products of developed countries that use cutting-edge technologies and electronic devices to manage their daily affairs. And it is doing the same to many developing nations.

One of the prime examples of the fintech revolution in the developing economies is the African continent, but recently, Latin America has also emerged as the land of new fintech opportunities with several fintech startups have been emerging with the aim of bringing a digital payment revolution there. At present, the entire region is moving towards a digital payment revolution there and the stats are there to support this statement.

During the first half of 2021, Latin America recorded huge growth in fintech funding through the first half of 2021 with total capital investment till June 2021 reaching $7.6 billion and exceeding 2020’s total of $2.9 billion. Funding has more than doubled compared to 2020 and is driven by sizable investments of over $50 million. Stats also showed that around 56 percent of the companies

26 | September 2021 | Global Business Outlook

were remittance and payments start-ups.

Surprisingly, it’s not only foreign and local investors noticing these innovative financial services, but the effects are being observed by the Latin American population too. Reports suggest that fintech usage has grown exponentially in the region in the past decade.

In fact, experts believe that it will surpass 380 million users by 2025. Lucky for us, it is fairly easy to understand how it is happening. Similar to people around the world, the easy-to-use alternative brought about by the fintech companies is getting popular since it is digitally accessible and their financial products are usually reliable. And this is exactly why digital payments are the most popular service of the fintech sector in the area, reportedly attracting nearly nine out of

Banking and Finance \ Fintech Brazil

Fintech investment in Latam

2017 $0.6 bn 2018 $1 bn 2019 $2.8 bn 2020 $2.9 bn 2021 $7.6 bn Source: FinTech Global

ten fintech users in 2021. All these innovative financial services are creating a virtuous circle, attracting even more attention and investment in the country's digital financial sector.

Similarly, it is also attracting more competition between international and local investors as it creates exciting results in a dynamic and

booming industry that is set to thrive in the Latin American region.

Increasing competition Fintech continues to be a leading category both in terms of building relationships and aiding economic growth, according to Carlos Ramos de la Vega, manager of venture capital

for the Latin American Private Equity & Venture Capital Association, a notfor-profit membership organisation supporting the growth of the private equity and venture capital industry in the region. Along with growth in investment in the fintech sector, the sophistication of attracting customers has also grown. Debit card companies are now developing apps for niche markets, such as teenagers or Gen Z, as well as adding features to be more inclusive of customers not already using a bank. One of the primary reasons why credit platforms have had success is the ability to attract a huge population. Competition is increasing, but there is the need for a bigger skill set because financial needs are changing and people are becoming more and more well-versed in technology.

And more importantly, the venture capital network is also growing. Along with QED and Clocktower, other US firms have been investing in the sector over the past five years, including Ribbit Capital, Lightspeed Venture

Global Business Outlook | September 2021| 27

Banking and Finance LATAM fintech

Partners and General Catalyst, which led spend management company Clara’s $3.5 million pre-seed round in March and a $30 million Series A funding round. Local venture capital fund managers are also eager to partner with foreign firms, thanks to the thriving financial ecosystem for more than a decade.

In 2020, 83 percent of local investors were a part of the local deals and while 39 percent were involved in deals with international investors. Additionally, foreign fund managers see local firms as good resources when it comes to understanding fintech. There is no denying that fintech poses a significant challenge to incumbent institutions within the financial services sector in LatAm. As mentioned earlier, there is an enormous amount of untapped opportunity in LatAm for financial services of all types. fintech products in LatAm are bringing revolutionary changes to underserved

28 | September 2021 | Global Business Outlook

populations and into markets where traditional banks don't dare to tread, particularly in Mexico, El Salvador, and Brazil.

This huge amount of untapped potential is also being noticed globally and after a few successful fintech ventures, global ventures and investors are becoming increasingly interested to look for opportunities to join the market. Currently, Nubank is LatAm's largest digital bank and also one of the largest around the world.

There are also a number of other examples of fintech companies that have grown into multi-million dollar businesses with help from venture capital (VC) investment.

Local investors are also becoming major contributors to the region's thriving fintech ecosystem. Driven by the success of the unicorns in the region, local investors were also given the opportunity to get involved in the country's sector more actively. The region’s industry is a proper mix of friendly

Banking and Finance \ Fintech Brazil

and supportive and that leads to investors supporting founders of new fintech startups who have proven to have expertise in the industry. This will help the sector to grow financially as investment continues to flow into the same bright minds that have proven their value to the industry.

Another reason why LatAm is enjoying a fintech boom is because of its large market. The region is home to over 650 million people across 33 countries. The largest countries in the region, Brazil and Mexico, are home to populations of 210 million and 130 million, and both these countries house a tremendous market that is ready for digital financial products that can be distributed to a huge number of eager new customers.

Since the LatAm fintech ecosystem is a friendly one, it has become a strong support pillar for the industry. With the governments of the countries supporting the fintech revolution in the region, companies can develop and grow more easily than they would be able to in other parts of the world, especially since the traditional financial institutions are deeply rooted in the financial industry's monopoly.

On the flip side, the LatAm region is setting a different example. Recently, in Mexico, a fintech law named ‘Ley Fintech’ was passed in 2018 that created a legal framework for digital financial businesses to provide customers with new products.

Additionally, the law also allows digital financial businesses to function legally under the same regulatory and supervisory laws as traditional financial institutions.

What are some major fintech players in the emerging market?

LatAm’s thriving fintech ecosystem primarily depends on three major markets present in Brazil, Mexico, and Argentina.

These three areas have the most number of fintech startups operating in the region

and they are also the top countries in terms of gross domestic product. Additionally, Brazil and Mexico are the two countries in the region that concentrate most of the investments that target fintech companies.

In Mexico, for example, over 50 percent of people are unbanked, over 30 percent have no access to any financial product, and just 31 percent have access to credit products. Credit is one of the most powerful tools to the present population as it can be a powerful tool for individuals to afford college, start a business, or buy a home.

Some of the proven successful fintech companies in Latin America are Nubank, Cornershop, Gympass and Loggi helping to bolster LatAm’s credibility. The massive funding rounds were led by or saw participation from firms like SoftBank, Tiger Global Management, Tencent, Accel, Ribbit Capital and QED Investors. Reports suggest that these companies are ready to pour money into the fintech landscape of LatAm as they think this area has more potential than the US. They believe that the region has always been ripe for disruption, especially in the fintech and proptech sectors, primarily because of the underbanked and unbanked population in the region and the relatively unstructured real estate industry.

A big chunk of these investments has gone to the digital banking giant Nubank, which has raised $950 million of its $1.5 billion in total known funding in just the past three years. Since the beginning of the year, a large number of US venture firms have announced their intention to focus on Latin America’s financial technology firms, including QED Investors and Clocktower Technology Venture to name a few. Apart from the global venture capitalists, local venture capital companies are also raving about the human capital present in the region. But, for some global investors, the appeal of Latin America extends beyond

Top 5 fintech deals in 2021

Loft $425 mn Nubank $400 mn RecargaPay $70 mn Alphacredit $40 mn LaHaus $35 mn Source: FinTech Global

Global Business Outlook | September 2021| 29

Banking and Finance LATAM fintech

the talent to the general populace.

The availability of credit is one of the most expensive and not readily available tools, thereby creating a massive pent up demand from customers who have historically been locked out of the financial system by incumbent financial institutions.

Given that they are the most significant fintech players in the region, they are also found in these leading countries with a strong digital financial ecosystem. Brazil is home to well-known startups like Nubank, RecargaPay, and Vortx. All these companies have witnessed $35 million each in the first half of 2021. Mexico is also home to successful Fintech startups like Konfio, Credijusto, and Clip, startups that successfully raised the most considerable amount of funds in the first part of 2021. All

Source: Statista

30 | September 2021 | Global Business Outlook

the mentioned startups have received over $100 million of investment.

Until recently, most banks in Latin America didn’t have a mobile app and was a completely brick-and-mortar institution.

For example, in Colombia, consumers must still visit a physical branch to open a bank account and other services. The traditional banks have long ignored techdriven, mobile-first approaches. One of the largest banks in Brazil, Itau’s prospective customers must fill out 26 fields to open an account from their app, and it is rather cumbersome. If this didn’t put off people enough, it takes another 18 hours for the account to get approved. And believe it or not, this is an improvement. Five years back, applicants had to visit a branch in person to open an account, then wait weeks for approval.

Most of the Latin American countries are heavily cash-based. In Mexico, more than 90 percent of payments are in paper money and for Brazil, it is 70 percent.

While e-commerce has gone through a tremendous change in the past year, buying products online is still relatively latent, as

Banking and Finance \ Fintech Brazil

only a small percentage of the population has the means to access e-commerce. In fact, the default for most customers in Latin America is to order online, then pay at the local convenience store in cash. As economies around the world have shifted to digital and card payments, Latin America is poised to take a similar trajectory.

The major banks in the Latin American region have few incentives to innovate. In Mexico, there are 51 banks and Colombia only has 25. Compared to the thousands of banks in the US, there is a significant decrease in the number of choices consumers have. The low number of banks in the region is exacerbated by the extreme bank concentration and monopoly the largest institutions have. 80 percent of the deposits in Brazil are concentrated in the country’s top five banks. This leads to mismatched incentives between the financial institutions and their customers.

This leads to banks in LatAm having some of the healthiest margins of any financial institution across the globe. In Mexico and Brazil, the return on equity, or ROE is around 18 percent, almost five times that of French banks and twice that of American banks. These large profit margins indicate an opportunity for fintech to offer better, more accessible, and more affordable products for consumers.

Covid-19 accelerated the fintech ecosystem in Latin America The Covid-19 pandemic has had a profound impact on financial services around the world and it has proved to be a primary drive for fintech in Latin America, spurring innovation out of necessity. While cash is still the most preferred mode of payment, business shutdowns prompted the increased acceptance of digital and online payments. A large section of the population tried out new financial products and apps, in lieu of visiting physical bank branches.

Additionally, many businesses that once relied on foot traffic have adopted online shopping, accepting card payments, and integrating with digital platforms.

E-commerce in the region has seen doubledigit growth over the last few months. In the US< it takes two days for funds to arrive, and the Fed has pushed the rollout of FedNow another 2+ years. Comparatively, real-time payments have existed for over 10 years in Mexico. Currently, the company is in the process of rolling out its own version of real-time payments, called PIX. There is still room for growth There is no doubt that Latin America has become one of the primary hotspots for fintech enthusiasts around the world and this is the best time for fintech startups or enterprises to move into the financial service sector of this region. It’s really amazing to witness everything is in place for a successful fintech business in this region. The government is working with the companies to facilitate and attract fintech players across the globe to their respective countries and banks are also looking forward to innovative, inventive, and reliable finance companies that can enhance customer service experience.

LatAm is home to a plethora of business opportunities. Venture capitalists have also mentioned that there is no dearth of interesting fintech opportunities in the region and unlike the US, there is still some room to grow with competitors flocking right after the launch. They feel good about how they are positioned in the fintech ecosystem. Venture Capitalists are excited about the pace of change, and there are no signs of it slowing down. The regulatory scenario in the region is also changing and Mexico has made amazing progress since 2017. There is a big pipeline of companies waiting for regulatory approvals, and that will get rolling next year.

Countries with most fintechs in Latam

Brazil 377

Mexico 394

Colombia 124

Argentina 110

Source: Slideshare

Global Business Outlook | September 2021| 31

Banking and Finance Blockchain finance Blockchain trade finance

How can blockchain disrupt banking?

Feature

Even though blockchain is still in its development phase, it possesses the potential to drastically change a wide range of industries and sectors including banking Rachel Taylor In recent years, blockchain technology has the potential to change the world and it has received a lot of attention. Back in 2017, JP Morgan Chase CEO, Jamie Dimon said bitcoins are worse than tulip bulbs and the future of bitcoin in the market is very gloomy. Lloyd Blankfein, senior chairman of Goldman Sachs echoed Dimon’s thought saying that bitcoin might be used to perpetrate fraud and a currency that moves digitally doesn’t feel like a currency at all. However, blockchain is now regarded as a tech of the future. Blockchain also uses smart contract tools which have the potential to automate manual processes from compliance and claims processing to distributing the contents of a will. To put it in simple terms, blockchain is nothing but a digital transaction record.

Another feature of the blockchain distributed ledger technology (DLT) could also help corporations establish better governance and standards when it comes to data sharing and collaboration. Blockchain

32 | September 2021 | Global Business Outlook

Global Business Outlook | September 2021| 33

Banking and Finance Blockchain finance Blockchain trade finance

Size of the blockchain technology market worldwide 2018

$1.2 bn

2019

$2.2 bn

2020

$3 bn

2021

$7 bn

2022

$12.7 bn

2023

$23.3 bn

2024

$39.7 bn

Source- Statista

transactions in financial institutions.

Additionally, Initial Coin Offerings (ICO) is currently experimenting with a new finance model that unbundles access to capital from traditional capital-raising services and firms.

Blockchain also aids in improving security as it tokenises traditional security such as stocks, bonds, and alternative assets and places them on a public blockchain, thereby creating a more efficient and interoperable capital market. Blockchain removes the need for gatekeepers in the loan and credit industry, making it more secure and providing lower interest rates.

How can blockchain disrupt financial services?

Blockchain has grown increasingly popular over the years. In 2016, the International Securities Association for Institutional Trade Communication released a survey for the future of the global financial industry. The report mentioned that around

34 | September 2021 | Global Business Outlook

62 percent of firms saw investment in technology as the top area of focus in 201617 and these firms also showed a renewed interest in sectors such as cybersecurity technology. Additionally, the survey also pointed out that 55 percent of these firms were already developing blockchain technology at that time.

Coming back to the financial industry, more and more players are now looking at blockchain. Currently, blockchain technology is present in digital currencies, which has become more and more popular. Last year, bitcoin became a trending topic in the financial sector, especially when its price skyrocketed, before dropping dramatically earlier this year. And despite its rise and fall, the demand for cryptocurrency is rising and new ones are being created every day.

Keeping digital currencies aside, a large number of financial institutions are adopting blockchain that helps them simplify their operations and cut costs. According to a 2018

Feature \ Blockchain trade finance

report published by global management consulting firm Accenture, the world banking sector is expected to save $20 billion by 2022 with the help of blockchain.

While there might be a few financial institutions that might be hesitant to apply blockchain technology since it’s fairly new, others have recognised the importance of blockchain technology in the banking industry. Experts have warned that if these firms don’t find a way to integrate blockchain into their operations, it could be very difficult for them to adapt to the growing environment.

One of the most important features of blockchain is that it eliminates the need for third parties in financial transactions.

Because of this, many have predicted that it could eliminate the need for banks altogether. Banking institutions can utilise this technology to automate their processes and free up valuable resources. Talking about consumers, the implementation of blockchain means faster payments and lower fees. Additionally, blockchain also has the potential to make financial institutions more efficient as well.

Another way blockchain technology can disrupt financial services is by fundraising.

Blockchain has created a new funding model for startups where it helps them raise capital.

Similar to other crowdfunding methods, initial coin offerings, backed by blockchain, give the public an opportunity to invest in a company in exchange for goods, services of monetary return. Where blockchain differs is that it gives users immediate access to the funds they collect without unnecessary fees paid to a third party.

When it comes to international payments, if you want to make a payment using your bank account, it may take several days to complete. Additionally, the transactional cost of sending an international payment might be high. Talking about blockchain finance, both central and commercial banks throughout the world can use the new technology to process payments and

maybe issue their own digital currencies.

Blockchains are not constrained by borders and do not require middlemen. It doesn’t matter if the transaction is local or crossborder, the slowest blockchains may complete a transaction in as little as 15 minutes, while the fastest can accomplish it in seconds.

In stock trading, blockchain-based trading transactions eliminate information redundancy and hence increase performance. As a result, minor transactions among groups of traders can be handled swiftly outside of the blockchain and only the final one will be recorded. The implementation of blockchain in stock trading can help eliminate the need for intermediaries. In the absence of a third party, regulations are more likely to be put into smart contracts and deployed, ensuring that no one can cheat another.

Blockchain in banking Even though blockchain is still in its development phase, it possesses the potential to drastically change a wide range of industries and sectors including banking.

Efficiency and transparency are important aspects of the banking industry hence blockchain has the potential to disrupt the sector. It can be used to facilitate crossborder transactions, money exchanges in real-time. This means companies that operate globally companies could have instant access to their funds anytime and anywhere. These funds could be in continual motion which often is not the case.

Funds in continual motion could change global trade immensely. Blockchain is already being implemented when it comes to trade finance. Many banks have carried out trade finance transactions with blockchain and the results have been promising, often leading to reduced time and efficiency.

Trades are still largely manual and paperbased. This is because numerous parties are involved in a transaction. Blockchain can change that.

Blockchain use case market share 2019 Cross border payments and settlements

16.8% Trade finance and post trade

10.4% Lot lineage, provenance

9.7% Asset, good management

8.4% Identity management

7.3% Others

47.5% Source- IDC world blockchain spending guide 2020

Global Business Outlook | September 2021| 35

Banking and Finance Blockchain finance Blockchain trade finance

An average bank spends nearly

£40 million every year on KYC Compliance. The cost sometimes goes up to as much as

£300 million for some banks.

In 2020 alone, global institutions paid

$10.4 billion in fines related

Another aspect blockchain is useful for the banking sector is the fact that it does not involve any third party which decreases costs. It also reduces counterparty risk and enhances automation. Over the years we have seen banks migrating from traditional methods of securities to technology-based methods. Banks have started experimenting with blockchain, which facilitates the transfer of digital assets among market participants in real-time.

Many financial spend millions every year on consumer records. With blockchain, all consumer records could be stored in one location and can be accessed as and when the need arises. If done manually, the Know Your Customer (KYC) process can take as much as 30-50 days or even longer. Current KYC processes also entail substantial duplication of effort between banks and third parties involved in the process. We must also take into account that the annual compliance costs are significantly high. Also, failing to follow due diligence in the case of KYC could lead to substantial fines. A Thomson Reuters survey revealed that an average bank spends nearly £40 million every year on KYC compliance. The cost sometimes goes up to as much as £300 million for some banks.

to anti-money laundering, KYC and data privacy issues.

36 | September 2021 | Global Business Outlook

In 2020 alone, global institutions paid $10.4 billion in fines related to anti-money laundering, KYC and data privacy issues.

The current KYC process is often tiresome, long and fails to serve its purpose on the financial institution front. Sometimes it can be repetitive as well and this creates an annoying experience for the customers.

Blockchain can solve all of these problems and make the KYC process a much simpler and efficient one. In a blockchain-based KYC platform, the customers complete a one-time setup using their identity documents. This gets uploaded to a common server, Once uploaded, the data become accessible to all the parties involved in the process and can be accessed easily. It is also the safest way to avoid fraud and money laundering. As we move forward, the use of blockchain by the banking industry will grow substantially.

How blockchain is chaning trade finance Trade finance is an important aspect of global trade as it serves as the lifeblood of international by enabling transactions between buyers and sellers who are often based in different parts of this world. Trade finance facilitates global trade by providing

Feature \ Blockchain trade finance

credit, payment guarantees, and insurance necessary for the transactions. However, trade finance comes with its limitations and challenges. One of the biggest limitations of trade finance is that it is paper-based. It involves a huge volume of paper documents that make up much of the information flow between the buyers and sellers involved in the trade.

It is time consuming as the paperwork is often being shuffled back and forth between the different parties involved in the trade, their banks, shipping companies, insurers, and others. This process is not only time consuming, but also the cost involved in verifying these documents at different phases in the trade proves to be an expensive process. Another drawback of paper documents is that they are error prone or even forgery. So far, many banks in different parts of the world have applied blockchain to trade finance.

Last year, Singapore-based banks DBS Bank and OCBC Bank took the lead in digitalising trade finance in the region by adopting blockchain technology. Both the banks issued their first electronic banker’s guarantee on the Singapore Customs Electronic Banker’s Guarantee Programme on Monday. The programme is designed to shorten the banker’s guarantee issuance and submission process to the Singapore Customs from about four working days to less than 24 hours.

During the same period, Abu Dhabi Islamic Bank (ADIB) also become the first Islamic bank to successfully complete a trade finance distribution transactions using blockchain. The lender successfully completed a trade finance distribution transaction in partnership with TradeAssets, a blockchain-based trade finance e-market. ADIB and TradeAssets have been collaborating for more than a year to automate trade finance transactions and digitise traditional processes.

Blockchain can redefine value chain interactions, reduce operational complexity

as well as transaction costs as it entails a distributed database that maintains a continuously growing list of transactions.

Such transactions are recorded in units called blocks which can’t be tampered with easily. There are numerous benefits of blockchain in the case of trade finance.

Firstly, it will allow different parties in the value chain to access or review documents in real-time, thus reducing the time it takes to initiate shipment. Invoices generated at different phases of the transactions can also be viewed in real-time. According to a Deloitte report, an important benefit of blockchain with regard to trade finance is disintermediation. The report said, “Banks facilitating trade finance through Blockchain do not require a trusted intermediary to assume risk, eliminating the need for correspondent banks.”

KPMG said in a report, “With immutable records that are visible to everyone involved, blockchain may improve data accuracy and security, help reduce the risk of fraud, and show compliance through an audit trail. For example, when supply chain information is put on a blockchain, companies can potentially reduce fraud and errors, improve inventory management, identify issues more quickly, reduce delays from paperwork, and increase trust among all parties. Blockchain also offers the potential to create a single source of information around customer identity, reducing costs and risk related to Know-Your-Customer regulations.”

The report further added that thanks to consensus mechanisms and smart contracts, blockchain can minimise the time that capital is tied up for a transaction, instead of triggering an automatic transfer of funds upon an agreed set of conditions. Blockchain will also eliminate some transaction fees by reducing reliance on third parties, and it will likely free up capital flows as the purchase of managed funds moves to real-time.

Distribution of blockchain market value worldwide 2020

Banking

29.7% Process manufacturing

11.4% Discrete manufacturing

10.9% Professional services

6.6% Retail

6% Others

35.3% Source- Inix-united.com

Global Business Outlook | September 2021| 37

Banking and Finance Insight Fintech

The Covid-19 pandemic has accelerated the growth of digital payments all over the world

Top online payments worldwide Digital / mobile wallets

44.5%

Digital payments are on the rise GBO CORRESPONDENT

Credit card

22.8% DEBIT CARD

12.3% BANK TRANSFER

7.7%

CASH ON DELIVERY

3.3% BNPL

2.1% Source: Oberlo

38 | September 2021 | Global Business Outlook

The Covid-19 pandemic has accelerated the digitisation of economies across the globe. As the need for social distancing increased in order to contain the infection, digital payments transformed into a daily necessity in many countries. Governments from all around the world introduced or expanded digital financial transfers in response to the severe damage inflicted by the Covid-19 crisis on the economy and livelihoods of people.

In this case, government support can help encourage the adoption of digital payments and promote financial inclusion.

It can also provide access to financial services to those who have been excluded due to low connectivity, limited access to handsets and identifications, and low literacy. For example, the World Economic Forum’s (WEF) Trade Facilitation 2.0 Project in Papua, New Guinea is working towards developing advanced digital payments in the country to encourage digital foreign direct investment. But, it is important to remember that digital financial transfers also bring risks, and that must be addressed to ensure their effectiveness and protect users.

Keeping this in mind, leaders from the public and private sectors, including the UN-based Better Than Cash Alliance of more than 75 governments, companies and international organisations who are

Insight Digital payment Covid-19

Digital wallet payments in Europe

committed to responsible digital payments to advance the United Nations Sustainable Development Goals (SDGs), convened around the Bill & Melinda Gates Foundation Global Situation Room to develop a quick reference resource based on global good practices for largescale digital transfers. The resources are built on the Better Than Cash Alliance’s digital payments guidelines to identify short-term and longterm actions to mitigate the risks brought upon by Covid-19.

1. Denmark

40.9%

2. Sweden

36.2%

3. Norway

25.8%

4. Switzerland

22.3%

5. Italy

21.1%

6. The Netherlands

19.7%

7. The United Kingdom

19.1%

8. Finland

17.9%

9. Russia

17.2%

10. Spain

16.5%

Source: Rapyd

The rise of digital and cashless payment Currently, a lot of consumers have been shying away from using cash because of the pandemic. This led to an increase in the use of an online payment gateway in order to protect from the virus. In this case, the best option is to use another payment method such as PayPal. For a lot of consumers, the Covid-19 pandemic has opened them to the possibility of using e-wallets and other similar forms of payment. According to an article on CBC News, 80 percent of Canadians are more likely to use PayPal now than before since it provides a digital payment method that gives consumers the ability to avoid contact with cash and touchscreens.

There are a lot of reasons why cash is not the safest option when it comes to payment, but there are two reasons that stand out the most. Firstly, cash transactions are found to be responsible for transmitting highly contagious infections like Covid-19, influenza, and tuberculosis to name a few. Secondly, we don’t have any way to know who used the currencies before we did.

Hence, no matter where or how it has been used, you have no way of knowing if it’s contaminated with germs so going up to a cash register and handing your money over to someone else puts you at risk of catching something.

Smaller businesses are turning towards digital and cashless options Recently, we have seen a rise in small to medium sized businesses that

Global Business Outlook | September 2021| 39

Banking and Finance Insight Energy

Most popular digital wallets 1. PayPal 2. Google Wallet 3. Groupon 4. Apple Passbook 5. PayPass by MasterCard 6. Dwolla 7. Venmo

79% 40% 20% 17% 5% 4% 4%

According to the Reserve Bank of India, the digital payments ecosystem in the country has increased at a compounded rate of

55.1 percent

over the past 4-5 years, i.e., between, 2016-2020

Payment revenue in 2019-2020 2019 $2.07 tn Pre-pandemic $2.17 tn During pandemic $1.9 tn Post- pandemic $1.86 tn Source: Statista

have stopped using cash as a form of payment. Instead, they have adopted other methods that do not require cash, such as credit cards and PayPal. Additionally, retailers are also using wireless card readers so customers can pay with a debit or credit card at checkout without touching anything.

This is much safer option for both the customer and the retailer trying to avoid infection from being transmitted through money or touchscreens. While cashless payments are becoming more and more popular among people, there are still some who prefer not to pay by credit card or any other digital form of payment.

Current leading fintech markets India is one of the world’s biggest realtime payments market and acts as a yardstick for what’s possible when it comes to the adoption of real-time payment infrastructure. India’s Unified Payments Interface (UPI) is currently the most popular payment method which is leading the already growing digital payments segment in the country, with transactions volumes and values are growing by every passing month.

According to the Reserve Bank of India, the digital payments ecosystem in the country has increased at a compounded rate of 55.1 percent over the past 4-5 years, i.e., between, 2016-2020.

In the UK and Europe, a Request to Pay (R2P) approach is the most popular one. R2P drives real-time payments usage through digital form factors which sends a digital request to the payer’s mobile phone usually on a banking application or thirdparty FinTech application. After this, the payer will either approve or reject the request. Once approved, it will automatically initiate a real-time credit transfer to the payee. Real-time payments have been popular in the UK for nearly 15 years now and experts have predicted that the upward incline

40 | September 2021 | Global Business Outlook

will continue till 2023, before levelling off again after 2025.

The US also has R2P on the The Clearing House (TCH) RTP rails, along with Zelle, a person-to-person overlay moving to TCH’s RTP rail. Currently, Zelle is examining how to enable an R2P bill pay experience, so that it can rival Mastercard’s launch of BPX. Additionally, FedEx is currently being piloted by the Federal Reserve and is expected to launch in 2023. Titled FedNow, it will facilitate Peer-to-peer (P2P), Business-to-business (B2B), Business-to-consumer (B2C), Consumerto-business(C2B) and Government-toconsumer (G2C) payments. FedNow aims to facilitate real-time payment services for all-sized banks in the US, thereby enabling establishments with a wider presence than is possible with the other available networks.

Coming to LatAm, the Brazilian PIX was launched in 2020 that combined both real-time rail and digital overlay capabilities. Brazil’s central government became the first user of this new method, and it is estimated that the volume of transactions in Brazil expanded by almost 50 percent between May 2019 and April 2020. PIX has also enabled Brazil to up its game when it comes to real-time payments. Argentina also has two real-time payment schemes in place; Pago Electrónico Inmediato (PEI), launched in 2016, and DEBIN, both of which were launched in 2017.

Since both are still under development, their transaction volumes remain low.

Improving digital payments While digital payments are becoming more and more popular all over the world, digital financial transfer recipients sometimes experience difficulties accessing the complaints and feedback mechanism systems, or having their problems addressed. In order to solve these problems, governments and cash transfer programmes should set

Insight Digital payment Covid-19

Keeping up with modern demands

Digital payments users double by 2020 (in millions)

Post Covid

While digital payments are becoming one of the most convenient modes of payment, there have been quite a few failures too which is stopping it from reaching its full potential. Factors such as poor connectivity, the poor performance of a payment partner’s system, or a mismatch in biometrics/identities all contribute to it. Ideally, digital transfer programmes should collect transaction failure rates as part of daily key performance indicators along with tracking the reason for such failures.

Since most of the transactions among digital transfer program recipients might still require the use of cash, it is important to provide information regarding cash-in and cash-out points.

Additionally, government and private sectors should work together to come up with a common platform that maps cashin and cash-out points across various service providers. It will help priortise locations that need immediate attention for improving outreach and also help providers optimise liquidity levels.

Pre Covid

requirements and define responsibilities to address grievances in real-time with financial service providers. These issues might be addressed by regulators through setting and enforcing minimum standards for complaints and feedback channels. Coming from the service provider’s perspective, they could develop feedback and complaints channels that work for low-literacy and inexperienced users and provide services with more gender sensitivity.

It is usually the low income who are the recipients of government benefits and they have limited or no exposure to digital payments. Digital transfer programmes are typically rolled out at a fast speed and this might make it difficult for a number of people to understand, thereby making it challenging. To solve this, governments can partner with business and nongovernmental organisations to create education campaigns that specifically target capacity challenges through popular media channels among target groups in local languages.

Another issue that plagues digital payment is lack of identification, especially considering the rural population, who have limited access to information of eligibility criteria and enrollment information. Most rural areas, especially in third world countries have poor connectivity and limited agent network outreach that contributes to excluding people from participating in digital transfer programs.

To address this issue, regulators should ensure that social welfare programmes are inclusive and all information about such programmes is made accessible by all, including the disabled. Governments and companies can leverage open and secure technology and tools established by utility companies, telecom operators and tax registries to conduct more outreach to help people obtain identification and gain access to digital payments.

Google Pay

39

Samsung Pay

51

100

Apple Pay

140

From a global perspective, the fintech industry has undergone a massive change and is currently meeting the demands of a modern society. Consumers, along with businesses and institutions now have the expectation to come with the most sleek digital experiences. While global real-time payments innovation caught the attention of the general public just a few years back, the shift towards realtime and digital experiences has grown more than it was estimated, and this will make real-time payment volumes rise dramatically. Experts have mentioned that we will also see the market move its focus away from traditional cards and will adopt a digitally native eal-time, and secure modern payment methods.

100

227

Source: Vietnam electricity

transfer recipients sometimes experience the complaints and feedback mechanism systems, or having their problems addressed

Global Business Outlook | September 2021| 41

Banking and Finance

Interview Zac Liew Chief executive and co-founder, Curlec

Covid-19 is changing how SMEs obtain finances GBO correspondent

L

ast year was tumultuous for the whole world with the Covid-19 pushing the global economy into recession. However, it was also a catalyst for the fast acceleration of Malaysia’s fintech landscape. This was evident from the

to 38.9 percent in 2019. In the previous year, SME's contribution to GDP was 38.3 percent. In 2020, the figures dropped to 38.2 percent again due to the Covid-19 crisis. Yet, on contrary, the pandemic has changed how SMEs in Malaysia obtain their finances. In the last one year, we have witnessed the growth in financial and banking products, online payments, the proliferation of e-wallets and much more.

According to the Economic Census 2016, SMEs accounted for 98.5 percent of total business establishments in Malaysia in 2015. Malaysia formed the National SME Development Council (NSDC) in 2004 which continues to oversee the develop-

We believe that in order to succeed in the industry that we’re in, we need to have the ability to move and execute extremely quick

fact that the sector moved up 11 places to 67th on the 2021 Global Fintech Rankings.

Growth was recorded in the different segments of fintech be it wealthtech, e-lending or e-remittances.

The small and medium enterprises (SMEs) in Malaysia play an important role when it comes to Malaysia’s economy. Data released by According to the Department of Statistics, Malaysia revealed that SME contribution to Malaysia’s GDP increased

42 | September 2021 | Global Business Outlook

ment of the SME sector in Malaysia. The council is directly involved in setting the strategic direction and formulating policies to promote the growth of the sector. In 2019, a survey conducted by the Malaysian central bank-Bank Negara revealed that more than 90 percent of the SMEs in Malaysia are engaged in the domestic market, whereas, around 7 percent are involved in exporting their products.

The subscription model is gaining popularity and more and more businesses are adopting the model to run their business. According to the ‘Sub-

Banking and Finance | Malaysia fintech

The Subscription Economy has grown by more than 435% over the last 9 years

scription Economy Index (SEI)’ by Zoura, who is a leader in subscription management, noted that the Subscription Economy has grown by more than 435 percent over the last nine years. The pandemic has only accelerated that process. Asia, and more specifically Southeast Asia is expected to become a big contributor if not the center of this new, untapped economy.

A report by EY also revealed that maintaining cash flow has been a huge challenge for SMEs. Data further suggest that over 30 percent of businesses in Malaysia have less than one month of cash in the bank. What makes matter worse for them is that the time period to collect payments from invoices is around 90 days.

Curlec is a fintech company based in Malaysia that allows merchants to collect recurring payments and manage their cash flow in a much easier and efficient manner.

Curlec makes it easy for businesses of all sizes to collect recurring payments and take control of their cash flow and enable them to enter the Subscription Economy.

They do this by building technology on top of payment infrastructure. Global Business Outlook spoke to Zac Liew, chief executive and co-founder of Curlec. Having previously worked at Barclays Bank in London and as a Product Manager for two enterprise-tech companies, Zac is a qualified lawyer by education and was listed in Forbes 30 Under 30 Asia 2020.

He said that Curlec provides the tools necessary to make it easier for businesses of all sizes to take control of their cash flow and enable them to enter the Subscription Economy. He further revealed that Curlec does it by providing an end-to-end recurring revenue platform that covers payments, payouts as well as subscription management and billing features - an omnichannel platform that can be used for both online and offline businesses, targeted towards both B2B and B2C.

GBO Curlec is one of the leading fintech companies in Malaysia. How has 2021 been for you?

Zac Liew: As with everyone else, 2021 has been a challenging year for us, having been under lockdown the majority of the year here in Malaysia. However, despite the challenges, it has been quite a breakthrough year for us as well. Our business has grown almost 4 times throughout the pandemic. We’ve seen a big shift as more and more businesses are enabling online payments, as well as making the transition to recurring revenue and subscription based models.

How does Curlec help businesses manage their cash flow? Can you stress a bit about your technology?

With many businesses having issues with late and failed payments, failure in controlling cash flow ultimately puts business continuity at risk. Due to the lack of suitable payment options, businesses have often relied on disjointed systems and manual processes have resulted in the inability to scale for businesses attempting to move to recurring revenue models.

Whilst enabling online Direct Debit was how we started, our product has evolved drastically since we launched in 2018. We now have added additional payment channels such as card payments and have built

Global Business Outlook | September 2021| 43

Banking and Finance

Interview Curlec

many features that enhance the whole recurring payment workflow. We are now in the process of building an entire Accounts Receivables platform that will help automate subscription billing and management processes.

We are big believers in the Subscription Economy and building tools to help businesses access it.

The Covid-19 pandemic has been devastating for almost every sector, but fintech as a whole has been doing better even during the pandemic. What were some of the major changes faced by your company during the Covid-19 pandemic?

Of course, technology aside, our company is deeply rooted with an amazing set of people that work hard to disrupt the fintech industry, and take our place as one of the leading players when it comes to subscriptions.

One of the major changes we faced internally is having to work remotely as a collective throughout the duration of the lockdown. This means having our staff spread out across states, with less face-to-face interactions and meetings, and move all our internal and client interactions online.

However, we have come a long way since the pandemic started, and we can definitely say that we have become excellent adapters to weather the constant changes.

We believe that in order to succeed in the industry that we’re in, we need to have the ability to move and execute extremely quickly. From a growth perspective, we have allowed ourselves the ability to move fast amongst all the uncertainty throughout the pandemic.

As a company, Curlec is serving the previously underbanked businesses by providing access to payment mechanisms such as Direct Debit which they never were able to do before.

streamlining their work processes seamlessly online.

This includes key benefits such as the ability to schedule their payment collections online as well as expediting their account receivables and automatically reconcile their accounts via the cloud, all within a single platform.

Now, businesses can use our payments engine to let outstanding invoices be a thing of the past by pulling payments automatically whenever they are due without having to chase for late payments and invoices.

Can you elaborate on your subscription management platform?

Curlec API is one of the most talked about features. Can you elaborate some more on that?

What we do here at Curlec goes beyond just payment processing. We provide the necessary tools to make it easier for businesses of all sizes to take control of their cash flow and enable them to enter the Subscription Economy. We do this by providing an end-to-end recurring revenue platform that covers payments, payouts as well as subscription management and billing features - an omnichannel platform that can be used for both online and offline businesses, targeted towards both B2B and B2C. While our business continues to grow, we have taken measures to support our merchants more effectively especially through this pandemic, such as providing flexible payments plans, helping to preserve business continuity by automating their payment operations and

As a company, Curlec is serving the previously underbanked businesses by providing access to payment mechanisms such as Direct Debit which they never were able to do before.

Banks are usually not API ready. So, we partner up with these banks to provide software on top of their infrastructure so that, through us, our merchants and businesses of all sizes will be able to integrate with the banks directly with our API. Thus, making banking products available and super useful to a lot of companies, particularly in tech and the fintech industries.

44 | September 2021 | Global Business Outlook

What are some of the value propositions Curlec has to offer that differentiates it from

Banking and Finance | Malaysia fintech

its competitors in the market?

From a product perspective, we’ve invested in providing a more holistic experience; taking a value-based approach and deepened our products functionally in addition to expanding to immediate adjacencies to supercharge acquisition, retention and therefore growth.

In comparison to our competitors, our platform is built with recurring revenue in mind, whilst solving common pain points for Malaysian businesses. While we are currently the only company in Malaysia to provide recurring payment options through the domestic banking network as well as international card networks, our main focus is to build out direct adjacent products and services to serve the end-to-end subscription billing management system, covering the whole order to cash process for businesses.

What has set our products and services apart from the rest is the fact that we are going beyond just payments. We are creating a “Shopify” type experience for businesses looking to enter the Subscription Economy.

What do you think is the future of fintech in Malaysia? Do you believe that the pandemic has somehow contributed to the sector growing so fast?

The pandemic has definitely accelerated the growth of fintech, not just in Malaysia, but globally. We are see-

ing growth in financial and banking products, online payments, the proliferation of e-wallets and many more. Additionally, we are also seeing a lot more businesses and consumers being more receptive to this change and acquiring access to these products.

According to Businesswire, the subscription economy has grown more than 350 percent over the past seven years. And the pandemic has basically accelerated that process.

We believe that Asia, and more specifically Southeast Asia will become a big contributor if not the center of this new, untapped economy.

As more and more businesses are shifting towards the subscription model - a trend that is seeing rapid adoption in most first world countries especially after Covid-19, our main focus is to educate and accelerate the adoption of recurring revenue models for local businesses.

What are your future plans for the company?

Do you plan on expanding further?

Our long term goal for the company is to potentially transition into a more secure, defensible business model. We plan to expand regionally in Southeast Asia, as well as enabling various payment types that are also localised, whether it is through payments (money in) or payouts (money out).

The market for Subscriptions and Recurring Payments globally is growing extremely fast. With the global Subscription Economy estimated to be valued at $530 million, the Southeast Asian Subscription Economy is currently estimated to be valued at $40 billion.

This is a sizable and fast growing market that Curlec is well positioned to penetrate in Southeast Asia - a region noted to be underpenetrated as of date due to lack of localised software companies serving recurring revenue business..

As we look to broaden our offerings further to serve the entire subscription billing process, this will set us apart even more as no other company in this region is doing this.

Global Business Outlook | September 2021| 45

News Banking

MAS launches Cosmic to combat money laundering

T

he Monetary Authority of Singapore has announced the launch of a data and information-sharing platform, Cosmic, to prevent money laundering, terrorism funding, and proliferation financing.

The platform will help enable financial institutions to securely share information on customers and transactions where they cross material risk thresholds.

Presently, MAS is working with six major commercial banks - DBS, OCBC, UOB, SCB, Citibank and HSBC on the Cosmic platform. Said to be one of a kind platform in the world, it will enable information to be shared in a structured format that allows for seamless integration with data analytics tools.

The central bank will also run

Cosmic and is promising legislation to ensure information sharing will only be allowed for fighting money laundering, terrorism financing and proliferation financing. The six banks will continue to co-develop the platform with MAS and will be the initial users when it is rolled out in 2023 along with a framework to govern information sharing.

The platform will initially focus on three key financial crime risks in commercial banking: abuse of shell companies, misuse of trade finance for illicit purposes, and proliferation financing. Eventually, MAS plans to extend Cosmic’s coverage to more financial institutions and plans on making some areas of sharing compulsory.

Digital Banking

Image: thestandard.com.hk

JP Morgan to launch digital bank Chase in the UK JP Morgan Chase will launch its highly anticipated digital retail bank in the UK and it is the first step of the firm’s plan to expand its presence in Europe and Latam, according to media reports.

Called Chase, it will initially start with current accounts. The firm also revealed that the current offerings and products will increase with time as the bank plans on investing hundreds of millions of dollars in the venture, as pointed out by Sanoke Viswanathan, head of JP Morgan's International Consumer division to the media. Chase,

at present, has around 600 employees in the UK, including 500 new hires.

This move will also see the firm taking on major British lenders like HSBC, Barclays, Lloyds, and NatWest, along with startups like Monzo and Starling. The company will also step up its rivalry with Goldman Sachs which launched its digital bank Marcus in the UK in 2018.

Britain’s consumer market has changed in recent years as startups

46 | September 2021 | Global Business Outlook

like Monzo and Starling have penetrated the financial sector along with Marcus. This particular move was planned more than two years ago when the firm agreed to buy the UK’s digital wealth manager Nutmeg Saving and Investment in June.

Viswanathan also mentioned that the bank wanted to become a force in UK retail banking and could ultimately expand in Europe and Latin America.

Merger and Acquisition

AXA to sell its operations in the Gulf UOB to invest $500 mn in digital banking initiatives Singapore’s UOB has announced that it will invest $500 million over the next five years to scale up its digital offerings in Singapore and the rest of ASEAN. The innovation will seek to serve more than seven million customers across ASEAN by 2026. As a part of the investment, UOB will combine its digital bank TMRW with the scale and product depth of its mobile app UOB Mighty on one platform - UOB TMRW. For now, they are launched in beta mode to all its Singapore-based employees. It will be released commercially to customers starting next year.

This decision comes after the Covid-19 pandemic that has driven an upsurge in digital payments and banking. In Singapore alone, the adoption of digital payment channels such as PayNow and QR codes increased by over 200 percent while physical cash deposits and withdrawals decreased by more than 30 percent in 2020.

TMRW is a standalone digital bank in Thailand launched in 2019.

It uses artificial intelligence to parse millions of transactions daily that helps drive personalised insights and anticipate customer needs in realtime. The UOB TMRW team will be the primary beneficiary of the $500 million investment where they will use the fund to drive new enhancements to the mobile app.

Insurance giant AXA recently announced that it has entered into an agreement with Gulf Insurance Group (GIG) to sell its insurance operations in the Gulf region, which includes its shareholding in the AXA Gulf AXA Cooperative Insurance Company and AXA Green Crescent Insurance Company, according to media reports.

It is already known that GIG is an established and one of the leading insurers in the Gulf region. The company’s position is further strengthened by the global footprint and insurance expertise of Fairfax as well as the regional market knowledge of KIPCO, its shareholders.

As a part of its transactions, Yusuf Bin Ahmed Kanoo, one of the largest conglomerates in the Gulf Region will also be

shareholding in AXA Gulf and in AXA Cooperative Insurance Company. In the terms of this agreement, AXA will sell its insurance and operations in the Gulf region for a total of $269 million.

Recently, the insurance company made headlines after AXA Asia and Africa partnered with LIMRA to grow the size and quality of its agency force through the AXA Prime programme.

It was established last year and its goal was to set new industry standards by focusing on the quality of service provided, not just on the amount of premiums sold. The programme also showcases top performers in AXA’s agency force, which is expected to serve as a motivation for existing agents and to attract new talent.

Global Business Outlook | September 2021| 47

Technology Bitcoin mining

Analysis

Why is China imposing ban on bitcoin production Ashley Samberg International miners from other countries are reaping benefits from China’s ban on bitcoin trading and mining

In recent weeks, China has doubled down on its efforts to control the country’s cryptocurrency industry by banning mining operations and discouraging its banks to carry out businesses with crypto companies. Back in July, China ordered the shutdown of a Beijing-based software maker over its suspected involvement in cryptocurrency trading. Since then, it’s website has been disabled and their operations have been stopped. According to a statement released by the Beijing financial supervision administration and a department of the People's Bank of China, companies in Beijing should not provide venues, commercial displays or advertising for cryptocurrency-related businesses.

While bitcoin brings a promise of being a decentralised cryptocurrency that is based everywhere and nowhere, around 65 percent of the world’s bitcoin mining happens in China. That is because a bunch of powerful Chinese mining hubs started competing against other miners to solve the computational puzzles that create more bitcoin. Chinese miners helped raise the bitcoin value by more than a 1000 percent in a year where it reached an all-time high of nearly $65,000 in April. After China strengthened its restrictive measures against bitcoin mining earlier this year, the cryptocurrency value plummeted, closing out the first half of the year down almost 50 percent from its record.

China’s crackdown on Bitcoin So why has China declared a war on cryptocurrency?

According to experts, there’s one theory that it’s a part of the broader law and order push before the country celebrates its 100th anniversary of the Chinese Communist Party. Since

48 | September 2021 | Global Business Outlook

Technology \ Bitcoin mining

crypto has been synonymous with illegal activities, the government sees this as a win. The largest ever Ponzi in crypto was Plus Token and it was a Chinese project. In that scheme, scammers swindled $5.7 billion from investors and dozens were arrested because of it.

There is also another theory that since China wants to introduce its own digital yuan, which is a central bank digital currency (CBDC), which has been in development since 2014, it is cracking down on the cryptocurrency.

Partially, this decision is taken to ensure that the adoption of CBDC can see all economic activity. The digital yuan could enable the government to track spending in real time. But some other experts have also mentioned that bitcoin and CBDC are very different in nature, hence they can’t be considered as natural competitors. Hence, in

this case, the most likely motivator is that Beijing is looking to step capital outflows through stablecoins and cryptocurrencies. If China cuts off the flow of yuan to crypto, it will make a lot of difference.

Coming to the pricing of bitcoins, bringing the entire Chinese retail into crypto will surely make a huge difference in the market. But the good news is that as the crackdown becomes more and more severe, bitcoin has managed to stay flat, which indicates that the market has gotten accustomed to this change. Experts believe that by stopping the use of bitcoin and crypto in China will help bitcoin in the future.

If China’s goal was to cut down mining by 50 percent and ban trading, then its plan to punish shareholders by crashing bitcoin’s value didn’t work.

For example, even after banning Didi, its IPO went fantastically. By riding out

this storm, bitcoin proved its resilience where traders just moved overseas to continue their work. Some other experts believe that this controversy may be moot since the government's capacity to continue the bitcoin ban will erode with time. This type of news is expected to have less impact on bitcoin’s exchange rate than it has historically. While there are some industry shifts after this news, it's also important to remember that prior to this, bitcoin was banned multiple times in many other areas, and even then, the adoption of bitcoin is only growing more popular with time.

Another concern of China regarding bitcoin is that they make it easy to circumvent China’s capital controls, which restrict people from converting more than $50,000 worth of yuan into foreign currencies each year. If there are no restrictions on bitcoin trading, it is easy to buy large

Global Business Outlook | September 2021| 49

Technology China cryptocurrency

values of the digital token and quickly convert it into other currencies. Bitcoin mining also leaves a large carbon footprint, hence there is also a growing concern about its impact on the world.

Currently, the network consumes 70 terawatt-hours (TWh) of power on an annual basis, according to data released by the Cambridge Bitcoin Electricity Consumption Index (CBECI), which is more than Venezuela. The number decreased to more than half from its peak of 141.28 TWh in May. So far, only local governments have voiced their concerns over bitcoin’s power consumption, but they have been tasked with helping meet

national emissions goals. The country has pledged to reach peak emissions by 2030 and be carbon neutral by 2060.

Crackdown isn't new, but what’s different this time?

Among the numerous cryptocurrencies currently in the market, bitcoin is by far the most popular one. It is not backed by any precious metals or government credit. Bitcoin’s price is based on future speculations on how well it will perform in the market. Since it’s a comparatively younger currency, many experts think it’s a volatile asset to invest in. Over the past ten years, bitcoin suffered four separate losses

After China banned financial institutions and payment companies from providing crypto-related services, widespread protests were observed in June where people were mass-arrested and were suspected of using cryptocurrencies in nefarious ways

50 | September 2021 | Global Business Outlook

Technology \ Bitcoin mining

of at least 50 percent, something other assets rarely experience.

In 2013, China ordered third-party payment providers to stop using bitcoin.

Chinese authorities put a stop to token sales in 2017 and promised to go after crypto exchanges in 2019. Previously, it was observed that each time Beijing has lashed out at the crypto industry, the rules have softened. This year however, it feels different. After China banned financial institutions and payment companies from providing crypto-related services, widespread protests were observed in June where people were mass-arrested and were suspected of using cryptocurrencies in nefarious ways. That same month, regulators increased the pressure on banks and payment businesses to stop providing crypto services, and Weibo, China’s Twitter, discontinued its use. As of July, half of the world’s bitcoin miners are facing uncertainty after Beijing called for a severe crackdown on bitcoin mining and trading. Prior to this, experts have raised concern about China’s influence over the bitcoin market, since it accounted for 65 per cent of the decentralised network last year, but once mining started happening, the situation changed.

Why is China a hotspot of Bitcoin mining?

The easy answer is accessibility to cheap power. In the early 2010s, bitcoin mining activity started to exponentially increase in China because of cheap electricity. Miners concentrated in Xinjiang and Sichuan, which is known for its hydropower.

Xinjiang was first to face the wrath of China’s bitcoin crackdown and by the end of June, the bitcoin miners were asked to stop their operations on June 18. In 2020, Xinjiang alone accounted for more than a third of the global bitcoin hash rate, and more than half of China’s mining activity,

according to the CBECI. But miners cleverly kept moving around China and Sichuan accounted for 61 percent of the country’s mining activity at the peak of the wet season.

China’s global bitcoin mining share has been declining for a couple years, falling from 75 percent in September 2019 to 46 percent by April 2021, according to the CBECI. But the reason why it became so high is because cheap electricity incentivised companies to set up mining pools. As the name implies, these involve pooling resources from many different users to mine cryptocurrency. Today, the world's largest mining pools are either based in China or have Chinese founders.

F2Pool, BitMain’s AntPool and Binance Pool all have Chinese founders and some cryptocurrency companies even changed where they were incorporated during previous crackdowns, but they have their servers present in China.

People join pools because of relatively little computing power, and it can share large mining operations. Rewards are divided proportionally, hence if someone provides one percent of a pool’s computational power, receives one percent of the reward for each new block added to the blockchain. While this means people taking part in larger pools get less money, per block added to the blockchain, more computational power means the pool is more likely to add more blocks, bringing in more money. And this is what makes China’s mining pools the best and the most efficient in the world.

Xinjiang was first to face the wrath of China’s bitcoin crackdown and by the end of June, the bitcoin miners were asked to stop their operations.

In 2020, Xinjiang alone accounted for more than a third of the global bitcoin hash rate, and more than half of China’s mining activity, according to the CBECI

What does China’s crackdown mean for bitcoin After its crackdown, China has made bitcoins more available and affordable.

Less computing power on the network means it will be easier to add new blocks of transactions. While the mining profitability

Global Business Outlook | September 2021| 51

Technology China cryptocurrency

Bitcoin mining in April 2021

China 48.04% US 16.85% Kazakhstan 8.19% Russia 6.84% Iran 4.64% Malaysia 3.4% Canada 3% Germany 2.81% Ireland 2.29% Others 5.92% Source: Statista

initially suffered a hit, once enough people left the network, profitability returned to April levels, as reported by blockchain intelligence firm Glassnode. China’s strict crackdown on bitcoin mining is seen as a welcoming initiative by a lot of people in the country.

As China cracked down hard on Bitcoin, Peter Theil, PayPal founder and a vocal supporter of Donal Trump, mentioned that bitcoin could be used as a Chinese financial weapon against the US. According to a paper published in the Princeton University and Florida International University on how China threatens the security, stability, and viability of bitcoin, it was observed that Chinese miners could exploit the network latency of international traffic coming in through the Great firewall.

The paper mentioned that there is a chance that Beijing might attack the bitcoin

52 | September 2021 | Global Business Outlook

network for political reasons, which could lead to censoring specific bitcoin addresses or deanonymizing users and tracking their behaviour.

International effect of China’s crackdown on Bitcoin After China imposed a ban on bitcoin, international miners are reaping benefits from China’s effective ban on the energyintensive practice, and generating even higher profits and filling the void by creating digital tokens. China has been the biggest producer of bitcoin in the world and accounted for half of the global output.

Miners from other parts of the world said that since the Chinese production has cooled down, the market has opened up to other competitors. Bitcoin miners use powerful computers where they create new coins by solving complex mathematical

Technology \ Bitcoin mining

puzzles. The number of coins mined each day is fixed. Hence, if there are fewer rivals, it is easier and relatively cheaper to mint the new currency.

The amount of power needed to mine bitcoin globally has been cut down by half since China imposed strict rules for bitcoin mining, but at present, it stands about 30 percent lower than May. The profitability of bitcoins depends on the present market price, the cost, and the amount of electricity required to run the servers, and the rate at which the new units can be mined.

Hut 8 mining has benefited and the company notched a 241 percent year-on-year increase in mining revenues in the second quarter, bringing in $24.8 million. The company’s CEO also noted that June and July proved to be the best months as almost the entire Chinese presence was absent. UK-based mining company Argo Blockchain also reported a 180 percent increase in revenues in the first half of 2021. The company also mentioned that the reason for such a high amount of profit is because of a change in global mining conditions that allowed it to produce more digital coins without increasing the number of machines used.

Crypto future in China Despite all of this, Bitcoin’s dream of becoming the currency of the future remains distant. Given the way the blockchain manages bitcoin’s supply, it is just a poor version of fiat currency, which typically has its value actively managed by a central bank and follows the strict rule of demand supply. While many look for this appeal of bitcoins, it also makes bitcoin a poor asset, for example, when you are

buying a Tesla car, tomorrow you might realise that you spent a lot more for the car than you initially thought.

In order to continue its business, miners from China have tried to migrate to neighbouring countries like Mongolia or Kazakhstan, but many have been unable to transport the equipment across borders.

Bitcoin mining also poses a threat to our nature, and it accounts for 0.4 per cent of the world’s energy consumption, using more electricity annually than Finland or Belgium. Miners in China usually use more power than other countries as they still rely on coal-powered energy.

Outside China, bitcoin miners can be found in places that have an abundant source of renewable energy such as Norway and Canada. But as demand increases, specialist site operators have found it hard to build facilities rapidly enough. Industry experts have predicted that it will take at least a year or so for mining capacity to recover. There is a lot of new mining equipment being sent to the US and Canada instead of China, but data centre capacity is a bottleneck.

In the US, Texas has become one of the biggest contributors of the new mining landscape, while specialist sites in Norway and other European countries are stretched out for demand. The price and quality of computers required for mining crypto units has also declined. Before China’s crackdown on bitcoin, miners had to pay increasing prices for their computers as they searched for more efficient ways to acquire bitcoins. At present, since there are servers that are inactive in China, the price of computers have also sharply declined.

At present, the profitability of bitcoin is so high that even the oldest, least efficient machine can be profitable.

The Top 10 cryptocurrencies

1. Bitcoin $815 billion 2. Ethereum $344 billion 3. Cardano $45 billion 4. Ripple $36 billion 5. Dogecoin $31 billion 6. Polkadot $19 billion 7. Bitcoin cash $10.4 billion Source: Business Insider

Global Business Outlook | September 2021| 53

Technology Satellite broadband space economy

I

n the modern day, it is very difficult to perceive a world without the internet.

In short, we can literally say the world runs on it. From banking to shopping to booking a cab, we need the internet. However, according to the United Nations, around 20 percent of the world’s population still does not have access to 4G network coverage or better.

While internet access is pretty good in the western world, in Africa, more than 73 percent of the population does not have access. So how

54 | September 2021 | Global Business Outlook

do we solve this problem? The possible answer could be satellite broadband.

Over the years, we have seen satellite broadband projects SpaceX come into existence to extend the global internet coverage and make the internet accessible for everybody across the globe. Since the inception of Starlink, we have seen many other companies exploring the same.

According to a report by investment banking giant Morgan Stanley, satellite

Feature

Tech firms are using LEO satellites to deliver low-cost, high-speed internet even in the remotest of regions

Satellite broadband is the next big thing Tom Hardy

broadband has the potential to heavily slash the cost of data as demand from new technologies such as Internet of Things (IoT) and cloud-related tech explodes. Morgan Stanley predicts that the per-megabyte cost of wireless data will soon be less than 1 percent of the current price, which is very fascinating.

The true potential for satellite internet lies in

serving those regions where telco’s or internet service providers (ISP) has not been able to reach or the services are poor. Morgan Stanley further revealed that the race to develop satellite constellations that deliver low-cost, high-speed internet is heating up in the global space economy. it's been predicted that the global space economy will be worth $1 trillion

Global Business Outlook | September 2021| 55

Technology Satellite broadband space economy

Global space economy activity Commercial Infrastructure and support industries

28%

19.17bn

Commercial space products and services

51.3% 217.72 bn US govt space budget

11.2% 47.17 bn Non-US govt space budget

9.5%

39.74 bn Source: spacereport.org

by 2040. Satellite internet will account for between 50 to 70 percent of the growth.

While Elon Musk’s SpaceX’s Starlink is currently leading the market, we are witnessing new entrants in the market. Some of the other big players are Amazon’s project Kuiper, OneWeb, Hughes Net, TeleSat and Eutelsat. Starlink is the pioneer in this field and has around 1600 satellites in orbit. The company is planning to launch up to 42,000 new satellites by mid-2027. This is possible because of the Low Earth Orbit (LEO) satellites which operates closer to Earth, often at an altitude between 160 to 2,000 kilometres compared to Geostationary Earth Orbit (GEO) satellites that are at a distance of around 35000 kilometres from Earth.

Even though the concept of satellitebased internet service is not new, the low orbit satellite technology being developed by the likes of Starlink are proving to be transformative. Through these satellites, internet could be provided to the remotest of regions for offering services such as telemedicine or even to schools in rural areas where there is no internet access. It is very fascinating that with improvements to existing technology such as DSL, cable, fibre or even 5G, coupled with satellite broadband could potentially bridge the digital divide across the globe.

Satellite broadband is definitely the next big thing A few decades back, if we talked about the space race, it meant reaching the moon.

Many perceived the next space race will be to reach Mars, but, as it turned out, tech companies are now competing to connect hundreds or thousands of satellites to bring high-speed internet services which are also affordable to businesses, governments, schools, and individuals around the world, irrespective of their geographical presence.

Besides providing affordable internet services, these companies are also looking to solve problems faced by various industries.

Satellite broadband will be able to provide

56 | September 2021 | Global Business Outlook

better connectivity for the transportation industry. It can offer better navigation services as well as emergency services when it comes to the shipping industry as well as the aviation industry. Satellite broadband can act as communication backbones for IoT devices for processes such as fleet management and remote maintenance, infrastructure or mobile backhaul for other communications companies.

Currently, hundreds of satellites are already in orbit and more are scheduled to be launched in the coming years. Starlink is the leader with the largest satellite constellation with over 1600 satellites launched as of mid-2021. It is to note that even though the services could be available in almost every corner of the globe, Starlink can offer its services in jurisdictions it has obtained a licence in. As of September 2021, Starlink’s services are available in 16 countries only.

Project Kuiper or Kuiper Systems, as it is currently known, is a subsidiary of e-ecommerce giant Amazon. It received approval from the Federal Communications Commission (FCC) to deploy a large broadband satellite internet constellation to provide internet services. Kuiper Systems aims to deploy 3,236 satellites to be fully

Feature \ Space economy

serviceable and aims to achieve its target by 2029. Last year, in July, Amazon revealed that it would invest more than $10 billion in Project Kuiper. In December 2020, the company unveiled a high-level overview of the low-cost flat-panel antenna that it plans to use for the Project Kuiper satellite constellation.

UK’s OneWeb is ramping up its launch pace and is planning an initial 648-satellite constellation. Founded in 2012 by Greg Wyler, the company launched its first satellite in February 2019. The company, however, went bankrupt in March 2020 but emerged from the bankruptcy proceedings and reorganisation in November 2020. The company currently has new ownership which consists of the Government of the UK and Indian multinational company Bharti Global. In May 2021, OneWeb revealed that it would have enough satellites in the sky to provide its services in the UK, Alaska, Northern Europe, Greenland, Iceland, the Arctic Seas, and Canada.

Telesat, formerly Telesat Canada, is a Canadian satellite communications company headed by Dan Goldberg. In 2016, the company announced its plan to launch a 120 satellite low-Earth orbit (LEO) constellation of 120

satellites about 1,000 km in altitude. Last year, it announced that the number of satellites would significantly increase to over 1600.

Telesat currently has around 15 GEO satellites positioned 35,000 kilometres above Earth.

Eutesalat, which is the world's thirdlargest satellite operator in terms of revenues, already provides internet services in Europe, Africa and some parts of the Middle East. Konnect is Eutesalat’s satellite broadband initiative and the company wants to leverage its 40 years of experience in the field to provide affordable and reliable internet services.

The pandemic has fast-tracked satellite broadband developments In 2020, there were around 4.66 billion active internet users across the globe, which accounts for 65.6 percent of the entire world's population. This means more than 30 percent of the population still do not have access to the internet. Also, there are plenty of people with limited access to the internet or those who can’t afford it. The Covid-19 pandemic has given technological development a significant push. More and more people are going online to satisfy their needs online, be it carry out financial

While Elon Musk’s SpaceX’s Starlink is currently leading the market, we are witnessing new entrants.

Some of the other big players are Amazon’s project Kuiper, OneWeb, Hughes Net, TeleSat and Eutelsat. Starlink is the pioneer in this field and has around 1600 satellites in orbit.

The company is planning to launch up to 42,000 new satellites by mid2027. This is made possible because of the Low Earth Orbit (LEO) satellites which operates closer to Earth, often at an altitude between 160 to 2,000 kilometres compared to Geostationary Earth Orbit (GEO) satellites that are at a distance of around 35000 kilometres from Earth.

Global Business Outlook | September 2021| 57

Technology Satellite broadband space economy

Growth of internet users across the globe 2005

1100 million 2010

2025 million 2015

3030 million 2019

activities, banking or even order groceries.

The pandemic has also brought new urgency to the idea of internet access for all, and this could finally be possible with satellite broadband. Over the years, the internet will become a necessity and an important aspect of the standard of living.

More and more emphasis is being given to the idea of ‘internet for all’ and satellite broadband companies are leading the charge.

The pandemic has resulted in an increasing demand for better, more widely available and affordable internet connectivity, fast progress seems more inevitable than ever.

Satellite broadband vs Fibre While fibre broadband is the most used form of the internet currently along with mobile internet, it may not be the case in the future.

When Starlink’s new satellites went online for the first time, the beta testers download speeds were good enough to rival those of fibre broadband service providers. Once these satellite companies manage to fully develop their satellite constellations, they

will be able to offer better speed to their users. More satellites mean more bandwidth which means faster speeds. There are other advantages that satellite broadband has to offer that make it a far more interesting and better prospect compare to fibre optics.

The very first problem satellite broadband solves is that of geography or terrain. It is not possible for fibre broadband to be available in almost all parts of the world, especially in geographically challenged locations or places with rough weather. However, satellite broadband can access almost every part of the world as is best suited for areas such as rough terrains and places where it is difficult for fibre broadband to reach. We can say that fibre broadbands are best suited for urban areas with good infrastructures.

Satellite broadband also offers mobility, which means a person using satellite broadband can stay connected on the go, irrespective of which part of the world he is, and will not need to look for wifi signals or even good mobile signals. It would be able to

3969 million 35000 kilom etre s

Source: Statista

GEO fr o

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ar

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58 | September 2021 | Global Business Outlook

Feature \ Space economy

access high-speed internet in a desert where there are no wifi routers or mobile towers nearby. This will not be possible when it comes to fibre broadband, its usage is limited within fixed locations.

Satellite broadband companies such as Starlink promises an average internet speed of up to 1Gbps, which is significantly higher than the top speeds offered by its competitors, however, the real kicker could lie in Starlink's projected latency rate. Fibre broadband's latency speed is around 17ms on average, which is slightly faster than that of cable internet (20-30ms). Satellite broadband companies are expected to have lower latency. Starlink’s latency speed is expected to be below 20 ms with the potential to reach under 10ms.

There are also some aspects such as bandwidth and data rates where fibre broadband has an edge. Fibre optic generally has higher bandwidth with minimal electromagnetic interference. Satellite broadband, on the other hand, has lesser bandwidth and is prone to interferences.

Another problem when it comes to satellite broadband is that it is very expensive. It involves huge investments of millions of dollars to launch satellites into space. Also, the cost of providing uninterrupted services and maintenance costs would also be very high. The challenge for companies like Starlink and Amazon is to turn this venture into a profitable business.

Satellite broadband is not new; however, we are yet to see a successful business model in the past 20 years.

LEO Satellite vs GEO Satellite It is forecasted that the satellite broadband market will reach 3.5 million subscribers by the end of this year a nd will reach 5.2 million subscribers in 2026, growing at a CAGR of 8 percent. A report from ABI Research revealed that the industry could make potentially around $4.1 billion in revenues.

Geostationary Earth Orbit (GEO) satellites have been in orbit for more than 50 years and

are at a distance of around 35000 kilometres from Earth. These satellites are in the high-orbit and since they travel at the same angular velocity as the Earth, they remaining stationary. Low Earth Orbit (LEO) satellites operate very closer to Earth at an altitude between 160 to 2,000 kilometres. Even though the concept of LEO satellites is not new, it's only in the late 80s that scientists started to explore its potential.

GEO satellites were initially used to provide broadband services in areas where it was difficult to offer fibre broadband or mobile internet. Even though GEO satellites provided a decent internet speed of around 100Mbps, the fact that they are so far away from Earth was a big hurdle. This means latency speed was also higher and could go as high as 600ms. LEO satellites solve this problem and that is how such satellites came into the picture. Disrupting the GEO satellites, the LEO satellites offer the advantage of low latency which can be around 20 ms or even lower. Latency is important for activities such as online gaming or live streaming.

There are so some downsides to LEO satellites, the most important being many satellites will be needed to cover a specific geographical area. LEO satellites are smaller in size compared to GEOs, and they orbit the Earth many times per day.

This means to serve a particular area, the company must make once a satellite passes by, it must be replaced by another and the cycle will continue. This adds to the network complexities. LEO satellites are however less expensive to manufacture compared to GEOs. While the space internet race is heating up, we may have to wait a few more years to witness its full glory. The satellite broadband companies are ambitious but they are still in the building phase and even are still not fully equipped to offer services of the highest quality.

LEO satellites offer the advantage of low latency which can be around

20 ms or even lower.

Latency is important for activities such as online gaming or live streaming

Global Business Outlook | September 2021| 59

Technology

Interview Victor Mapunga Chief executive officer, FlexFinTx

Digital identity can transform Africa’s economic landscape GBO correspondent

D

igital identification is proving to be an important factor for social protection, financial inclusion and also the fight against the Covid-19 virus. In recent times, digital identity verification has become pivotal for onboarding

Compound Annual Growth Rate (CAGR) of 16.2 percent from 2021 to 2026. The UN and the World Bank envision that by 2030 every individual in the world will have a digital identity.

Since the pandemic, digitalisation has also accelerated as more and more people are now going online to buy products and services due to the lockdown measures introduced across the globe to curb the spread of the Covid-19 virus. According to a research report published by market research firm Grand View, the global digital payment market is forecasted to grow at a CAGR of 19.4 percent and reach $240 billion by 2028. This emphasises the importance of digital identity as we head towards a

We’ve built a decentralised, interoperable, fast & cheaper digital identity highway which utilises Self Sovereign Identity wallets

customers at banks and authentication processes by insurers. The process of digital identity verification done physically is time-consuming; however, when done digitally, it leads to efficiency. The ‘Digital Identity Solutions Market - Global Forecast to 2026’ report published earlier this year revealed that the global digital identity solutions market size is forecasted to grow from $23.3 billion in 2021 to $49.5 billion in the next five years, growing at a

60 | September 2021 | Global Business Outlook

more inclusive global digital economy.

According to a World Bank report, around 1 billion people across the globe do not possess basic ID credentials including 1 in 4 children. The report further reveals that there are many youths whose births were never registered, meaning they are not a part of the system at all. Also, there are many that possess identifications; however, they are of poor quality or cannot be reliably verified. Citing a McKinsey Global Institute report, the World Bank says around 3.4 billion people in this world have some

Technology | Digital identity

The global digital identity solutions market size is forecasted to grow from $23.3 bn in 2021 to $49.5 bn by 2026

form of identification but have limited ability to use it in the digital world.

Most of these people live in sub-Saharan Africa and South Asia. The World Bank report said, “They are typically members of the poorest and most vulnerable groups.

Women are disproportionately less likely to have official proof of identity. One out of every two women in low-income economies does not have a national ID or similar identity credential, according to the ID4D-Findex survey."

Some reports also suggest that nearly half of the adult population of some countries in sub-Saharan Africa lacks documentation and they are unable to open a banking account. Most of these people are rural farmers, low-income minorities, immigrants and also refugees. Even senior citizens in these regions or even the young population sometimes lack proper documentation for various reasons. These sections of people often find themselves not included in the financial umbrella and have limited contribution towards the digital economy. Lack of documentation of any kind often limits their housing, healthcare options and other socio-economic benefits. With digital identification, these sections of the population could have opportunities that were often lacking for them and at the same time, it promotes inclusion, reduces fraud, protects rights and increases transparency.

Digital identity has the potential to unlock a range of basic and empowering services for individuals, including financial inclusion, healthcare and education. It is without doubt technology will play an important role if we are going to achieve identity for all. But it is not going to be an arduous task and will require huge investments.

Kristalina Georgieva, chief executive officer, World Bank said that it will take nearly $12 billion to achieve identification for all. She further revealed that the World Bank will secure over $750 million investments in ID-related

Share of adult population without an ID, by income quintile

Poorest 20% Category Percentage Lower Income Countries (LICs) 45% Lower Middle-Income Countries (LMICs) 9.2% Upper Middle-Income Countries (UMICs) 3.9%

Richest 20% Category Percentage LICs 27.8% LMICs 5.3% UMICs 2.6%

Source- World Bank

projects in the next three years and we will strive to mobilise more financing from other sources.

Technology is bringing widespread changes all around, be it banking, healthcare, or even education. Technological changes are at an all-time high and technologies such as artificial intelligence (AI) the internet of things (IoT) and 5G are only going to intensify the changes and this means a greater emphasis will be given to digital identity.

According to a McKinsey report, in Brazil, China, Ethiopia, India, Nigeria, the UK and the US, extending full

Global Business Outlook | September 2021| 61

Technology

Interview FlexFinTx

digital ID coverage could unlock economic value equivalent to 3 to 13 percent of GDP in 2030. Over the years Africa has been a hub of digital revolution such as fintech or mobile money (M-Pesa) in particular. According to the report ‘Biometrics – Global Market Trajectory & Analytics 2020’ published by Global Industry Analysts, the Middle East and Africa (MEA) biometrics market is forecast to grow at an annual rate of 21 percent. The report further reveals that the global industry will reach $82 billion by 2027. According to the World Bank Vice President for Western and Central Africa, Ousmane Diagana, the African continent has strong digital growth potential and to fully explore its potential, digital identity systems have to be developed especially in the Western and Central African region.

With digital identity, Africa can transform its economic and political landscape. If properly explored and implemented, has the potential to unlock more inclusive digital economies. It can also lead to an increase in access to government services, financial products and healthcare services as well. Many African nations move forward with their own digital identity programmes.

However, the success will depend on adopting standard laws and norms which ensure data protection and regional interoperability.

FlexFinTx, a Zimbabwe-based firm established in 2018, through its flagship product, FlexID, has created an easily accessible and verifiable digital identity platform on the blockchain which like financial institutions and government services to users through various mobile interfaces; thus, making the unbanked, bankable.

According to its website, it helps develop self-sovereign digital identities, accessible to them even without the internet. FlexFinTx chief executive officer, Victor Mapunga, shares his views about digital identity, blockchain technology and the risk involved with digital identity among others in this exclusive interview with Global Business Outlook.

GBO Can you tell us a bit about the importance of digital identity?

Victor Mapunga: Traditional identity infrastructure has left out some 1 billion people in the world without any form of identification, this drastically increases the cost of verifying such individuals when it comes to service provision for example, financial services; thus, it’s far much easier to deny service. Digital Identity is the infrastructure upon which these gaps can be bridged in a globalised society.

62 | September 2021 | Global Business Outlook

FlexID is a self-sovereign digital identity, which means the digital identity is fully owned and controlled by the user.

FlexID allows users to securely exchange their credentials and gain access to services without intervening third parties.

Can you tell us about the problem of digital identity in Africa and how it can be solved?

What does FlexFinTx has to offer in this regard?

In 2018, I was trying to open a bank account in my home town of Mutare, Zimbabwe, having just come back from the 1st world, I was under the impression it would take me at most 30 mins to an hour. I immediately realised I couldn’t provide most of the requirements such as my ‘Proof of Residence’ and many more. It turns out it took weeks and months for some to finish the entire process.

There are 400 million Africans who face such challenges daily due to a lack of identification and the ease of verifying them.

FlexFinTx emerged due to such a need which cuts across different sectors from; finance, healthcare to education, verifying credentials in the emerging world is a daunting conquest. Through FlexID, we’ve built a decentralised, interoperable, fast & cheaper digital identity highway which utilises Self Sovereign Identity wallets to allow different stakeholders across different industries to easily verify credentials and individuals.

Can you tell us how FlexFinTx is using blockchain technology to offer digital identity solutions?

The Flex Network (FN) is a Layer 2 network built on top of

Technology | Digital identity What are the risks when it comes to digital identity?

The naive solution is digital identity, but history has proven that central data stores i.e, aggregators are high-value hacking targets and can affect millions of users in case of a leak as there’s a central point of failure.

FlexID is a self-sovereign digital identity, which means the digital identity is fully owned and controlled by the user/thing being referred to. FlexID allows users to securely exchange their credentials and gain access to services without intervening third parties.

What role will digital identity play when it comes to the evolving global payment landscape?

the Algorand blockchain Every issuing authority and verifier organisation will be required to either run or use a SaaS API, to interact with a FN node. The node acts as a trustless way to create, update, and fetch information about digital identifiers (DIDs) from the blockchain. This enables verifiable credentials to be independently issued and verified against the public keys associated with the issuer and holder DIDs.

What value propositions FlexFinTx has to offer that differentiates it from its competitors?

Issuers: Issuance of digital credentials on the FlexID network is cheaper, faster, and more secure than physical credentials, which are prone to forgery and are expensive to issue and manage.

Verifiers: Verification of digital credentials on the FlexID network is cheaper and faster than physical credentials, enabling verifiers to onboard customers faster and offer their services to more users that could not previously obtain physical credentials. It also reduces the risk of fraud in the identity verification process, as digital credentials on the FlexID network cannot be faked.

Holders: Ownership of digital credentials enables individuals to access services digitally and remotely without visiting in-person offices typically only in major urban centers.

FlexID digital credentials are also easily recoverable compared to physical credentials, and users fully control when their credentials are shared.

Digital Identity in particular, self-sovereign identity wallets, will allow users the flexibility and fluidity amongst variable payment channels from crypto to fiat. This is an area FlexID is working towards as Africa leads in mobile payment solutions, there’s no reason you can’t authorize a payment with your FlexID.

In your opinion, what are the challenges or hurdles that the sector or FlexFinTx in particular, have to overcome in the coming years?

Interoperability is a must; we must build interoperable infrastructure before we build closed up systems again; perpetuating the problem further. Adoption is also key; we must work smarter to bring traditional industries onto next generation identity platforms.

What is the outlook for the identity verification industry in the next few years?

The catalyst moment is already here, the combination of an explosion of decentralised platforms and payment options; further, increasing the need for identity verification platforms as billions of more people enter the digital world as more people are connected online.

Global Business Outlook | September 2021| 63

News

Technology

Softbank invests $3 bn in LatAm tech firms

S

oftbank Group, recently announced that they are investing $3 billion in Latin American tech companies and also announced the launch of the SoftBank Latin America Fund II, its second dedicated private investment fund focused on tech companies in Latam, according to media reports.

The latest funds will build on Softbank’s already existing $5 billion Latin America Fund, which was first announced in March 2019 and was formerly called the Innovation Fund.

According to the firm, Softbank has invested $3.5 billion in 48 companies with a fair value of $6.9 billion. Additionally, the Japanese conglomerate has also invested in 15 unicorns out of that fund, including companies like QuintoAndar, Rappi, Mercado Bitcoin, Gympass, and Madeira Madeira.

Recently, the company also co-led a $350 million Series D funding round in Argentine personal finance management app Ualá.

The firm also mentioned that it has participated in significant value uplift for portfolio companies. Softbank has also backed companies across the region including in Brazil, Mexico, Chile, Colombia, Argentina and Ecuador.

Recently, the company also coled a $350 million Series D funding round in Argentine personal finance management app Ualá

Microsoft’s launches financial cloud services Microsoft is making its financial services-specific cloud offering available from next month with Virgin Money UK on board as an early user, according to media reports. Over the last year, Microsoft has been rolling

out more cloud services. Till now, the software giant has already unveiled services for the healthcare and retail sectors, its latest offerings are specific to financial services, manufacturing and non-profits.

64 | September 2021 | Global Business Outlook

Financial cloud services were first unveiled in February and it promises a foundation of privacy, security, and regulatory compliance.

In a blog, corporate vice president, worldwide financial services, Bill Borden mentioned that the offering brings together cloud services across Microsoft Azure, Microsoft 365, Microsoft Dynamics 365, and Microsoft Power Platform, which is underpinned by the industry data model.

Borden also added that the introduction of this cloud service will improve the experience of retail banking employees and customers.

This, in turn, will help unify customer profiles, onboarding, customer engagement and collaboration.

Google Deepmind

Deepmind announces profit for the first time

Global blockchain market to reach $104 bn by 2028 The global blockchain market growth is expected to be valued at $104 billion by 2028, according to a report published by Fortune Business Insights. The market is projected to grow by a compound annual growth rate (CAGR) of 55.8 percent between 2021 and 2028.

In 2020, the blockchain market was valued at $3.06 billion and the growth was accelerated by the advent of technology and blockchain in particular.

Additionally, there has also been an increasing demand for cloud-based technology solutions in recent years.

According to an analysis report published by Research Dive, the global blockchain IoT market is expected to grow by nearly $5.802.7 million in revenue by 2026 and a CAGR of 91.5 percent from 2019 to 2026.

Google’s UK artificial intelligence unit DeepMind has announced its first-ever profit last year, after losing half a billion pounds in 2019.

This first sign that Google’s huge investment in the research outfit is starting to pay off.

This profit comes after years of losses incurred since Google acquired DeepMind in 2014 for about £400 million.

DeepMind’s revenue is derived entirely from applying its technology to commercial Alphabet projects. It rose more than three times in 2020 to £826 million. Additionally, staff costs and other expenses rose to £780 million.

The DeepMind from the Google team embeds its AI technology into other Alphabet products. The company is split between London and California and

has around 100 employees who are working on different product areas within Alphabet including ads, sales, shopping, YouTube, text-to-speech, cloud, infra and Waymo, a self-driven car company. Since Deepmind’s revenue is rising steadily, its sales are exclusive to Alphabet and are described as research and development services.

With the newly acquired profit, the company plans to make significant progress in solving intelligence to accelerate scientific discovery. The company is also proud of its research which was powering products and infrastructure and has improved the lives of billions of people.

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Economy Dubai Economy

66 | September 2021 | Global Business Outlook

Analysis \ Dubai Expo 2020

Analysis

Expo 2020 Dubai a driver for UAE economy

The mega event will lead to foreign investment opportunities, economic diversification and provide a timely boost to tourism and hospitality

Tom Hardy

A

fter being postponed by a year due to the coronavirus pandemic, the Dubai Expo 2020 is scheduled to start on October 1st and conclude on March 31st, 2022.

It is estimated that nearly 25 million visitors will attend the Expo this year. Held every five years, the Dubai Expo allows countries to showcase their latest developments in fields such as architecture and technology. Around 200 participants are expected to be part of the Expo which includes nations, multilateral organisations, local and foreign businesses as well as educational institutions from across the globe.

Reem Al Hashimy, director-general of the Dubai Expo 2020 said that despite travel restrictions due to Covid-19, Dubai Expo 2020 is expected to be a success and hit pre-pandemic numbers. He said that the world has gone through these galactical shifts over the last year but now with vaccines being rollout. He believes that the situation will settle by October and be far more positive by then.

The pandemic proved to be disastrous for the UAE economy as well, as it shrank 6.1 percent in 2020 as a result of the coronavirus pandemic and the dip in demand for crude, according to the Federal Competitiveness and Statistics Centre. It was further revealed that the non-oil economy in the UAE also shrank by 6.2 percent during the period. However, economic growth is expected to return in 2021

as economic activities are resumed across the globe.

Even though the event was postponed by a year, the government decided to still call it Dubai Expo 2020. According to the UAE government, it will be the largest event ever to have happened in the Middle East. It brings in foreign investment opportunities worth $100 to $150 billion, economic diversification, provides a timely boost to tourism and hospitality and also boosts the real estate sector in the region.

Dubai Expo 2020 a key economic driver With borders sealed and people advised to stay indoors, the UAE economy took a beating in 2020. The oil price war and the slump in demand for crude added to UAE’s miseries. The postponement of Expo 2020 did not help either. However, Expo 2020 is finally happening and it is expected to be a major economic driver. The event is

Global Business Outlook | September 2021| 67

Economy Dubai Economy

UAE GDP GROWTH 2016

3% 2017

0.8% 2018

2.9% 2019

3.7% 2020

-3.5% 2021

3.3% Source: Statista

arguably the biggest to be held in the Arab world and it comes at a time when the whole world is battling a global recession.

According to the Dubai Statistic Centre, its economy declined by 10.8 percent in the first half of 2020, however, the economy is forecast to grow by 4 percent in 2021.

Along with stimulus packages, the government did announce reforms to attract investment and help businesses in the region grow.

This resulted in the International Monetary Fund upgrading the growth outlook for the UAE to 3.1 percent for the current year.

The government is also hoping that the World Expo will help revive the economy. Dubai is gearing to

68 | September 2021 | Global Business Outlook

welcome nearly 25 million new visitors to the emirates despite the pandemic. This highlights the massive potential of the expo and what it could mean for the economy.

Besides attracting millions of visitors, the mega event will also provide a stimulus for development which will lead to an increase in economic activities in the region.

Dubai won the rights to host the prestigious event in 2013 and since then, considerable investments have been made throughout the emirate. We have already seen big infrastructure projects undertaken as a result of the expo. It is to note that the event offers historical significance to the UAE as it is the first large-scale international event to be hosted in the Middle East and North Africa (MENA) region.

The expo has already resulted in many developers fast-tracking their redevelopment and expansion projects. To

Analysis \ Dubai Expo 2020

accommodate the huge influx of tourists, new hotels were built. The hospitality and real estate industries are expected to benefit from the expo which will ultimately lead to job creation.

Expo 2020 Dubai expected to drive real estate demand Another sector that is expected to see a big impetus is the real estate sector. Dubai’s real estate has been depressed for quite some time due to an oversupply in the market. However, as a result of Expo 2020, Dubai has made significant investments in real estate projects. One of the major benefits of hosting such a mega event is investments in real estate. Expos in the past have drastically changed the host nations, and the same is being predicted for Dubai.

According to an E&Y report, Expo will create nearly 49,700 full-time jobs this year and contribute around Dh122.6 billion to the Dubai economy.

Tourists flying in for the expo are sure to be attracted to what the real estate sector in Dubai has to offer. The overall socio-political stability offered by the UAE combined with the world class modern infrastructure along with sociopolitical stability makes Dubai a great place to invest in.

In 2020, rents and property prices in Dubai declined which resulted in record transactions in the market property market in Dubai. In the fourth quarter of 2020, we saw a massive decline in the off-plan segment, however, the secondary market moved in an upward trajectory.

As a result, many projects slowed down.

Now, developers in Dubai and the UAE are hoping for positive growth as a result of Expo 2020.

According to a report by Dubai Chambers, business conditions in Dubai is forecast to see a positive change in the third quarter of 2021 as confidence in companies and investors return once again. Also,

according to an analysis by S&P, offices are reopening and the staff are returning to their workplaces in Dubai quicker compared to the financial hubs across the globe. Due to the pandemic, rentals and sale of office spaces took a severe hit as companies adopted work from home policies, however, as things return to normal, that is expected to change.

As a result of the pandemic, the e-commerce and logistics enterprises have boomed not only in the UAE but in most markets across the globe. This has resulted in an increase in warehouses and storage demand. The pandemic has also forced many businesses to go online and obtaining an e-trade licence in the emirate is not a difficult task. Also, Expo 2020 is likely to create a large number of job openings for residents across few sectors including hospitality, architecture, service sectors and infrastructure development.

It is without a doubt that the much-anticipated Expo 2020 is going to give Dubai’s real estate sector a significant boost. A lot of investors are willing to have their base in UAE, as the rules and infrastructure are promising fascinations as any other major city in the world. The Dubai Expo 2020 and other factors such as flexibility in loan repayment, visa terms for investors will lead to the rise of Dubai’s real estate market. The policy reforms undertaken to create a business-friendly environment in the region by the government will also play an important role to drag investors back to the emirate.

The World Expo 2020 is expected to have a positive and far-reaching

% MENA REGION: GROSS DOMESTIC PRODUCT (GDP) IN 2020 Saudi Arabia

701.47 bn Iran

635.72 bn Israel

402.64 bn Egypt

361.85 bn UAE

354.28 bn Iraq

172.12 bn Qatar

146.09 bn Oman

63.19 bn Jordan

43.38 bn Source: Statista

Global Business Outlook | September 2021| 69

Economy Dubai Economy

impact on Dubai’s real estate market.

Over the last couple of months, we have witnessed that real estate prices have gradually started to pick up once again.

Experts are hoping this will result in real estate developers in the UAE undertaking construction activities. A lot has been done by the government over the years to make expats feel welcome in the emirate and build confidence, which will lead to them investing their money in the emirate.

Dubai Expo 2020 will boost UAE’s economy by $33.4 bn According to the EY report ‘The economic impact of Expo 2020 Dubai’, Dubai Expo 2020 will boost UAE’s economy by $33.4

Dubai Expo 2020 is also in line with UAE vision 2030 and intends to contribute to new business generation, GDP growth and job creation across the region to support a sustainable, resilient and diversified economy

70 | September 2021 | Global Business Outlook

billion and support 905,200 job-years between 2013 and 2031, which is equal to nearly 49,700 FTE jobs per annum.

During October 2021 and March 2022, when the Expo is scheduled to take place; it is forecasted to add the equivalent of 1.5 percent to the UAE’s GDP. Matthew Benson, Partner, Strategy and Transactions, MENA, EY said in the report that Expo 2020 is an exciting long-term investment for the UAE, and is expected to have a significant impact on the economy and how jobs are created directly and indirectly. As the host, Dubai aims to use the event to further enhance its international profile and reputation. The event will celebrate innovation, promote progress and foster cooperation, and entertain and educate global audiences.

The major benefiter will be the construction sector as projects are undertaken to build hotels, building the site and supporting infrastructures such as roads and bridges. Also, the construction of the Dubai Metro Route 2020 line was announced. The small and medium

Analysis \ Dubai Expo 2020

enterprises (SMEs) in UAE will receive around Dh4.7 billion in investment during the pre-Expo phase. The sector is forecast to support 12,600 job-years which are in line with Expo 2020’s goals.

Further, during the period of October and March, tourists will spend significantly on hospitality, tickets, food and beverage, merchandise, accommodation and transportation and communication which will propel economic activities in the region. Nearly 70 percent of visitors to the Expo 2020 are expected to come from outside the UAE. This provides the hospitality industry in Dubai a massive impetus to capitalise which will again contribute to economic gains. Dubai Expo 2020 is also in line with UAE vision 2030 and intends to contribute to new business generation, GDP growth and job creation across the region to support a sustainable, resilient and diversified economy.

What will the UAE economy look like in the next few years?

The UAE’s open economy, which is the Arab world’s second-biggest economy, heavily relies on crude oil and tourism.

It confronted a double whammy shock with a dip in both price and demand of oil. Even though the economy is trying to diversify, it has a long way to go. The Covid-19 pandemic attacked the UAE economy on the two fronts it heavily relies on. Oil demand dipped as a result of the pandemic. Borders were sealed and flights were grounded, which led to severe losses of the aviation as well as the tourism and hospitality sector.

As a result of the pandemic, the UAE economy contracted by 6.1 percent in 2020, according to the Federal Competitiveness and Statistics Centre. It was the first time that the UAE economy contracted since the financial crisis of 2008. Economic recovery depends on factors such as vaccine rollouts,

exposure to tourism and stimulus packages to support businesses and households in the emirate. This is why the Dubai Expo 2020 is going to play an important role not only in an economic recovery but to drive growth in the coming years.

According to the Central Bank of UAE, the value of the country’s goods and services assessed with regard to inflation is expected to rise by 3.5 percent in 2022. This was revealed in the central bank’s annual report. Dubai’s economy is forecasted to maintain 3.8 percent to 4.6 growth over the next 5 years, according to a paper published by the London based Capital Economics organisations.

Moody’s also reaffirmed a positive rating for UAE and praised the economy for the government's rapid and sufficient support to cope with the shock. The agency estimates the country’s GDP to return to pre-pandemic levels in three years.

As the third-largest oil exporter from the Gulf, the hydrocarbon sector is still a major contributor to the emirate’s economy. According to the Organisation of Petroleum Exporting Countries (OPEC), global oil demand is forecasted to grow by 6 million barrels per day (bpd) this year as economic activities are resumed in every part of the world.

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Economy Global economic recovery Covid-19 vaccination

Feature

Due to unequal distribution of the Covid-19 vaccine, the economies of rich nations are thriving whereas the poor countries are showing a stark decrease

Vaccine inequality hinders economic recovery Rachel Taylor

72 | September 2021 | Global Business Outlook

B

y now, the Covid-19 pandemic has reached almost every country in the world and it has left a devastating effect on the global economy. As the world stood still, governments from all over the world witnessed plunging economies. Since then, a number of vaccines have been developed across the globe and some are still in the development phase. But we also need to recognise that vaccine programmes are an investment for any country as they improve public health, life expectancy, and work performance. Swift vaccination can also reduce government spending on disease treatment and control. Without the vaccine, it will be extremely difficult to end the spread of Covid-19. The pandemic launched an economic crisis unprecedented in speed and clarity. In order to contain the disease, most countries ordered nonessential businesses to shut down. What followed was a massive number of people losing their jobs and the demands of certain products plugning all over the world.

The Covid-19 pandemic also showed its effects on the fragile economy of Middle East and North Africa (MENA) as the region faces lockdown measures, interrupted supply chain, major declines in tourism, and temporarily low oil prices. Iran was one of the early victims of the pandemic, with a first wave of fatal cases as early as March 2020. Similar to Europe, the MENA regions, barring a few countries, faced three

waves of the pandemic. Disruption of the global value chain and capital flow also affected the domestic production and demand, not to mention the confinement measures imposed for containment reasons in most of MENA countries brought the economy for many sectors to a standstill.

Most governments have responded with monetary and fiscal measures to protect

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Economy Global economic recovery Covid-19 vaccination

companies from going bankrupt. The effectiveness of these measures ensure a swift recovery once the spread of the virus is under control. But how well these sectors perform also depends on how well they were doing before this tragedy struck.

Vaccine recipient per continent 1. Asia

59%

2. Europe

17% 3. North America

16% 4. South America

6% 5. Africa

1.7% 5. Oceania

0.3% Source- Al Jazeera

Vaccines are vital for global economic recovery While the Covid-19 vaccines are one of the most successful ways to get the world economy back on track, it has also been witnessed that vaccines are not equally available in all the regions. Early during the pandemic, when Pfizer announced that they have come up with the vaccine for Covid-19, they also mentioned that they intend to profit from this. In the first three months of 2021, Pfizer’s vaccine brought in $3.5 billion in revenue and hundreds of millions in profit.

Other companies that have developed the vaccines are making marginal profits as a result of Covid-19. Moderna received public funding to develop its Covid-19 vaccine and expected to earn in billions from the vaccine sales. Even with AstraZenca and its ‘nonprofit’ model, it will receive billions in revenue and it can also raise its price once the pandemic is considered to be over.

Amid all of this, the rich nations are refusing to share their vaccines with the developing nations speedily or equitably.

While 60 percent of the adult population in the UK is completely vaccinated, only 1 percent of Uganda’s population has received both the doses needed. According to data, the 50 least wealthy nations of the world are home to 20 percent of the entire world’s population and have received only two percent of vaccine doses. Following the news of the release of the first Covid-19 vaccine, the Organisation for Economic Co-operation and Development (OECD) mentioned that there is hope for the first time since the pandemic began. Hopes of life one day returning to a semblance of normality for the world were given a huge shot in the arm, quite literally, after Pfizer and BioNTech announced that

74 | September 2021 | Global Business Outlook

they have developed a Covid-19 vaccine vaccine that is more than 90 percent effective in preventing the contraction of the virus.

In response to this, the International Monetary Fund (IMF) stated that a faster global economic recovery was feasible since it meant that transmission among people will be reduced, and that will allow activity to return more rapidly to pre-pandemic levels than currently projected, without triggering repeated waves of infection. Experts have predicted that from the middle of 2021, global recovery will start strengthening as vaccines are rolled out across the world, and socialdistancing measures begin to be relaxed. While the recovery path is proving to be bumpier than expected, as the second wave of the virus prompts new restrictions, the vaccine news is very positive for the economic outlook over the next two years. Rating agencies such as the Global Economic Outlook published in December see global gross domestic product (GDP) falling by 3.7 percent in 2020, which is smaller than the 4.4-percent contraction it predicted in September.

However, Europe and North America will contribute less than their respective weightings in the world economy. According to experts, the European Economy is predicted to decline by 3.6 percent in 2021 and 3.3 percent in 2022, while the US economy is projected to expand 3.2 percent in 2021 and 3.5 percent in 2022.

Even after six months of vaccine rollout, not everyone had received them immediately. In fact, time and again we have seen headlines regarding the vaccine crisis in many parts of the world, especially in Southeast Asia and Africa. Currently, there are not enough doses for 7.8 billion people of the world and it’s likely to stay this way until some time. A lot of work is needed to ensure the world can successfully move into a post-COVID era with the global economy operating once again at full capacity.

Vaccine inequality could disrupt growth The International Monetary Fund (IMF) has released a stark warning for the

Feature \ Vaccine inequality economy

global economic recovery, saying that the divergence between higher- and lowerincome nations is getting worse because of Covid-19 and its highly unequal rollout of vaccines. In it’s updated report titled ‘World Economic Outlook’, IMF said overall economic risk remains significant. The report also showed an upward growth for all developed nations but downgraded the prospects for emerging and developing markets, showing that the recovery is largely confined to specific regions and countries.

The global economy was projected to grow at the rate of 6 percent in 2021 and 4.9 percent in 2022, which is also considered to be the strongest rebound since the 1980s, when the economic body started keeping records. The 2022 estimate was made earlier this year, keeping in mind that experts expected the virus to slowly die down. Both the above projections are made keeping in mind the expectations of further fiscal support in the US and the stronger growth trend observed in the wealthier nations.

Gita Gopinath, chief economist of IMF mentioned that if the pandemic gets worse,

the already fragile economy would tighten further, which, in turn will inflict a double hit on almost every emerging market, thereby severely setting back their recovery. But, for emerging and developing markets as a group, growth projections for this year were cut down by 0.4 percent from the previous number revealed by the IMF. The primary reasons behind the lowered numbers are lower vaccination rates, higher infection rates, and less fiscal firepower to support their economies. Gopinath did mention that the primary reason for the downgrading of the market is the Covid-19 virus. She also mentioned that amid all of this, if there is political instability and geopolitical risks, the inequality will worsen further.

While the developing economies of the world saw annual per capita income decline by 2.8 percent relative to pre-pandemic levels, the IMF said the decline was much more for middle and lower income countries, standing at 6.3 percent, except China. It has been more than a year since the pandemic started and vaccine access still remains as the best option for global recovery. IMF in its

Global vaccination rates 1. North America

41%

2. South America

26% 3. Asia

22% 4. Europe

38% 5. Africa

2% 6. Oceania

16% Source- Al Jazeera

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Economy Global economic recovery Covid-19 vaccination

The lowincome nations are at a risk of facing upward price trends, especially if food costs don't go down.

This could increase the borrowing cost of middle to lower-income countries, along with some existing concerns

report also mentioned that even rich nations with better rollouts may face headwinds if the virus continues to circulate around the world. According to a calculation by the IMF, across advanced economies, nearly 40 percent of people have been fully vaccinated.

Compared to the emerging markets, that rate is only 11 percent and only a tiny fraction for lowest income countries.

Seeing these trends, the IMF urged the other countries to improve their cooperation on fighting the pandemic, mentioning that it has strong economic benefits. The latest report mentioned that better global cooperation on vaccines can help prevent new waves of infection and emergence of new viruses, which, in turn will end the pandmeic sooner. And as we all know, the sooner the pandemic ends, the faster everything will be back to normal, especially among emerging markets and developing economies.

Another strong area of divergence being offered by the government is fiscal support.

For many of the world’s lower income countries, the support given was already depleted last year. During the same period, the low-income nations are at a risk of facing upward price trends, especially if food costs don't go down. This could increase the borrowing cost of middle to lower-income countries, along with some existing concerns.

Gopinath also mentioned that central banks don’t need to take any action immediately, but they should be prepared to stick to their stricter policies if price rise keeps increasing.

One way to help ease this massive pressure is the IMF’s issuing $650 billion in Special Drawing Rights (SDRs). These funds can help a lot of countries around the world to cope with the economic fallout from the pandemic but the allocation will favor wealthier nations since the distribution is based on quota share by the IMF. Some governments and activists are calling for wealthier nations to donate their chunks of the allocation to those in need.

While Gopinath didn’t exclusively promote this proposal, she lent her support to the idea.

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Covid-19 delta variant a growing concern The rapid spread of the delta variant of Covid-19 is causing economists to worry about Europe’s economic outlook as the risk of infection rises along with reintroduction of travel with social restrictions. In the recent months, we have witnessed the lifting of lockdown measures across many regions in Europe, which, in turn, has led to an increase in business activity, shopping, and household earnings. This is making economists forecast a positive economic outlook for Europe. However, these assumptions seem doubtful ever since the infectious delta variant started accounting for the majority of new cases in many European countries and is driving infection rates up to their highest level for months. Germany and France warned their citizens against travel to Spain because of the growing number of delta variant cases.

According to recent media reports, Spain’s tourism sector suffered a major blow as the country crossed Portugal, registering the highest number of cases in mainland Europe.

This period was critical for the economy to grow as it attracts a lot of global tourism.

Pablo Hernández de Cos, governor of the Bank of Spain mentioned that the forecast of strong economic rebound was made keeping in mind that the global health crisis will be averted after the summer and the Spanish tourism sector will be back on its feet. He also warned saying that there is still a lot of uncertainty surrounding the new Covid-19 variants and what kind of containment measures we need to take to contain the spread further. The European Centre for Disease Prevention and Control in its July report mentioned that infection rate for the EU increased to 51.6 per 100,000 people, but hospitalisation and death rates remained stable.

Paolo Gentiloni, the EU’s economics commissioner, said the forecasts did not undertake the repercussions of the delta variant. It was rather a side effect or a

Feature \ Vaccine inequality economy

downside risk. Hospitalisations and deaths from the virus remain very low, while more than 70 percent of EU adults are fully vaccinated. Economists have pointed out that the delta variant is primarily targeting the younger people, who are less likely to fall fatally ill. Despite the rise in cases, the Spanish government reports that hospitalisation rate is only 2.6 percent of beds occupied by Covid-19 patients compared with 2 percent a week ago and the infection rate is less significant among the vaccinated people, when compared to the unvaccinated ones.

India is one of the countries that faced the worst wrath of the delta variant. The infectious strain was discovered last October and because of a casual attitude towards safety measures and a lack from the government’s side, it led to a disastrous second wave, and since then, has swiftly spread globally. The variant, taking everyone by surprise, has managed to dethrone the previously dominant alpha variant, which was first detected in the U.K. last fall, and has been responsible for new infections in Europe along with a steep rise in cases in the U.S. The World Health Organisation has already warned that, based on the estimated transmission advantage of the delta variant, it might rapidly cross other variants and become the dominant circulating lineage over the coming months. WHO also noted that the presence of the delta variant over the last month crossed the 75 percent mark in many countries including Botswana, China, Denmark, India, Indonesia, Israel, Portugal, Russia, Singapore, South Africa and the UK, Bangladesh, Australia.

Fortunately, ever since the cases peaked in May, the situation has improved a lot. On May 7, the cases in India stood the highest at the astounding number of 414,188 infections and several thousands deaths. On August 22, India reported 30,948 Covid-19 cases and 403 deaths in 24 hours. Nonetheless, after the US, India has the second-highest number of recorded Covid-19 cases in the world, with

over 31.2 million registered cases and almost 419,000 recorded fatalities. A number of public health officials mentioned that the regional lockdowns in May reduced social interaction and an increasing number of antibodies against Covid among the general population were the primary reason for the decreasing number of Covid-19 cases in India. Overseeing one of the world’s largest vaccination drives is a massive undertaking since India has to vaccinate around one billion adults and the total vaccination rate remains sluggish when compared with other countries around the world.

Countries with highest vaccination rates

Global economic outlook positive

85.59

The economic prospects of the world have changed sharply from the April 2021 World Economic Outlook forecast in 2021.

The inequality of vaccine distribution has divided the world into two parts- those who can afford the vaccine and look forward to a comparatively normal life later this year and those that will still face resurgent infections and rising COVID death tolls. The recovery, however, is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere.

The global economy is projected to grow 6 percent in 2021 and 4.9 percent in 2022.

Prospects for emerging markets and developing economies have been marked down for 2021, especially for Asia. It is also important to keep in mind that slower than expected vaccine rollout will help the virus mutate further and it might again lead to tightening economic conditions. The actions taken by global economic bodies also play a vital role here. A $50 billion IMF staff proposal, jointly endorsed by the World Health Organization, World Trade Organization, and the World Bank, provides clear targets and action aimed at ending the pandemic. The proposed $650 billion General Allocation of Special Drawing Rights at the IMF is set to boost the assets of all economies and is expected to ease liquidity constraints.

1. Israel

121.63 2. UAE

115.75 3. Chile

86.65 4. Bahrain

5. UK

82.52 6. US

80.98 4. Hungary

74.65 5. Serbia

59.10 Source- Statista

Global Business Outlook | September 2021| 77

News

Economy

Brazil’s GDP is projected to grow by 5.3%: IMF

E

arlier last month, the Executive Board of the International Monetary Fund (IMF) concluded that Brazil’s economy has performed better than expected and is projected to grow by 5.3 percent in 2021. GDP regained its pre-pandemic level in the first

quarter of 2021 and the economy continues to flourish and is supported by booming terms of trade and robust private sector credit growth.

The economy was also helped by some renewed lockdown measures after a severe Covid-19 wave earlier this year and the

rollout of vaccination have helped bring down infections since April, with new daily Covid-19 cases and deaths falling significantly from their peaks. The government also has a significant amount of vaccine doses to fully inoculate the entire adult population in 2021, with the most vulnerable population expected to be fully inoculated by the end of the year.

Inflation is expected to fall steadily from recent peaks by the end of 2022. Additionally, public debt is also expected to drop to 92 percent of GDP in 2021 and remain around that level over the medium term.

Post-Brexit

Boris Johnson promises revamp of post-Brexit economy British Prime Minister Boris Johnson recently promised to repair the UK economy by cancelling cheap foreign labour from the country. Mentioning that people might

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panic buy at petrol stations, there might be hoarding situations, with retailers even warning of a bleak Christmas but, the UK Prime Minister says that the short-time pain is worth it.

Johnson also mentioned that the country is dealing with the biggest underlying issues of the economy and society alike and the current government is tracking problems that no other government has previously thought of facing. The government is embarking on a new direction which has been long overdue for the country. During this speech, he also vowed not to go back to the pre-Brexit model of uncontrolled immigration.

Additionally, British businesses will have to invest in their workers and in technology to push the country "towards a high wage, high skill, high productivity economy."

The government is embarking on a new direction which has been long overdue for the country.

During his speech, he also vowed not to go back to the pre-Brexit model of uncontrolled immigration.

Dubai economy to grow by 3.1% in 2021

Japan

Fumio Kishida takes office as Japan’s prime minister Fumio Kishida has led Japan's ruling Liberal Democratic Party (LDP) to victory and by becoming the next prime minister the world's thirdlargest economy out of the Covid-19 pandemic, according to media reports. The 64-yearold Kishida was elected leader of LPD last week and was officially confirmed as the country's 100th prime minister following a parliamentary vote.

Kishida also announced a new cabinet and out of 20 members, 13 have no previous Cabinet experience, three are women and the average age is 61. The party's popularity fell after it was pushed to host the Tokyo Olympics despite public opposition. Kishida, who was formerly a foreign minister, beat Taro Kono, who was widely regarded as the most popular candidate. Given that he is

entering this position post a global pandemic, he faces a range of tough issues including post-pandemic economic recovery and confronting threats from North Korea.

He has also suggested a health crisis management industry in order to deal with the pandemic and backs the idea of passing a resolution condemning China's treatment of the Uyghur minority.

Dubai’s economy is forecasted to expand by 3.1 percent this year and will be primarily driven by effective policy measures that minimised the impact of Covid-19, according to the latest government projections. Another driving factor for Dubai’s currently thriving economy is Expo 2020 global trade fair, which began in October.

The trade fair has attracted economic activity this year and laid foundations for even faster growth momentum, according to data from the Department of Economic Development. Dubai’s economy is expected to grow by 3.4 percent in 2022. The government took smart and decisive action to mitigate the negative impact of Covid-19 on the emirate and those efforts were supplemented by new legislation and amendments to the investment and residence laws in the country.

Dubai’s economy, which is the commercial and tourism hub of the Middle East, has bounced back strongly after suffering from a slump last year during the Covid-19 pandemic. The tourism and real estate sectors have also made significant recovery aided by the stimulus package of $1.93 billion since the outbreak of Covid-19 to support the economy, businesses and people.

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News

Economy

Dubai non-oil foreign trade up by 31% in H1 Over the last couple of years, the UAE and other Gulf nations are trying to diversify their economy and broaden their revenue sources and at the same time, reduce the economy’s dependency on oil. During the first half of 2021, Dubai’s non-oil foreign trade was up by 31 percent.

Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Dubai Crown Prince and Chairman of the Executive Council of Dubai revealed that during the period, non-oil external trade reached Dh722.3 billion from Dh550.6 billion a year ago.

China continued to be Dubai’s biggest trading partner. Trade with China reached Dhs86.7 billion, up 30.7 percent compared to Dh66.3 billion recorded in the first half of 2020.

Other trading partners include India, the US, Switzerland and Saudi Arabia.

Exports also grew by 45 percent yearon-year in the first half of 2021 to Dh109.8 billion from Dh75.8 billion. Additionally, imports also increased by 29.3 percent yearon-year, from Dh320 billion to Dh414 billion, re-exports grew by 28 percent year-on-year.

Dubai's foreign trade grew by 10 percent during the January-March 2021 quarter and reached Dh354.4 billion.

Indonesia overhauls major tax laws The Indonesian Parliament approved one of the country's most ambitious tax overhauls recently. Some of the important decisions taken during the parliamentary session include the decision to raise the value-added tax

(VAT) rate in the coming years. The parliament also passed a monumental tax overhaul bill with an aim to improve its revenue stream. The bill means we could see the introduction of a new carbon tax and the

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Dubai's foreign trade grew by 10 percent during the January-March 2021 quarter and reached Dh354.4 billion

cancellation of a planned corporate tax cut. We could also see a higher income tax rate for wealthy individuals.

Currently, the VAT rate in Indonesia is 10 percent. However, it is expected to be raised to 11 percent next year and eventually to 12 percent by 2025.

The decision to increase VAT has attracted considerable criticism from various experts and policymakers.

Indonesian law minister Yasonna Laoly has defended the decision saying that the new regulations will help the country improve its revenue which took a severe hit as a result of the Covid-19 virus.

One expert argued that a phased increase in the VAT rate will be less onerous on consumers, considering that the post-pandemic recovery will be fragile and uneven.

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