Global Business Outlook Issue 01 2022

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Volume 06 Issue 01 | Jan - Mar 2022

AEROSPACE & SAUDI VISION How ARX Aerospace and Defense is working on Saudi Vision 2030 FINANCE | TECHNOLOGY | ENERGY | REALTY | BRANDS | EDUCATION | GBO AWARDS

2 | Jan - March 2022 | Global Business Outlook

Editor's note Jan - March 2022

Global inflation not going away soon The catastrophic effect of the COVID-19 on the global economy and business was yet to be over when the war between Russia and Ukraine started, jeopardizing the revival process. The ill effects of the war can be seen in the form of high global inflation leading to price rises, particularly in food products and fuel. The inflation has reached such an alarming level that experts are talking of a possible global recession.

Many experts are even arguing that central banks across the world have failed to proactively stem this rapid inflation at its bud. When the prices were rising a year back, the US thought that it was a temporary phenomenon mainly caused by the disruption of the supply chain due to COVID, which will self-correct once the pandemic is over.

This did not happen and the prices further rose due to the RussiaUkraine war and sanctions imposed by the US and western allies on Russia.

There is no end in sight to the Russia-Ukraine war and the prices are likely to sky-rocket further. The war has already disrupted the Black Sea trade which is crucial for the movement of agricultural goods globally. The sowing of the next agricultural crop has also been affected.

Some economists suggest that the world is passing through the Kondratieff cycle (named after Russian economist Nikolai Kondratieff).

These cycles are long cycles caused by deep-seated technological changes.

They last for decades against a few years in ordinary business cycles. So, the deep-seated cause of the current inflationary shock is not going to go away soon.

Under the circumstances, we at GBO have done our cover story exploring what companies are doing to overcome these hurdles and keep their momentum of growth alive

Thomas Kranjec Editor kimberly@gbomag.com

Global Business Outlook | Jan - March 2022| 3

Content Jan - March 2022

ARX Aerospace & Saudi Vision 2030

ARX Aerospace and Defense 18 How is working on Saudi Vision 2030

Features

10

50

06 | Thai airway is

14 | Qatari real estate

56 | Riding the fintech

plotting a turnaround

set for recovery

wave to success

10 | Navigating hurdles

50 | A chip that detects

of hybrid work

minute actions

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Director & Publisher Krushikesh Raju

Analysis

Editor Thomas Kranjec Production & Design Brian Williams David Brenton Ian Hutchinson Shankara Prasad Editorial Stanley Rogers, Ashley Samberg Rachel Taylor, Lucas Cooper Business Analysts Peter D’Souza Stella Thomas Sneha Shet Chris D’Costa Ryan Anderson Sumith MK

30 | Britain is heading to a summer recession

34 | How the war will shape global economy

38 | How the war will disrupt global supply chains

46 | Is it a dip or a free fall for

Business Development Managers Benjamin Clive, Mike Lloyd, Avinash Nair Marketing Danish Ali

Netflix?

Research Analysts Richard Sam, Sophia Keller

Regulars Editor's Note News

Accounts Manager Edyth Taylor

03 28, 42, 54,62

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

Global Business Outlook | Jan - March 2022| 5

Industry Aviation Business strategy

Thai Airways International is poised to expand again after a fiveyear austerity effort Feature

How this sinking airline is plotting a turnaround

GBO Correspondent

T

hai Airways International is poised to expand for the first time after a five-year austerity effort. The airline president Charamporn Jotikasthira in an interview in Bangkok in August, 2021 said that the company aims to extend routes and acquire new, more fuel-efficient planes to replace older jets. The airline, which last purchased planes in 2011, is putting up a 10-year strategy that will involve jet acquisitions to enhance passenger growth until 2027. Thai Airways International recorded its first full-year net profit in five years in 2021, thanks to one-time contributions from asset sales and reductions in employee benefits.

The expansion plan Thai Airways is catching up to full-service airlines

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such as Singapore Airlines Ltd. and low-cost carriers such as AirAsia Bhd., who have spent billions of dollars in aircraft acquisitions while Thai Airways has shrunk its fleet.

According to Charamporn, adding new planes that consume less fuel would help the Thai flag carrier maintain expenses as it expands routes and competes more fiercely on ticket prices. The company recently announced a consolidated net profit of 55.1 billion baht ($1.7 billion), reversing its worst-ever net loss of 141 billion baht in 2020. The recovery reflected the company's restructuring efforts as part of a court-supervised rehabilitation program.

Piyasvasti Amranand, a Thai Airways board member in charge of the company's rehabilitation, stated while the company has

registered profit, it was not due to its operational success but due to asset sell-offs.

The airline's already precarious financial situation was further weakened by the COVID-19 epidemic and accompanying travel restrictions throughout the world, leading it to apply for rehabilitation with the Central Bankruptcy Court in May 2020. Its reconstruction plan was finally authorized in June of last year.

The selling of assets and shares resulted in a profit of 4.4 billion baht for the corporation. To help

shore up its finances, Thai Airways had listed various assets for sale. Reducing employee benefits and cutting executive posts resulted in an extra 8.8 billion baht. Debt restructuring also added 61.8 billion baht to the company's resources by extending loan and debenture repayment dates.

The corporation was able to avoid debt payments by entering a court-supervised rehabilitation program. Penalties for missing repayments from May to December 2020 were retrospectively forgiven and added as an unusual gain in 2021.

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Industry Aviation Business strategy

Passengers carried in year 2021

19,422,000 2020

3,536,000 2019

194,000 Total revenue in year (Million Baht) 2021

89,891 2020

48,637 2019

188,954 Source- Thai Airways

Meanwhile, the cost of severance payments for an early retirement program was 4.6 billion baht, up 51% over the previous year.

Passenger and extra baggage revenue were 5.5 billion baht, down by 84% from the previous year. Over the same period, freight and postal income increased by 59% to 10.9 billion baht, owing to increased demand for deliveries triggered by the global economic recovery. Flights will be unaffected by Russia's invasion of Ukraine.

In January, Russians were the most frequent visitors to Thailand by nationality, but they generally use charter aircraft.

Geopolitical concerns, on the other hand, have driven oil prices much higher. Higher fuel costs are expected to increase the cost of travel, deterring potential tourists.

Betting on the future Next year, the Thai flag carrier hopes to return to a consistent operational profit.

Piyasvasti asserted that the airline's profitability had increased dramatically as a result of lower operational expenses. Thai Airways will begin to make an operational profit if other nations' travel restrictions are eased, according to the director in charge of the rehabilitation.

Flights to nations and areas that are currently open, such as the European Union, Australia, India, and Saudi Arabia, will be increased. By the end of the year, Piyasvasti believes Japan and South Korea will have lifted their travel restrictions. China, on the other hand, is expected to close for the full year, according to him.

The carrier is exploring new routes to the United States; however, it will not fly to Los Angeles, which it discontinued last year, according to Charamporn.

Thai Airways began adopting a new management system for prices and itineraries last week, according to Charamporn, which improved the airline's competitiveness in ticket pricing. He claims that the technology can access rivals' prices in real-time, allowing the corporation to

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modify rates in hours rather than months.

The worst is over, Charamporn stated in a recent media interaction.

Troubling reality Despite turning a profit for the first time in five years, the flag carrier's financial woes are far from finished. Thai Airways' financial situation will remain precarious for the foreseeable future, limiting its capacity to spend fast in the future.

The airline is in negotiations with its creditors for a 25 billion baht extra loan to help it get through rehabilitation. In March, the airline will have a final conversation with banks and sign a deal by the end of the month, according to Piyasvasti. The loan will be underwritten by Bangkok Bank, Thailand's largest commercial lender.

According to the airline, co-underwriters might include Krung Thai Bank, ExportImport Bank of Thailand, Government Savings Bank, and Kasikorn Bank. The loan will be secured by the company's assets, which include land, planes, and even aviation components. The assets were estimated to be worth 30 billion baht.

Employee compensation amounting to 4 billion baht will be spent from the new revenues, while unused ticket refunds would contribute 10 billion baht. The remaining funds will be utilized for operating capital.

Thai Airways' initial restoration plan, which was accepted by the court, contained a government loan of 25 billion baht. However, the government opted not to issue the loan late last year, requiring the airline to find another solution. The revised strategy will need to be approved by the court once more.

The origins of the crisis The airline was founded in March 1960 as an international airline, but in April 1988 it merged with Thai Airways Company, a domestic carrier. The airline began purchasing a variety of aircraft for its fleet in the 1990s. Because different airframes and engines needed more experts and greater maintenance costs, this strategy

Feature \ Business strategy

was eventually blamed for the company's future financial woes. The company made its first loss in company history in 2008, after more than 40 years of profit – roughly 21 billion baht – despite earning more than 200 billion baht that year. High fuel prices and Thailand's political unrest were blamed by the airline.

The losses soared to a record 141 billion baht last year, following meagre earnings of 48.3 billion baht during the COVID-19 epidemic. In comparison to a year before, this represented a 73.8% decline in income and an astounding 1075% increase in losses.

From 2010 to 2019, the national airline made between 181.4 billion baht and 207.7 billion baht in yearly revenue. However, it still lost 76.5 billion baht over seven years, compared to a cumulative profit of 21.8 billion baht over three years in the black.

The COVID effect After COVID-19 rocked the global airline sector in 2020, the national carrier had its worst year of operations. The pandemic resulted in travel restrictions and a drop in tourist and traveler demand. Airlines all across the world were forced to cancel flights, lay off staff, and appeal to governments and investors for financial assistance. Many of them applied for Chapter 7 bankruptcy protection.

The company did what it had done previously and sought government assistance, requesting a guarantee from the Finance Ministry for 50 billion baht in loans to keep its operations functioning.

This time, though, things were different.

The people pressured the government not to carry the airline’s financial load again as the COVID-19 situation worsened. Analysts noted that a 50 billion baht loan was unlikely to be approved.

Cost-cutting measures According to the company’s interim president Chansin Treenuchagron, the restructuring plan aims to generate 50 billion baht in new

capital over the next two years through new shares or borrowing, with the objective of returning to profit in 2025.

Meanwhile, the company wants to downsize its staff from 29,000 to 14,00015,000 employees by 2025, as well as its fleet from 102 to 86 aircraft, decreasing aircraft types from twelve to five and engine types from nine to four. Negotiating reduced airplane rental costs is also part of the costcutting strategy.

The rehabilitation plan for THAI recommends no debt haircuts, but it does ask for waiving off of outstanding interest on loans and a six-year delay in bond obligations. It also has a debt-to-equity exchange option.

New monetization schemes To stay afloat, the struggling airline has sold properties, cabin items, and food supplies for quick cash. With an expected monthly expenditure of 2 billion bahts, the airline presently makes less than 1 billion baht every month. Its average monthly revenue before COVID was 15 billion baht.

The company made 2.7 billion baht in January through the sale of shares in its subsidiary Bangkok Aviation Fuel. It also offered to lease out certain properties and sell more than 40 used airplanes, five sets of aircraft engines, a land plot, and a building in Bangkok.

Meanwhile, grounded passengers were invited to dine in first-class at the carrier’s headquarters restaurant. It also had stores all throughout Bangkok selling in-flight foods, including "pa tong ko" (fried dough) and croissants, which drew long lines.

The airline introduced its ‘Re-life Collection’ of fashion items created from recycled vest jackets and slide rafts in October of last year. Unused in-flight amenities, including plates, glasses, silverware, and seat coverings, were also available for purchase.

EBITDA (Million Baht)

2021

8,846 2020

11,319 2019

9,345 Source- Thai Airways

World passenger traffic collapse due to pandemic The COVID-19 impact on world scheduled passenger traffic for year 2020 (estimated actual results), compared to 2019 levels: – Overall reduction of 50% of seats offered by airlines Overall reduction of 2,703 million passengers (-60%) Approx. USD 372 billion loss of gross passenger operating revenues of airlines Source- International Civil Aviation Organization

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Industry Logistics

Feature

Everyday, more businesses are embracing a blend of remote and on-site employees

Navigating hurdles of hybrid work GBO Correspondent

H

ybrid work culture has gained popularity in the past few years.

With this, hybrid workers can benefit from the best of both worlds by working remotely and at the office on different days of the week or month. They can spend more time with their family and experience less stress by avoiding the traffic to get to the office. Moreover, they do not have to skip out on work since they can always bring their laptop or tablet wherever they go.

However, the hybrid model also comes with

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some challenges that you need to be aware of when creating your hybrid working schedule.

Studies from top research institutes like Harvard and Stanford confirm that workplace flexibility positively affects employees, employers, and company profits. A flexible schedule can be great.

The biggest pro is that one can spend more time at home, during the holidays, or with family and friends. The worst thing about commuting, whether by road or train, is that it takes up most of your day.

Hybrid work offers you the flexibility to work from wherever be it your place or a vacation home. Thus, you can hopefully save time during your regular office hours. Instead, they can organize everything around their own needs and schedules. This helps in maximizing productivity and allowing for a greater sense of freedom.

Working from a remote environment may help reduce stress, especially if you are sensitive to noisy environments. Work from home will also negate most effects of weather as you can stay in your cozy home office instead of suffering from rain or snow.

Further for working parents with small children at home, working from home can be very convenient. They can work and play with their child at home by saving time on the commute.

Every day, more businesses are embracing a blend of remote and on-site employees.

According to an Upwork report, 22% or more workers planned to work remotely by 2022.

The benefits are evident. Companies can reduce overhead by increasing employee productivity, while employees gain flexibility in spending their days.

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Industry Logistics

Post-lockdown global work status On-site/WFH

37% WFH only

21% Hybrid – WFH & WFO

42 % Source: United Nations Population Division

Challenges with a hybrid setup However, it can also lead to a significant downside: an isolating work culture and deteriorate work-life balance. Additionally, working from home does not always work out well if some workers need micromanaging and are not self-motivated.

In absence of adequate monitoring options, there is no way to prevent workers from procrastinating or scrolling through Facebook instead of doing their designated tasks. Without a permanent workplace, It can be challenging for some people to transition into two different workplaces within the same week. Further, remote employees may feel isolated from their in-office coworkers. There may be fewer opportunities to build relationships or develop a sense of company culture.

Moreover, a workplace that's not fully staffed may feel less dynamic than one where all employees are working in person. If half of a team works remotely on any given day, they may not have the chance to ask

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questions or bounce ideas off each other. This in turn will slow down the work process and affect their productivity.

Challenges of hybrid team collaboration Running a hybrid workforce isn't without its hurdles—and many start with communication. With employees working from so many locations—home offices, coffee shops, restaurants, train stations—how do you keep lines of communication open and transparent? In other words: how do you maintain a work culture when your team members aren't all working together in one place? There's no magic bullet for overcoming these hybrid work culture problems. Since you don't have direct access to your colleagues, it can be challenging to build relationships. So, figure out what tools and technologies best fit your style—phone calls, text messages, conference calls, video meetings—and use them regularly. Add coworkers on Facebook or follow them on

Feature \ Hybrid work

Twitter if that's where they hang out online.

Keep the conversations going about projects you're working on and events at work. Even though you can't physically show up at an office happy hour, try to get to know each other better virtually before you meet in person for your first time.

Poor remote work policy management You do not want your employees to feel isolated. Work with them to create a working environment that makes sense for them.

Remember, hybrid work culture doesn't have to be an all-or-nothing situation. It can be tailored specifically to each person's working style without compromising productivity.

For example, consider pairing employees who like working alone with coworkers who thrive when they work together. This combination seamlessly integrates remote work culture into their schedule while maintaining frequent communication via meetings or phone calls.

However, employees also need time to focus. So, it's crucial to schedule check-ins at set times throughout the day and week.

You should also make sure everyone knows when quiet hours occur—during which no one will respond unless something is urgent. The first step to allowing remote work culture is creating and maintaining a culture that supports it. You need to trust your employees, but you must also set up guidelines for them. If they're working from home, what are acceptable ways to contribute? When are they expected to make progress? These may differ depending on whether you're hiring full-time employees or independent contractors.

In addition, you need to let people know how they can communicate with their team—should they schedule daily check-ins or hold regular meetings? What do those meetings look like? A survey Gartner conducted with 127 corporate leaders showed that only 30% are worried about maintaining the company culture when they move to a hybrid work culture model.

People working remotely typically crave communication with their peers and managers. Thus, figuring out how everyone can maintain a healthy relationship over video calls and Slack should be high on your priority list once you decide to go remote or hybrid.

According to McKinsey, nine out of ten businesses combine remote and on-site work environments. This can be tough, especially if you're starting your own business. There will always be gaps between you and your colleagues, with flexible work hours and remote communication.

Hence, be patient and communicate often.

Plan for times when you might not be able to communicate face-to-face. Thankfully, many online tools exist that make instant collaboration possible. What's more important is your ability to find what works best for each project or task at hand. The more comfortable you are working remotely, the more successful you'll be as a hybrid worker.

The way out A regular, timely feedback mechanism can be a good starting point. Set aside specific times to discuss workplace culture issues with your remote staff. For example, each Friday afternoon might be virtual meetings and conversation time. It doesn't have to be much longer than 15 minutes per session—just enough time to ask questions and give updates.

Hold monthly calls or conferences via Skype, Zoom, or other video platforms like Google Hangouts. Inviting everyone in your virtual office to attend can be a team-building activity.

Before meetings begin, take a moment to make sure everyone has been doing well outside work. Let people know you care about their lives and careers outside work.

Start with something like, “How was last week?” Is anything new going on in their life? Then, let them speak first.

76% said working from home after the pandemic would make them happier

38% said they would be willing to take a 5% pay cut to work remotely at least part of the time

70% want a hybrid or remote working style after the pandemic is over

36% of people believe the office is best suited for individual work

Global Business Outlook | Jan - March 2022| 13

Industry Real Estate

Feature

Qatari real estate sector is poised for recovery The government is taking steps to cushion the damage caused by the pandemic

GBO Correspondent

T

he global pandemic has caused devastation in all walks of human life.

Regardless of how prosperous the country is, the ill effects of Covid-19 were felt. There was no person whose life did not change because of the dreadful virus. No less than 183 countries experienced the impact of the pandemic. Like all countries, Qatar, too, faced its own share of distress due to the pandemic. In a country with a population of 2.8 million, approximately a million people were infected with Covid-19. Qatar reported its first

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Covid-19 case on February 29, 2020, and the government declared a lockdown with strict social distancing norms.

As a result of this, most of the real estate projects were either delayed or abandoned during the pandemic. Another factor for the negative impact was the loss of jobs, which were rampant. New and completed house properties remained unsold. This sluggish trend for lower demands for houses had an overall downward effect on the country’s real estate industry as a whole. This continued for almost two years before Qatar started lifting its Covid-19 related restrictions in October 2021.

Feature \ Qatar Real Estate

Due to a decline in the demand for both residential and commercial properties because of the pandemic, the income from rentals went down for property owners. Also, more and more properties became unoccupied due to loss of jobs, pay cuts, and lack of affordability on the part of the potential buyers. This hampered cash liquidity and the servicing of loans on mortgaged properties became a challenge.

The continuing pandemic conditions resulted in hampered movements of men and materials in Qatar. This resulted in projects missing their deadline of completion. The disrupted workflow put a strain on the real estate developers for their funds, and the cost of construction rose

exponentially. Many projects had to be abandoned. The projects which were at their early stage of construction had a lesser impact, as they still had the flexibility to change plans and reconstruct. But this was a real trying situation for the projects which were nearing completion.

The lending institutions also found it risky to keep funding the on-going projects, which had overrun their timelines. Also, a decline in demand for new properties slowed down the entire real estate sector and therefore the requirement of fresh funding took a hit as well.

As is evident, the short-term demands for real estate in the residential, as well as the

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Industry Real Estate

commercial sector, took a nosedive due to a combination of various factors.

COVID, the speed breaker

Per Capita consumer spending on Housing, Water, Fuels, and electricity in Qatar (in USD) 2017

9.27K 2018

9.51K 2019

9.39K 2020

9.33K Source: Statista

The demand was moving north with the economy thriving. The government policy of encouraging the private sector and allowing foreign direct investment had further helped in the growing demand for office space.

But with the onset of the Covid-19 pandemic in early 2020, the offices were closed, and work from home started.

This directly impacted the demand for commercial properties in Qatar.

The economic activity and trends in the real estate business have a directly proportional relationship between them.

Hence, gradual improvement in the economic activities in Qatar leads to the hope of the resurrection of fortunes for the real estate industry in the country.

It is forecasted and believed by the industry experts that trends in the real estate industry in Qatar will start looking better gradually, and 2022 may witness reverse trends. At the same time, there has been a realization that the new normal ecosystem has changed the expectation of the people.

In the post-Covid-19 era, there has been an incremental trend in remote working and the development of e-commerce. This trend has given rise to hybrid lifestyles, necessitating the real estate industry to recalibrate its game plans. As per a survey conducted by PwC in February 2021, only 7% of people prefer to have a full-time office.

As things stand now, one may conclude that commercial properties and retail stores may continue to see a lower footfall in the conceivable future.

The recovery plan To put the real estate industry back on track, the Qatar government has identified some growth engines to support the process of recovery. Tourism is to lead the demand generation of real estate in the post-pandemic world. The travel and hospitality segment

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has always been a strong contributor to the economy of Qatar. In the year 2018, around 2.18 million people visited Qatar.

The country boasts approximately of 27,000 accommodations. There were 107 projects which were under construction, which would have added another 21,000 rooms.

In order to boost travel and tourism, the national carrier of Qatar, Qatar Airways, offered incentives to tourists. With the advent of the pandemic, airports closed down, and the arrival of cruise liners into the port dried up. This impacted the revenue of airlines and cruise companies. As the hotel and hospitality industry is entwined with the logistics sector, the occupancy rates at hotels have come down drastically. Offices started the practice of work from home and teleconferences and video calls, hence the culture of business meetings started weaning off. The cost of booking hotels for business meetings became an avoidable expense.

The above trend had a negative fallout on the employees engaged in the tourism sector

Feature \ Qatar Real Estate

in Qatar. Loss of jobs and salary cuts became a rampant practice. To support this fledgling sector, the State of Qatar decided to infuse 75 billion Qatari rials to support the hotel and hospitality sector. Further, the government is encouraging banks to offer loans at low interest for businesses in this sector.

The government has also allowed a shorttime moratorium on loans that have been shelved due to the prevailing situation.

The World Cup promise The quadrennial showpiece tournament of the most popular team sports in the world, soccer, is going to be held in Qatar in 2022. In this tournament, 32 teams from all over the world will be taking part. This is the first one to be played in the Arab world.

The FIFA World Cup 2022 is an integral part of the economic plan of Qatar. The tournament features in Qatar National Vision (QNV) 2030. The World Cup is going to ensure an inflow of tourists from all over the world. The influx of people would mean

a boost for the fledgling hospitality sector.

Qatar as a country would be showcased as an attractive destination for investment on the world stage. The World Cup 2022 is targeted as a catalyst of economic growth for Qatar even beyond 2022.

Another factor that will lead to the recovery is the upcoming PropTech firms. The word PropTech is an acronym combining “property” and “technology”. As the name suggests, the concept involves a marriage between technical innovations and real estate, or property.

The introduction of technology in the real estate industry can be a boon for Qatar. The property technology may act as a propeller of growth and sustainability in the real estate industry in Qatar.

Notwithstanding the effect of the pandemic that cast its spell over the real estate industry of Qatar, recovery is just around the corner. The rise in the price of oil and the resumption of economic activities in the country is working towards repairing the damages incurred.

Additional impetus has been given by the FIFA World Cup 2022. Qatar’s preparations for the World Cup have already started getting global acclamation in terms of its commitment to innovation and sustainability.

Transitioning to a greener and more sustainable way of doing business and living daily lives is also likely to drive the real estate market to newer heights. Though the real estate industry suffers from the syndrome of resistance to innovation, it will not be out of place to mention that the growth of the real estate industry of Qatar will be laced with the presence of environmental, social, and governance (ESG) criteria. With a sustainable effort on the ESG front, the real estate industry of Qatar will surely move towards a modern, environmentally conscious, and progressive market scenario.

The government has decided to infuse

75 billion

Qatari rials to support the hotel and hospitality sector. Further, the government is encouraging banks to offer loans at low interest for businesses in this sector. The government has also allowed a short-time moratorium on loans that have been shelved due to the prevailing situation.

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Cover story Aviation ARX Aerospace and Defense

ARX Aerospace & Saudi Vision 2030 Lucas Cooper

How ARX Aerospace and Defense is working on Saudi Vision 2030

Global Business Outlook | Jan - March 2022| 19

Cover story Aviation ARX Aerospace and Defense

We have strong integration with aerospace & defense industries, supporting the 2030 vision by localizing 50% of the military expenditures.

ARX Aerospace and Defense, formerly known as Aviation Australia Riyadh College (AARC), is gunning toward becoming the best training organization in the defense, aerospace, and allied segments in the entire gulf region. The institute was established to support the development and growth of aviation and aerospace industries by providing applied practical training in aviation maintenance and engineering in the Saudi capital in 2014 at the King Khalid International Airport.

While the college had started out with a batch strength of 300 pupils, it now has attracted as many as 5,000 students. Among the college facilities that were on offer from the beginning included a hanger and aircraft maintenance training environment. Over the years the college has incorporated newer technologies that have emerged within the industry with regard to the advancement of technology and have worked on training its pupils with the necessary skills to be a qualified professional and industry-ready.

The college insists that training will remain the key differentiating factor for organizations, especially in specialized sectors like aerospace and defense. The college constantly updates its training modules to ensure that students develop the necessary technical capabilities by using the most contemporary technologies and methodologies.

The rebranding was done earlier in 2022 keeping in mind the brand positioning that the school wants to achieve. Earlier to its name, the college was only identified as an aviation-only organization but the company wants to be a leader in the training space for other allied defense disciplines. The institute is of the belief that with the rebranding it can represent itself a little bit more truth in the marketplace even though the aerospace area remains the primary focus.

As the years have gone by, the college has introduced newer specializations. Speaking

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about the same, they say that they have understood the demand from the industry and responded accordingly. A bright example of this is courses on drone technology, which has seen a rapid rise in use by the government authorities and private companies for several purposes over the last few years.

Today the company has courses on aviation maintenance, UAV pilot/ operations, air defense diploma, E-war, and cybersecurity among others.

The college has also introduced specific modules for an avionics course as the demand for this stream was felt by the Saudi Royal Air Force and the homegrown civil aviation market alike. The primary goal of the college is to ensure that in the very near future every single student of every batch gets placed in the industry upon graduation.

Currently, the placement record for the batches is an impressive 95% approximately.

The companies take pride in training excellence, offering education and training to young Saudi Arabians seeking a career in the aviation industry. ARX aims to provide the market with skilled, motivated, and dependable technicians in line with KSA Vision 2030.

Cover story \ ARX Aerospace and Defense

Practical training in Aviation Maintenance and Engineering

The goal of the college is aligned with the Saudi Kingdom's Vision 2030 of localizing half of all military expenditures by the year 2030. One of the prime aspects of making this dream a reality is dependent on creating an able workforce that is homegrown and the institute is working toward that direction. Furthermore, they are creating a situation where Saudi nationals can seek opportunities abroad and creating a surplus of human resources that can be utilized as the industry segments grow gradually.

The college faculty is keen on creating the workforce of the future and contributing to those educational goals

that sit within. With this, the college wants to continue creating opportunities for young Saudi men in the workforce and in the future, hopefully, even for young Saudi women.

The institute first came to be a joint venture between Saudi company Shamal Investments and Aviation Australia Brisbane. While on one hand, Aviation Australia Brisbane is a Queensland State Government established entity, Shamal has got the Saudi Arabia government’s clearance to operate in the sectors of security, intelligence, and military equipment.

Aviation Australia is a world-class registered training organization established by the Queensland State Government in 2001 to support the development of the aerospace industry in both the Australian and international markets by providing applied practical training in aviation maintenance and engineering.

Global Business Outlook | Jan - March 2022| 21

Cover story Aviation ARX Aerospace and Defense

Shamal is a Saudi-owned company formed in 2003 to consolidate the financial investments and holding of its founding partners; it also provides consulting services to several foreign defense and security companies throughout the world. Shamal is approved by the KSA Ministry of Interior’s Department of Public Security to deal in security, intelligence, and military equipment.

Being a part of Shamal investments helps the college navigate the different regulatory compliances required for operating within the Saudi kingdom and also it leverages the credibility Shamal lends as a result of its brand recognition.

With this, the institution has run programs like ‘English on the bases, Type rating training for Airbus 320 MRTT, and King Air aircraft for the Royal Saudi Air Force (RSAF).

Some of the private clients include Al Salam Aerospace Industries and UK’s BAE Systems.

Global Business Outlook magazine spoke with the dean of the college Ian Smythe in an exclusive interview on the back of successful participation in the World Defense Show.

What is your company’s (ARX aerospace & defense) contribution to Saudi Arabia’s vision of localizing 50 % of the military expenditures?

Firstly, I would like to thank you for this interview to highlight the company’s value. ARX aerospace and defense used to be Aviation Australia Riyadh College. We started in 2014 as a joint venture between Shamal Investments & Aviation Australia.

The aim of this JV is to operate the International Aviation Technical College at Riyadh (IATC).

Shamal investment has selected Aviation Australia to be its partner as it is a world-class registered training organization established by the Queensland State Government in 2001 to support the development of aviation and aerospace industries in both the Australian and international markets by providing applied practical training in aviation maintenance and engineering.

Recently, the company has worked on a big rebranding program that aims to reposition the company as a leader in the aerospace industry, which came as an outcome of the company’s business expansion in Aviation, Aerospace &

22 | Jan - March 2022 | Global Business Outlook

Defense Industries.

We at ARX aerospace and defense are aligning with the 2030 Saudi Vision in three main pillars. We have strong integration with aerospace & defense industries, supporting the 2030 vision by localizing 50% of the military expenditures. Another pillar is supplying Saudi Arabia’s aerospace and defense industries with highly skilled, motivated, and dependable Saudi manpower.

Finally, we are contributing to Saudi Arabia’s economy by building Saudi talents to serve both the local and global markets.

Our alignment with the KSA vision Industry: Strong integration with the aviation and defense industry, supporting KSA’s aim to become a global leader in the industry.

Manpower: Supplying Saudi Arabia’s aviation and defense with highly skilled, motivated, and dependable Saudi manpower Economics: Contributing to Saudi Arabia’s economy by increasing the number of Saudi skilled technicians.

Since ARX aerospace & defense is the operator of the International Aviation Technical College at Riyadh (IATC), can you tell us more about this project?

ARX aerospace & defense is the operator of the International Aviation Technical College at Riyadh (IATC) since 2014. The IATC is an initiative of the Technical and Vocational Training Corporation (TVTC) and is supervised by colleges of Excellence (CoE) as a way of providing world-class vocational training to the Kingdom of Saudi Arabia. Since we operated the college, we have had around 3000 graduates and 5000 current students in the college. These students have already been sponsored by different Saudi Military entities such as the Royal Saudi Air Forces (RSAF), Royal Saudi Land Forces (RSLF), Royal Saudi Naval Forces (RSNF), and the Ministry of National Guard (SANG). Also, some of our students are sponsored by different Saudi defense companies.

We consider ourselves as an international training provider which provides the highest quality of training with a goal to supply the aerospace & defense sector with highly skilled and motivated trainees by utilizing national & international experts. Using state of the art technology in education & training.

In IATC, we provide state-of-the-art education in various aviation maintenance specialties. These are three-year training programs that begin with one year

Coverstory \ ARX Aerospace and Defense

Global Business Outlook | Jan - March 2022| 23

Cover story Aviation ARX Aerospace and Defense

of intensive English language study followed by two subsequent years of technical and on-the-job training. Each specialization leads to a Diploma endorsed by TVTC. IATC aims to provide the aviation market with skilled, motivated, and dependable technicians in line with KSA vision 2030. IATC’s dedicated employment services office facilitates career opportunities for current civilian students and graduates through seminars with interested employers within the aviation sector.

IATC is a certified Aviation maintenance training school by the General Authority of Civil Aviation (GACA) and all its civilian diploma programs are endorsed training (GACAR Part 147).

Also, the IATC operator (Aviation Australia) is an approved center for maintenance training and examination by the European Aviation Safety Agency (EASA Part 147).

Is ARX aerospace & defense thinking in terms of becoming a part of the global supply chain and creating an export market?

By Achieving international levels of excellence through our training, education, and development programs. Also, we focused on our clients due to our customized curriculum for each ministry, facility, and organization locally and globally. We believe in our strong curriculums and great infrastructure.

Apart from our current local business in serving the Saudi market, we are aiming to serve both the national and international markets with new specializations such as Aviation Maintenance, UAV pilot operations, Air defense diploma, E-war, Cyber security, Communication, Flight operations, Safety and Logistics.

What has been your company’s contribution to Saudi Arabia’s economy?

Contributing to Saudi Arabia’s economy by increasing the number of Saudi skilled technicians and supporting the Kingdome in Saudization initiative and transforming the international experiences and knowledge of the Kingdome of Saudi Arabia.

With the oil price fluctuation and the economic recession, Saudi Arabia is striving for

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Contributing to Saudi Arabia’s economy by increasing the number of Saudi skilled technicians and supporting the Kingdome in Saudization initiative diversification of its economy. One of Saudi Arabia’s main focuses in achieving the mentioned intention is via promoting the growth and development of the aerospace and defense sector by investing in the infrastructure.

Saudi Arabia's efforts in promoting its aeronautical industry have included increasing its military spending.

The Saudi Arabian military industry (Sami), Has been focusing on establishing strategic partnerships in aerospace and defense to support the goal of localizing 50% of the industry by 2030 in developing nextgeneration technologies and producing world-class defense products.

The initiation and direct support of the Saudi Arabian government in the Human Development & Capability program release, which aims to enhance the current skills of its citizens in Saudi Arabia and become globally renowned in education and vocational training.

How has been the World Defense Show in Riyadh for Saudi Arabia in general and your company in particular? Did it yield any business for the ARX aerospace & defense?

The World Defense Show WDS was an outstanding exhibition. It is one of the biggest investment opportunities for building a sustainable partnership in the Aerospace & defense industries, which enriches the local market and builds training & job opportunities. The

Coverstory \ ARX Aerospace and Defense

World Defense Show had many opportunities for the public sector and those who are interested in the defense sector to see the most updated technologies and developments.

Our participation goals are to present our capabilities in the national and international markets. we succeed in introducing ourselves to the national and global market as a specialized training provider and one of our biggest projects is operating the International Aviation Technical College in Riyadh.

The World Defense Show has opened a lot of business opportunities to serve the Saudi military entities in the training fields.

Fully integrated and future-focused defense event set to showcase the latest technological

developments from around the globe and demonstrate defense interoperability across all domains.

World Defense Show is an interactive platform for governments and industry thought leaders from across the global defense and security supply chain, to help shape the future of defense. It was a pleasure meeting the decision-makers who are facing more complex choices regarding defense solutions than ever before. This makes interoperability across systems increasingly challenging.

We develop and sustain a world-leading defense & security exhibition in the heart of the Kingdom of Saudi Arabia.

Taking place at the core of the global supply chain, the show will bring together the largest players and start-up visionaries from the defense sector to collectively craft the future of defense.

Global Business Outlook | Jan - March 2022| 25

Building Towards Efficiency Providing Brilliance to local and global skills demand

arx.sa 26 | Jan - March 2022 | Global Business Outlook

International operator of

Part of

Group Global Business Outlook | Jan - March 2022| 27

News Industry

China keen on building highspeed SA rail line China is keen on building a huge speed rail corridor connecting two of the most prominent cities in South Africa – Johannesburg and Durban. The proposal that has been doing the rounds since the 2010s has not seen any work on the ground over the past decade.

As per the initial plans, the project which will pass through the Drakensberg mountains will cost the authorities a thumping $30 billion. This high cost has been the reason for the project to remain shelved over the years.

Currently, the 720 km journey takes around 12 hours time to complete. The proposed high-speed line is targeted to complete the journey within three hours.

However, after a lull, the project has made a comeback in the public domain once again with a feasibility study underway to check

the prudence of high-speed passenger and freight trains. An investment in South Africa is not a one-off matter for the Chinese as they have already contributed to the growth of 400,000 jobs in the African nation, with another 20,000 jobs touted to be in the pipeline for the next three fiscal years. Some of these jobs will be in emerging sectors like cellphone technology giant Huawei hiring 450 residents for its factory.

The project which will pass through the Drakensberg mountains will cost the authorities a thumping $30 billion

Dubai is world’s busiest airport for 8th time Dubai International airport once again emerged as the world's busiest air terminal by worldwide traveler numbers for the eighth consecutive year in the wake of timing 29.1 million in yearly rush hour gridlock in 2021. The airport’s yearly traffic surpassed conjectures

for the year by the greater part of 1,000,000 travelers, on the rear of a solid last quarter. India keeps on being its top objective in traveler volume.

29,110,609 travelers made their way into the airport for the entire year of 2021 -- a year-on year increase of

28 | Jan - March 2022 | Global Business Outlook

12.7%. The numbers were pushed by a strong development in the last three months of the year during which the airport recorded 11,794,046 travelers, 77% more than in the past quarter.

It was the most active quarter since Q1 2020, and the initial time since the beginning of the pandemic that Dubai's quarterly traffic outperformed the 10 million imprint. December was the most active month of the year with 4.5 million travelers.

India held its position as the top objective country for Dubai by traveler volume, with traveler traffic for 2021 adding up to 4.2 million, trailed by Pakistan with 1.8 million, Saudi Arabia with 1.5 million, and the United Kingdom with 1.2 million travelers.

Violation

Wind power co pays $8 million for killing eagles A US-based wind power company ESI Energy has been given five-year probation and has been ordered to pay more than $8 million in fines for the deaths of 150 bald and gold eagles on its wind turbines. According to a press release from the Ministry of Justice, NextEra Energy's ESI Energy subsidiary has pleaded guilty to violating the Migratory Birds Act. The law prohibits anyone from killing or participating in bird protection without the permission of the federal government. Rock eagles and bald eagles are further protected by federal law.

The company confessed to three specific deaths, which resulted in fines for the DOJ

(Department of Justice). The case also identified the deaths of more than 150 eagles at the company's wind farms in Wyoming, New Mexico, Arizona, California, Colorado, Illinois, North Dakota and Michigan, and other states.

Prosecutors say the eagles have died since 2012 and 136 of them died after being hit by a turbine blade. In its required agreement, ESI agreed to spend up to $ 27 million on an "eagle management plan" during the trial period to minimize future eagle deaths and injuries.

The company also promised to pay $29,623 for any future injury or death to a calf or bald eagle.

OPEC+ will not increase supply of crude The Organization of the Petroleum Exporting Countries (OPEC) and Russia, its allies are unlikely to alter their output quota for the month of June when they meet again in May. Currently oil prices around the world are rising in wake of the Russia-Ukraine war which broke out on February 24.

But even as the oil output of Russia is set to shrink further, the cartel is unwilling to raise their production and ease the prices as a result. According to estimates, Russia, which is among the top three oil producing countries, will see a 17% slump in production in 2022 according to its own government estimates. The United States, which is the largest consumer of fossil fuels, has been appealing for a hike in production. Analysts say that this drop in production will be unprecedented compared to the robust last two decades. They further estimate that the trend of underproduction by the OPEC+ countries will continue.

According to available data, for March these oil producing countries had produced 1.45 million barrels per day below their targets.

Global Business Outlook | Jan - March 2022| 29

Economy UK Recession

Analysis

Is Britain heading to a summer recession?

GBO Correspondent

A lesser steep than previously expected rate hike is expected from the Bank of England

30 | Jan - March 2022 | Global Business Outlook

Britain may witness a summer recession, according to a section of economists. The country had recovered from the recession of the first two quarters of the 2020-2021 financial year and was beginning to gather some steam. But a double whammy of high inflation and stagnant wages has meant that the ugly head of the recession is likely to pop up again. Experts fear that currently, the former imperialist superpower is seeing the lowest household savings in more than 70 years. And the same will trigger an inevitable curtailment of non-essential spending.

The economy is currently tending to the blows of two major factors, experts say. The first being the fallout of the Russian invasion, and the second was a much-muted recovery from the pandemic-induced slowdown. And the UK, currently being an economy that is largely powered by consumer spending, is likely to suffer inevitably until the prices cool off.

By some estimates, the British economy will see growth stunted for at least the next two quarters, which will technically mean a recession after which the economy is expected to see positive growth.

As stated, the current crisis stems from the subdued recovery of the UK economy following the relaxations of the COVID-19induced lockdown norms had economists worried. On top of that, the highest recession in 30 years, triggered due to the RussiaUkraine war, had meant that discretionary spending is a null possibility for economically fragile households. In real terms, the wages currently in the UK are lower than that during those in the 2008 financial crisis, according to many estimates.

Analysis \ UK Recession

The situation is so critical that even a single day additional bank holiday on account of the Queen’s 75th birthday in June will lead to reduced economic output.

Further, in the health sector reduced transactions in the form of lower interest in getting booster doses for the COVID-19 vaccine will contribute to this negative expansion.

Sensing the same sentiment, Bank of England Governor Andrew Bailey has suggested that the central bank will now try to balance this critical situation by much less aggressive rate hikes than previously thought. While speaking at the sidelines of the spring meeting with officials of the World

Bank, International Monetary Fund, and all member nations in Washington, he suggested that a more graduated rate hike will be carried out to contain the possibility of a recession. This is because on one hand, the BoE is concerned about demand-driven shortages and on the other, a drop in disposable incomes due to staggering inflation of basic goods and services will see a contraction in consumer spending.

But the situation has gone further south since then. Just ahead of the May 5 meeting of the monetary policy committee, many expert commentators and ex-officials have suggested that recession is more of an inevitability. They say that

Global Business Outlook | Jan - March 2022| 31

Economy UK Recession

pushing the UK into a recession was the only way to contain this unprecedented inflation.

Many of them are of the opinion that rising interest rates were necessary to protect jobs and minimize inflationary shocks which were already prominent due to Brexit-caused restrictions against the movement of goods and labor.

Think tank Peterson Institute, which has former Bank of England officials as part of its staff members, said that the central bank is likely to increase key interest rates by 0.25%. Furthermore, the think tank said that the BoE's reaction was late and that MPC officials should have taken more proactive steps to counter the damages on the economic front caused by the Brexit.

They also further said unlike the situation in the US and the rest of Europe, the situation in the UK was unique. The cost of labor in the UK has been on the rise due to a shortage of labor and unless monetary policies are not tightened, then the current crisis will persist for some years.

Their reading of the situation is that the inflation in the US will be contained by the monetary policy changes while the European situation will continue till the Russia-Ukraine war persists.

Economists who echo this view said that increase in wages along with stronger savings

for the middle class and rich is bound to create further demand-driven inflation.

This is especially at a time when businesses are short of adequately skilled workers who can match up with the appreciating postCOVID demand. Most affected are sectors which were serviced by foreign workers with IT, manufacturing, and hospitality being the most important industries.

Falling incomes, consumer spending According to some experts, this cost of living expense has surged due to the policies of the Boris Johnson government. The most prominent among them is the massive hike in national insurance costs which have been implemented. Along with this, which will hurt ordinary UK citizens is the four-year freeze of personal taxes meaning those within the lower end of the salaried class will effectively shell out on taxes than on their discretionary spending.

But in April, the situation has only worsened with 40% of UK households expected to fail to afford proper heating for their homes in the winter, according to energy providers.

Cost of living sky high Around 9 in 10 (87%) adults reported an increase in their cost of living over the previous month in March 2022 (16 to 27 March 2022), an increase of 25 percentage points compared with around 6 in 10 (62%) adults in November 2021 (3 to 14 November 2021).

Of adults currently paying off a mortgage and/ or loan, or rent, or shared ownership, 30% reported that it was very or somewhat difficult to afford housing costs, and 3% claimed to be behind on rent or mortgage payments, in March 2022 (16 to 27 March 2022).

In March (16 to 27 March 2022), the proportion of adults living in the most deprived areas of Source: Statista

32 | Jan - March 2022 | Global Business Outlook

England who reported that they found it difficult or very difficult to pay their usual household bills, was 9 percentage points higher than in November 2021 (3 to 14 November 2021), increasing from 25% to 34% Around 34% of renters reported their rent had increased in the last six months, compared with 19% of mortgagors who reported their mortgage payments had increased over this period. The difference in the responses of renters and mortgagors likely reflects some mortgagors being on fixed-rate mortgages, whereas renters may be more exposed to increases in rent.

Analysis \ UK Recession

“Inflation is set to peak close to 9% in April and probably won’t fall below 7% this year,” noted James Smith, Developed Markets Economist for ING bank.

As a result of these, multiple studies have suggested that the levels of consumer confidence have fallen to the lowest in as much as 50 years.

The UK official data showed that consumer retail sales fell by 1.4% on a month-on-month basis in March and the same is feared to deteriorate further.

This study was carried out by the Office for National Statistics. This included the sale of essential items like food and petrol. The figures said that close to 20% of the surveyed population feared that they will be forced into debt in 2022 while almost half of them will not be able to save anything for the next year.

Another key finding of this survey was that 23% of those surveyed said it was “very difficult or difficult” to pay for household bills, a 6% increase from the same survey conducted in November 2021.

The situation is further likely to worsen as this survey was conducted ahead of the steep rise in energy prices which came into effect in April and other higher costs to the working class.

By the start of April, there was a survey conducted by Nielson that found consumers were underspending on supermarket bills compared to their expenses in 2021 even during the lockdown period. The highlight was that while branded produce saw a contraction of more than 5% in sales, the produce with private labels dropped by close to 2% over the period of the last four weeks.

This meant in total, that consumers were spending an overall 4.1% less on groceries on a year-on-year basis in 2022 which was the biggest drop since the study came into existence.

In mid-April, Tesco, the largest retail

chain in the country had forecasted a drop in profits citing higher acquisition costs and retail prices. The company has a hold of more than a fourth of the country’s entire retail market.

All this has also seen the pound taking a hit. The pound fell below the level of $1.29, its biggest fall since November 2020 by the end of April.

Possible way out Earlier in March, a sense of this situation was foreseen by research organizations like the Resolution Foundation. They had estimated that the incomes of families across the country are likely to fall at a time when they are burdened with high energy costs. This setback in the aftermath of the Russia-Ukraine war will be the worst since 1975, they said as households’ income may reduce to the tune of £1,000 for the year.

“Taking into account the measures announced by the Chancellor, the typical working-age household faces a fall in income of 4%, or £1,100, in 2022-23.

But the greatest falls will be felt by the poorest quarter of households who are set to see their incomes fall by 6%. This will see a further 1.3 million people fall into absolute poverty next year, including 500,000 children – the first time Britain has seen such a rise in poverty outside of recessions,” the think tank had said.

As a solution to this, the think tank had called on the UK government to take decisive action to subsidize low-income households who are struggling with their day-to-day expenses and prevent a rise in children growing up in poverty to prevent an economic contraction. They had feared that absolute poverty levels in the UK would deteriorate and the gains made on eradicating poverty will be diminished to 2019-20 levels.

1.3

million people fall into absolute poverty next year

"the greatest falls will be felt by the poorest quarter of households who are set to see their incomes fall by 6%. This will see a further 1.3 million people fall into absolute poverty next year, including 500,000 children – the first time Britain has seen such a rise in poverty outside of recessions,”

Global Business Outlook | Jan - March 2022| 33

Economy Global Economy

Analysis

How RussianUkraine war will shape economy GBO Correspondent

Russia is the leading oil and gas supplier to Europe

T

he Russia-Ukraine war is the most severe armed conflict in Europe since the Second World War. It is poised to affect the global economy, crawling through a zigzag recovery trajectory after being hit by the pandemic. Though tension was brewing over the past few months due to the amassing of Russian troops near the Ukrainian borders, the sudden attack by Russia on February 24 has deeply shocked and caused utter disbelief among political leaders across the world. There has been speculation that if the conflict sustains itself, it may set the stage for a new world war. However, keeping speculations aside, the Russia-Ukraine war’s financial impacts on the global economy can be gauged only after the emergence of the endgame, which means after Russia withdraws its troops from Ukraine. The stock markets have been volatile, inflation is on the rise, the investors’ confidence in the markets is falling, and the current conflict is set to make the global economy further vulnerable after a terrible ‘once-in-a-century’ setback due to the pandemic. The impact is expected to range from moderately optimistic to extremely serious depending on the tenure and scope of the ongoing Russia-Ukraine war, the severity of the sanctions by Western countries, and any further escalations in the retaliations.

Stressing the global supply chain The Russia-Ukraine war will severely impact the global supply chains that are already in a fragile state since the start of the pandemic. Given that Russia and Ukraine form a critical

34 | Jan - March 2022 | Global Business Outlook

Analysis \ The war effect

Over 50% of Ukraine’s wheat

exports are sent to the Middle East and North African countries.

global hub in the production and supply of oil, natural gas, industrial metals, fertilizers, food commodities, the problems in global supply chains shall only exacerbate across industries. The problem will be acute, particularly for those heavily reliant on energy resources. Russia supplies 40% of Europe’s gas. This makes the European nations heavily dependent on Russian gas supplies. Hence, finding an immediate alternative will be difficult for these countries.

The more pressing concern is the impact of the crisis on the price of oil, gas, and other commodities. Any sharp rise in

prices would only add to inflation and hit consumers. The disruption to gas supplies could also significantly impact global energy prices. Considering Russia is the leading oil and gas supplier to Europe, the risk of soaring energy prices shall be most severe in the European nations.

Russia and Ukraine also lead the global production of industrial metals like copper, aluminum, nickel, and iron ore and remain the leading suppliers to the European markets.

Russia is also home to around 40% of the world’s palladium, a key ingredient in semiconductor chips in electronic

Global Business Outlook | Jan - March 2022| 35

Economy Global Economy

Impact of the war on GDP

Russia 9.71% Lithuania 2.48% Latvia 2.02% Estonia 1.98% Czechia 1.16% Poland 0.78% Belgium 0.51% Germany 0.4% Italy 0.31% Austria 0.28% Spain 0.22% France 0.16% United Kingdom 0.09% United States 0.04% China 0.02% Source: Statista

devices that has application in the automobile manufacturing industry. Auto manufacturers also use palladium in catalytic converters in gasoline-powered vehicles to curb emissions.

Impact on food security Russia is the world's largest wheat exporter, and Ukraine is the fifth largest. Further, Ukraine is also a significant supplier of barley and corn to the European markets and a top producer of other commodities like fertilizers, edible oils.

Russia and Ukraine jointly account for nearly 30% of global trade in wheat, 32% for barley, 17% for corn, and more than 50% for sunflower oil seeds. Thus, the crisis cuts into food and energy supplies, impacting the agricultural sector (grain, edible oil) and energy supplies (gas). This means that people of different countries will be burdened with higher prices of these staple food commodities. The Food and Agricultural Organization (FAO) has already warned that the conflict can disturb the food supplies, increasing the prices of commodities by 8 to 22%, potentially triggering food insecurity globally.

The likely fallouts Economists predict the following three possible scenarios emerging from the ongoing conflict between Russia and Ukraine. The severity of the Russia-Ukraine conflict’s impact across different economies depends on the duration of the crisis and the western sanctions. The first likely scenario is wherein there is a swift end to the crisis, with the withdrawal of troops by Russia with a proMoscow regime in Ukraine. This can ensure quicker recovery from the recent slump in world trade without necessitating any major financial reforms. The second scenario is a prolonged conflict among the two nations, which can entail significant sanctions on Russia by Western countries, disrupting Russia's oil and energy supplies, whose ripple effects will keep shocking the global markets. The third and the worst possible scenario could be a complete shutdown of energy supplies. This will result in a severe

36 | Jan - March 2022 | Global Business Outlook

recession across European markets, further creating ripple effects on American and other global markets. It will force the central banks of the affected countries to induce stringent financial reformative measures.

Considering the possibilities of the above geopolitical conflict, the following are the impacts on the different regions of the world.

Varying effect on regions The US is one of the main actors involved in the run-up to the ongoing Ukraine crisis.

As a country that has committed many foreign invasions in the recent past, the US is comparatively insulated from the aftereffects of the crisis with a mild to moderate impact on its economy, provided the conflict does not prolong to the point of shutdown in energy supplies. As understandable, this conflict is only serving the geopolitical interests of America. However, a protracted Russia-Ukraine war can profoundly impact the American economy through Europe.

Being in the relative vicinity of the conflict region and due to its anti-Russian interests, the impact is likely to be moderate as far as Britain is concerned.

The disruptions in energy supplies could impact inflation with higher energy prices and negative spiral growth. The UK is already facing inflationary pressure and a 4.1% unemployment rate caused by the pandemic, and it is gradually treading on its path to recovery. This negative growth could further spiral depending on the continuity of the crisis. The worst-case scenario of a shutdown of energy supplies shall further deepen the negative growth. With higher inflation, there is every possibility of the UK entering into a recession due to heightened uncertainties. This scenario remains predominantly similar to other European markets. Hence, the UK would consider its best interests and do its best to de-escalate the tensions at the earliest.

Unlike the UK and US, the Middle

Analysis \ The war effect

Eastern countries are more exposed to the crisis as they import the lion’s share of their wheat from Russia and Ukraine.

Egypt imports nearly 85% of its wheat from eastern Europe through the Black Sea. An estimated 70% of Russia’s wheat exports went to the Middle East and Africa in 2021.

Likewise, most of Ukraine’s wheat exports, of over 50%, are sent to the Middle East and North African countries. The ensuing conflict has also given the Middle Eastern countries an option to leverage their position among the US and the European nations. However, there is going to be mild to moderate repercussions in terms of their economy as Saudi Arabia and Qatar, the leading crude oil and liquified natural gas producers of the region, are getting enhanced demand to divert their supplies to the European markets, providing an opportunity to make short-term gains.

However, it must be noted that no country can replace Russia in terms of gas supplies, and many countries are hoping that there is a quick end to this war. Conflict-ridden countries like Libya and Syria will face further challenges and ongoing internal instabilities. Hence, a swifter resolution of the crisis will avert troubles in food supplies to the Middle Eastern countries.

Like the Middle East, Africa too is dependent on the two war-torn nations.

Given that Russia and Ukraine collectively supply 30% of the world's wheat, the ongoing conflict's impact on the African region needs to be monitored closely.

Most of Africa’s wheat imports come from Russia and Ukraine, and corn imports from Ukraine. There could be severe disruptions to the food supply chains in the African countries dependent on imported food grains. Many African nations are already suffering due to the worst drought in decades, and they are on the verge of a catastrophic famine. Countries like Burkina Faso, Chad, the Democratic Republic of

Congo, Ethiopia, Madagascar and South Sudan suffer from acute food shortages and need food relief.

Therefore, a prolonged RussianUkrainian war could harm Africa’s food security and trigger a massive famine in the drought-hit region. A quick and peaceful solution to the Russia-Ukraine conflict is essential to avert such a catastrophe.

The South Asian region relatively is expected to face milder impacts with the ensuing Russia-Ukraine conflict. However, a quicker resolution is also beneficial to the regional interests, as the countries are recovering from the economic shock of the Covid-19 pandemic. The conflict has also brought the region to the forefront of global geopolitics, with the primary players being India and China. Both India and China have exercised their right to remain neutral, remaining agnostic to support either of the parties. The crisis also enables China to negotiate its relations with the USA, especially in the Indo-Pacific region.

India has been gradually recovering from the economic crisis induced by the pandemic, and the International Monetary Fund (IMF) has predicted a rebound in growth “influencing both the region and the world”. India too has taken a neutral stand, going with its non-alignment policy, seeking de-escalation of military conflicts, and engaging diplomatically with both Russia and Ukraine. The war can have some marginal impacts on India’s edible oil and fertilizer imports from Ukraine.

Export and Production of global food items Ukraine vs Russia

Sunflower oil

42% 30%

Wheat

8.9% 3.7% Barley

9.7% 5.61% Maize

16% 3.12%

21% 27% 14% 9.72% 9.5% 12.89% 18% 1.24%

Source: ourworldindata.org

Russia and Ukraine also lead the global production of industrial metals like copper, aluminum, nickel, and iron.

Global Business Outlook | Jan - March 2022| 37

Economy Global Economy

Analysis

How the war will disrupt global supply chains Ashley Samberg

Major global freight forwarders have suspended Russian suppliers, passing a sanction against their services

38 | Jan - March 2022 | Global Business Outlook

Ever since Russia invaded Ukraine, the ongoing war between them has been wreaking havoc on maritime and aviation freight.

During previous conflicts of this nature, the warring countries suffered the maximum repercussions. However, the 21st century has improved technology and communication methods, leading to interdependence among nations for commodities, technology, and financial investments. Therefore, the war between Russia and Ukraine has not only generated repercussions on the warring nations but the whole world.

One reason for this is the price of oil as it is needed for the movement of all goods be it on land, water, or air. Since Russia declared war on Ukraine, Brent prices soared to $110 a barrel, meaning prices have risen more than 80% in just 12 months. This in turn has triggered inflation on a global scale.

Prices have peaked because Russia is the world's third-largest oil producer and its inventory levels have been dipping for the past two years due to the effects of the COVID-19 epidemic. The present conflict has worsened the shortage in supply. Like oil, Russia is also a lead producer of gas. In fact, it provides for 40% of Europe’s total gas consumption. And this in turn has led to high energy prices across Europe, the UK, and the greater world.

A global economic model shows that in 2022, an average oil price of $100 per barrel would reduce GDP growth by 0.2% and increase inflation by 0.5%. High inflation will reduce household spending overall. However, the potential impact on GDP growth will vary widely by region, with major oil importers among the hardest-hit ones.

Analysis \ The war effect

Other than the price of oil, a shortage of raw materials due to reduced production and transportation is another major reason for high prices.

Fault in supply lines Russia and Ukraine are the prime exporters of metals such as platinum, aluminum, palladium, steel, xenon, neon, and chrome. Of these, palladium and platinum are widely used for running catalytic converters. Xenon, neon, and palladium are necessary for making semiconductors.

Since the war broke, they impacted the prices of these raw

materials and their finished products drastically as the war disrupted the supply chain of these extraction processes as it was before. Semiconductors are used for manufacturing all consumer equipment starting from mobile phones, to computers, and automobiles.

The two countries are not only a leader in energy production and mineral extraction, it is a marquee agricultural exporters too. They are one of the lead exporters of barley, wheat, corn, sunflower oil, and maize.

The usual agricultural processes of cultivating, harvesting, selling, and transporting crops have been hampered. And

Global Business Outlook | Jan - March 2022| 39

Economy Global Economy

Because Russia and Ukraine account for almost one-fourth of worldwide wheat exports, global commodities prices have skyrocketed.

Wheat prices have risen by 80% since April 2020 due to the epidemic and logistical issues, wheat futures in Paris jumped 16% on February 24.

as a result, this conflict is likely to affect the production of staple food items, including bread, pasta, and packaged foods, because they require spring wheat as raw material.

Worse, countries in North Africa and the Middle East that are more dependent on these two countries are like to suffer the most on the back of the worst droughts in decades. Africa imports most of its wheat from Ukraine.

Because Russia and Ukraine account for almost one-fourth of worldwide wheat exports, global commodities prices have skyrocketed.

Wheat prices have risen by 80% since April 2020 due to the epidemic and logistical issues, wheat futures in Paris jumped 16% on February 24.

Several Middle Eastern countries are severely affected by the rising prices and upset supply chain. Countries like Egypt are particularly vulnerable to increased commodity fee pressures due to their heavy reliance on imports. Around 30% of Egypt's population is impoverished, and many of the poor rely on subsidized bread for nourishment. In other parts of North Africa, price increases and supply interruptions coincide with severe droughts.

Source: Statista

40 | Jan - March 2022 | Global Business Outlook

Wheat shortages will exacerbate the region's fragile states. Lebanon's economic crisis has already harmed its people's capacity to purchase food, with prices rising by 1,000% in less than three years.

Lebanon imports wheat to cover most of its needs, with Ukraine accounting for around 60% of total imports. The country has around a month's worth of wheat stored. War-torn wheat shortages are also a concern in Libya and Yemen.

Further to make matters worse. Russia and Ukraine are lead exporters of fertilizers too.

Challenges in shipping Shipping costs have shot up not only due to the rise in global oil prices and delays in goods reaching their destinations creating a supply-side shortage. Major global freight forwarders have suspended Russian suppliers, passing a sanction against their services globally, in light of the havoc caused by the Russian military in blocking off shipping routes, destroying ports, and stopping services in Ukraine.

Analysis \ The war effect

The entire cost of shipping has increased significantly since this war molded ChinaEurope freight that traveled via the new Silk Road trade. Now, the world is in desperate need of alternative routes, which will lead to a sudden decrease in the need for Russia, its services and goods, in global trade.

The cost of rising insurance costs for shipping will further exacerbate the price of goods across the world which makes their way to ports via the Black Sea. Insurance companies are charging as much as a 10% premium on the value of the price of ships due to the ongoing war which effectively makes the cost of insurance higher than the value of hiring a cargo tanker.

The Black Sea is a key corridor for both trade and transportation for Russia, former parts of the USSR, and landlocked countries in Central Asia. The water body is used for the transportation of crops, crude oil, and agricultural products primarily from Russia and Ukraine.

Insurance companies are wary of missiles or mines damaging ships as at least five ships were severely damaged within a week of the war breaking out in Ukraine. Other than the risk of physical damage, ships are also at the risk of being seized by Russian or Ukrainian authorities which would trigger clauses by which insurers have to pay the ship owners the full value of the hull.

And for this, they are quoting prices higher than most customers can afford. A Bloomberg data compilation shows that transporting a million barrels of cargo to Italy from Russia will now cost $3.5 million compared to $700,000, the price quoted in 2021 during the same time of the year.

As a result of this, many of the world’s leading cargo operators have stopped plying these routes leading to shorter supply and high prices.

In fact, NATO had issued warnings of the threat of drifting mines in the Northwest, West, and Southwest areas of the Black Sea.

Global marine insurer North in its advisory at the end of the first week of April said the threat of GPS jamming, AIS spoofing, communications jamming, electronic interference and cyber-attacks in the area are considered “high”.

The war-affected Black Sea region contributed to more than 25% of all of the world’s wheat trade and 20% of that of corn in the pre-war times. But now with ports in Ukraine closed down to prevent collateral casualties, all these trade activities have been muted for the foreseeable future. Freight movements are at a halt as the Ukrainian ports of Odessa and Mariupol are shut, harmed or enduring an onslaught.

Ukraine had traded around 6,000,000 tons of grains and oilseeds each month prior to the conflict, however at present it has dropped to 200,000 tons, according to the Ukrainian government.

Other than food, Russian oil is a touchy issue for global brokers. Before this war the North Sea region used to see a transfer of 2 million barrels of crude oil. Similar closures are being reported from the Sea of Azov, which were essential for Ukraine’s exports.

Experts following the developments closely have said there had been a sharp abatement on activity in the Bosphorus waterway too, (otherwise called the Strait of Istanbul), which interfaces with the Black Sea and the Sea of Azov where Ukraine gets its ocean access, and an abrupt spike in vessels changing their AIS (programmed distinguishing proof framework) communicated objective from Ukrainian ports to Constanta, Romania, and to Istanbul, Turkey.

On top of this, restricted air freight capacities presents a dual challenge for transporters. With airspace over Ukraine shut and aircrafts keeping away from Russian airspace, airship cargo rates are also spiking.

Negative impact on real GDP Growth from Russia-Ukraine war

World 0.7% US 0.6% UK 0.4% France 1.6% Germany 2% Italy 1.2% China 0.3% India 0.8% Mexico 0.6% Russia 4.8%

Global Business Outlook | Jan - March 2022| 41

News

Economy

Saudi Arabia helps Egypt with $5 billion

T

he Kingdom of Saudi Arabia made a deposit of $5 billion at Egypt’s central bank on March 30, making its total deposit in the nation more than $10 billion. According to reports, the term of the deposit can be extended to more than a year based on mutual consent

between the two nations.

In addition to this, the Saudi Public Investment Group is also likely to put more money into the Egyptian economy. All these efforts are targeted toward attracting foreign investments to the tune of $10 billion. Egypt had resorted to the devaluation

of its currency by 14% in wake of a storm of a pullout by investors from its treasury markets.

Other than Saudi, UAE, and Kuwait too have made significant long-term deposits in recent times. Both the countries combined have put close to another $10 billion while Qatar is also expected to bring in investments worth $5 billion in the near future.

These marquee deposits will help Egypt a long way to severe the storm of the Russia-Ukraine war. The country is heavily dependent on food imports from the war-torn region especially wheat, which is the staple food crop and politically significant.

Global Economy

IMF cuts global growth forecast The prolonged Russia-Ukraine war has resulted in the International Monetary Fund (IMF) reducing its global growth forecast to 3.6% from 4.4% for 2022. In its half-yearly update, the global financial body has warned that this war will potentially see cold war-era like two blocs from a comparatively much

42 | Jan - March 2022 | Global Business Outlook

more global collaborative atmosphere of the last few decades.

The IMF has said that growth will suffer in all G-7 economies including developing nations and their industrialized counterparts with a fear of recession. According to the half-yearly report, the UK is likely to be the best performer among G7 countries this year with a growth of 3.7% but is projected to see a muted growth of 1.2% in 2023.

This subdued growth will be a result of the high cost of living that Britons are forced to endure primarily due to high energy and food prices.

Italy and Germany, which are more prone to the shocks of the war due to their reliance on Russian energy imports, will suffer reduced growth by 1.7% and 1.5% respectively.

Meanwhile, the US will see its growth forecast shaved by only a mere 0.3%.

According to the halfyearly report, the UK is likely to be the best performer among G7 countries this year with a growth of 3.7% but is projected to see a muted growth of 1.2% in 2023.

Nepal bans import of luxury items

Cryptocurrencies

Central African Republic adopts BTC as currency The CAR (Central African Republic) has announced that the cryptocurrency bitcoin (BTC) will be an official legal tender in the African nation.

CAR, although rich in natural resources like gold and diamonds, is economically fragile and politically unstable.

The adoption of BTC as a legal currency has been backed by the government as a panacea to the situation by President Faustin-Archange Touadera. With this CAR becomes the second country in the world after El Salvador to adopt cryptos as a legal tender. This development comes after the country’s parliament unanimously approved a bill for the same.

The country until now was using the African CFA franc, a regional currency governed

by the Bank of Central African States (BEAC) along with other five neighboring countries.

However, CAF has not taken clearance from the central bank regarding the adoption of BTC. In wake of the development, two of CAR’s former prime ministers had publicly opposed the move stating that it was an offense to not consult the BEAC (Bank of Central African States). While the world is mixed with regard to the adoption of cryptocurrencies as official currencies, neighboring Nigeria has outlawed cryptocurrencies but launched its own digital currency called eNaira.

The former Himalayan kingdom of Nepal has banned its citizens from importing luxury items in a bid to preserve its foreign currency reserves in face of the peak global inflation of basic commodities.

The ban will be effective till mid-July as of now. The banned items include imported tobacco and alcoholic drinks. Other items under the ban are toys, diamonds, playing cards, cars, sports bikes, and expensive TV sets. The caution by the Nepalese authorities comes as another subcontinental nation Sri Lanka is facing an unprecedented crisis. In its worst financial debacle since its independence in 1948, Sri Lanka is now left under the mercy of international monetary aides to survive this foreign currency deficit. The situation is so dire that the island nation has to ration basic necessities like food and fuel.

According to estimates, Nepal is also on a slippery slope. In less than a year from July 2021, the Nepal government’s foreign reserves fell by 17% at the end of February 2022. Following this in March, the central bank of the country had restricted banks in the country to not importing more than 10 kg of gold per day from the 20 kg limit in place earlier.

Global Business Outlook | Jan - March 2022| 43

VI Markets

Advertorial

i

In an exclusive interview with the Global Business Review, VI Markets CEO Talal AL-Ajmi talks about his vision, strategy, and challenges facing the Middle East market.

An excerpt from his interview:

clear, and four pillars were developed to meet the challenges in infrastructure, liquidity, transparency, and products, each of which was addressed through a series of solutions.

This is the 12th year in business for VI Markets. Tell us about your vision when you started this company and how much of it have you already achieved?

What are your plans for the next 10 years for the company? Are there plans to delve into any emerging markets?

There was a need for a multi-pronged strategy, which not only meets the needs of the Middle East capital market but also includes the views and opinions of all market participants.

The challenges facing the market became

We are working to develop strong and credible financial markets. We also strive to operate a financial trading platform that enjoys integrity, fairness, and high transparency and is able to efficiently provide services for all investment assets

Advertorial \ VI Markets

Aim is to spread awareness through education We strive to operate a financial trading platform that enjoys integrity, fairness, and high transparency and is able to efficiently provide services for all investment assets, says VI Markets CEO Talal AL-Ajmi in an interview with GBO.

traders to copy the same trades from any traders with specific parameters. In the coming month, we are planning to add a feature that allows full ownership of Crypto Currencies.

Currently inflation is a concern for most parts of the world, do you see that as a hindrance to your growth in the short term?

It depends on the cause of inflation in the first place, if the economy is experiencing overheating activity, then central banks can implement what is known as deflationary policies that would curb aggregate demand, usually by raising interest rates.

In some countries, central banks link their local currencies to others and thus are linked to their monetary policies (such as the Gulf countries that peg their currencies to the US dollar, and their monetary policies are influenced by the Fed's policies).

In some cases, the government may set prices directly, when things seem to be getting out of control beyond what the citizens can tolerate. These price-fixing procedures usually lead to the accumulation of financial obligations on the government.

Central bankers increasingly rely on their ability to influence inflation expectations as a tool to reduce inflation. The greater the credibility of central banks, the greater the impact of their statements on inflation expectations.

Currently Web3.0 is the talk of the entire world.

And cryptos are being touted as an essential part of that system. Are you considering adding cryptos to your array of offerings for customers?

Cryptos have been an essential part of trading in recent years. We at VI Markets have started with the main cryptos, and now continuously adding more, reaching now to over 10 cryptos in our platform while also being able to trade them at any time 24/7.

Outside of VI Markets, you individually enjoy a lot of popularity and have a strong social media presence. Tell us how did it all start.

of different classifications, with a focus on the interests of customers through various types of services.

We have proudly released the One Connect app that allows our customers to copy the trades from an experienced trader/mentor or anyone at all -- this new technology allows beginners and even experienced

I have always believed that social media will serve me right in spreading awareness about online trading and how it should be done. My intention at the beginning was to share all my knowledge and daily trading with the people interested in online trading. It was not to gain popularity at all. However, I believe it started because I was keen to simplify all the long concepts and show the people that trading online is not as complicated as they thought.

Technology OTT

Analysis

Is it a dip or a free fall for Netflix?

GBO Correspondent

Netflix said that it lost 200,000 subscribers in 2022 Q1

46 | Jan - March 2022 | Global Business Outlook

N

etflix, a first mover in its category of OTT platforms, announced an unprecedented contraction in its subscriber base by 200,000 as part of its quarterly results earlier in April. This was the first time, that the company has faced a situation where it has failed to increase its net paying subscribers in a decade’s time.

To suggest things will go further south before it gets any better, the company further said that another two million subscribers will leave the platform in the second quarter. The development was a shocker as stock analysts had predicted that the company would stick to its forecast of adding another 2.5 million paying users.

These numbers obviously eclipsed the fact that its revenue was better on a quarter-on-quarter basis. The dip in the subscriber pool led to the erosion of its value in the stock market. Shares of the company were trading close to 40% below their value ahead of the results for the following days immediately after the earnings call. This meant that in effect $50 billion and more in investor wealth has been wiped off in a matter of days.

In its defense, the company said that the net loss of paying subscribers was due to the termination of 700,000 accounts in Russia which it had to forego as part of the Western ostracization measures against the Vladimir Putin regime.

Further, the company blamed the menace of sharing passwords between families as a contributor to its slump.

Analysis \ OTT

Netflix pegs this number to be around 100 million across the globe.

The company ahead of these results had already started plugging this leak by charging customers in certain geographies a paltry sum if it was clear that accounts were shared outside a household.

According to Netflix COO Greg Peters, this is certainly an area that is fertile for the company to look for improving the bottom line. However, the company is not yet ready to play hardball on this. Netflix has stated that only in certain South

American countries it is rolling out the additional charge for sharing passwords instead of introducing a blanket ban on sharing the credentials.

Apart from this, the company’s recent rate hikes can be a contributing factor to the its growth fortunes, especially at a time when most of the world is struggling through inflationary pressures and fears of a recession in the global north remains a possibility.

In some of the developed markets, consumers are paying around 33% more than what they were paying in recent

Global Business Outlook | Jan - March 2022| 47

Technology OTT

Net worth

$237.65 billion (July 2021)

Market capital

$235.45 billion (July 2021)

Revenue in 2021

$7.16 billion

Net income in 2021

$1.7 billion Source: Macrotrends

years. But the company seemingly remains bullish with the CEO claiming that its retention rate of subscribers is better than most of its peers.

Is Netflix losing its sheen?

Close to two years ahead of this current slide in its fortunes, crypto evangelist Sylvain Saurel had declared that the best for Netflix was all but over after the company failed to stick to its forecast with respect to the on-boarding of new subscribers in the second quarter of 2019.

Not to miss, the fiscal prudence of the company was not suspect even though it went to invest in many

48 | Jan - March 2022 | Global Business Outlook

original productions. Netflix had posted a profit of $271 million.

Saurel elaborated that over the last 10-12 years, the company had clearly profited from its first-mover advantage, but the advent of competitors had made the segment far from lucrative.

He noted that Netflix was the first to register 150 million global subscribers, but by 2019 when Amazon Prime and Disney+ emerged as potent rivals, Netflix was failing to make a further dent in the global market. Since then the market has only gotten further crowded. And at that time itself, the US, which is Netflix’s largest market, was saturated.

Saurel also pointed out that Disney had a far more attractive price point

Analysis \ OTT

which would make it an easy replacement for Netflix, especially with its collaboration with its subsidiaries ESPN and Hulu, a smaller on-demand video streaming service.

In a potential epitaph of sorts, he predicted that the spring of 2020 was when Netlfix will face its biggest challenger with the introduction of HBO Max, a joint venture between HBO and Warner Bros.

While it all seemed gloomy for Netflix, the onset of the COVID pandemic sometime in mid-March of 2020 proved to be a window of opportunity for the streaming service. And within a span of less than a year, it turned the number of its global subscriber to 183 million while rivals Disney managed to get only 50 million subscribers. The lack of live sports meant that the bundling of ESPN services did not help the customer base. But come to the present, the growth train for Netflix has seemed to hit a stop.

Newer avenues to the summit But now that the company has hit the speed breaker, it is looking for newer avenues to up its oomph. And one addition to the service that is being offered by the company is games.

The first game to debut on the platform will be an animated version of the popular card game Exploding Kittens. The company has said that the game which will be released on the mobile version will act as a prelude to the animated series, which will be launched under the same title due for release in 2023.

While the company is betting on games to drive itself out of this slowdown in growth, it is nothing radically new. Since September 2021 Netflix has spent a lot of its resources to acquire three gaming studios to support this long-term vision.

Industry observers note that Netflix however, won’t delve into hardcore gaming

and this won’t be its mainstay.

Currently, games will be part of the streaming platform’s customer retention vehicle and an accessory marketing tool.

At the same time to reduce its cash burn, the company will reduce expenses by downsizing its own productions in the short term.

The company is also flirting with the idea of a cheaper version of its services for the end consumers while the product remains the same. The California headquartered tech behemoth may roll out cheaper subscription plans with advertisements subsidizing the cost of content for the user.

This will come at the expense of losing a part of the company’s core identity. But at a time when most of the world is suffering from inflationary shocks and a recession may raise its ugly head, this pivot may be a necessary poison pill that the company has to swallow to safeguard its pole position.

The other idea that has been brought up in this regard is the option of adding other content on its platform like live news and sports to its folds. There is no doubt that live sports and its already bingeworthy content can get it an injection of new subscribers especially as its documentary series on Formula 1 saw record interest. But right now the company is not yet convinced that it’s a good idea.

As part of the earning’s call interaction, the company’s COO and co-CEO Ted Sarandos suggested that they are yet to figure out how to create a “big stream of revenue” out of it while clarifying that the possibility is not ruled out.

Netflix global subscribers in millions

2016

89.1 2017

110.6 2018

139.3 2019

167.1 2020

203.7 Source: Netflix

Global Business Outlook | Jan - March 2022| 49

Technology Sensors

A chip that detects micro movements without a camera Feature

The Soli sensor was introduced in the Pixel 4 smartphone GBO Correspondent

I

nnovation unlocks many new ways for companies to capture new markets, onboard new users, and in turn, improve their bottom lines. And this is why like every year, there was a usual fanfare at the Mobile World Congress event recently held in Barcelona which showcased path breaking innovations. A vivid example is a Metaverse, a whole new virtual world where things work beyond imagination. Apart from this, applications powered by AI (Artificial Intelligence), IoT (Internet of Things), and other emerging technologies surprise us at regular intervals and indicate a more tech-enabled

50 | Jan - March 2022 | Global Business Outlook

future. In this line, Google has introduced a new technology that can read body language without needing any cameras, and it's called Google's Soli.

Essentially the chip is a purposebuilt chip that tracks body motion at a microscopic scale, with unmatched accuracy making use of a miniature radar to track the movement of the human body in real-time. The chip can track submillimeter motion, no matter how swift it is, with high precision. The size of the chip is just 8 x 10 mm, and it puts a sensor and antenna array together in a single device, which makes sure that this chip can be included in the smallest devices. Since it comprises no moving parts, the energy consumption of this chip is comparatively low. This aspect makes Google's Soli chip the most preferred choice for all upcoming flagship device makers.

Feature \ Sensor Chip

Intending to make a huge leap, Google’s ATAP (Advanced Technology and Products) division is working on a language to facilitate the interaction with the Soli sensor. The goal is to establish a universal set of gestures through which people will instruct their devices (running with a Soli sensor) to perform certain actions.

How Soli tracks movements According to Google ATAP, the Soli sensor uses electromagnetic waves to identify movements.

And whatever information the reflected signal provides like time delay and frequency

fluctuations allows the sensor to understand what action needs to be taken.

The remarkable feature about the Soli sensor is, it can sense subtle changes in the received signal, which allows it to distinguish complicated finger movements easily. It understands the gestures by interpreting information in all possible ways, which makes it super precise.

Wearables and other likely applications Google’s Soli is garnering attention from the wider tech world because of its small size and

Global Business Outlook | Jan - March 2022| 51

Technology Sensors

efficiency. Wearables are the most natural choice to apply this technology because such devices usually have small displays, and that’s why technology like the Soli sensor is required to make them feature-rich more than ever.

Let’s take an example of the Apple Watch, which comes with a physical Digital Crown that allows users to interact with the watchOS interface in multiple ways. And Apple can take its game to the next level if it incorporates the Soli sensor into its smartwatch as it will eliminate the need for a digital crown, as users will just need to wave their fingers to get the desired task done.

For instance, they just move their fingers in the clockwise direction to increase the volume, imitate the action of pressing a button to turn on or off their Apple Watch. In

Ripple: An open-source API for Soli Soli is a miniature radar that understands human motions at various scales: from heartbeats to finger movement gestures to running. To expand the usage of its Soli chips, Google is partnering with many companies across verticals like Ford and Blumio health to change how things are currently done like measuring blood pressure without touching the patient or providing assisted driving technologies. The concept of virtual tools is essential to Soli interactions. The gestures that mimic familiar interactions with physical tools are referred to as virtual tools. This metaphor makes soli interactions easier to communicate, learn, and remember.

Now in order to broad base the use of Soli chips and other similar radar technology, Google has launched Ripple, an open-source API for incorporating Soli chips to other devices in January 2022. Ripple will be accessible to the Consumer Technology Association (CTA) members which host the Consumer Electronics Show every year in Las Vegas.

Ripple participants include Google, Ford, blood pressure sensor maker Blumio, and vendors like Infineon, NXP, and Texas Instruments.

According to a Markets and Markets forecast, this motionsensing technology market will reach $20.64 billion by 2023 by registering a growth of 20% annually.

52 | Jan - March 2022 | Global Business Outlook

a nutshell, the sensor can enhance the user experience, make the product look futuristic and justify the premium price tag, and so on.

Applications in the market The Soli sensor was introduced in the Pixel 4 smartphone. It took the smartphone industry by storm because the customers were able to perform gesture controls like waving hands to skip songs, put their phone on silent, snooze their alarm, etc. Google even announced that these capabilities are just a glimpse of what is coming its users' way. But Google didn’t launch the improved version of the Soli technology in the Pixel 5 series. Despite dropping the idea of using Soli in its smartphones, Google decided to use this technology in its other devices like Google Nest Hub with the objective of giving a whole new experience to its users. The radar sensors are embedded in the second generation of the Google Nest Hub smart display that detects body language and breathing patterns when anybody sleeps close to it. The remarkable fact is that this device observes the sleeping pattern without needing physical contact, unlike wearables.

What’s next for Soli Other than its gesture-picking functions, Google wants this technology to have other game-changing applications, and that’s why it is using sensors in devices like desktops to recognize users’ everyday movements, to make new kinds of decisions rather than taking some gesture-based actions. This has the potential of revolutionizing everyday tech products. Some of the advanced applications in the pipeline are a thermostat that shares weather reminders or suggests the user take an umbrella before leaving the house, a TV that turns itself off automatically after detecting no movement from the user, a computer cleans the cache without needing a specific command using the keyboard.

Leonardo Giusti, head of design at ATAP, revealed that the major portion of the research revolves around proxemics. In a

Feature \ Sensor Chip

layman’s language, when we come in contact with another person, we expect certain things like engagement. Similarly, the ATAP team has used this concept to establish a connection between humans and devices.

The ATAP team has a vision where machines give immersive experiences to their users. For instance, whenever a computer detects the user is coming closer and entering its personal space, it takes the initiative to perform specific actions like turning on the screen without waiting for any button to be pressed.

But it is significant to understand that proximity alone won’t do the job because there will be scenarios when the machines will perform undesirable actions following proximity cues. This is where the Soli sensor comes into the picture because it closely monitors subtleties in the body movement to conclude. It tries to understand which path the user is going to take next, the direction of the head, among other fine details.

The origins of the chip The ATAT team had pulled off such solutions after putting a dedicated team to perform a series of choreographed tasks in a living room, using multiple cameras to track movements.

Lauren Bedal, the senior interaction designer at ATAP, has a background in dancing, which is why she was able to explain how choreographers understood a basic movement idea and came up with more variations. She emphasized how it was crucial to observe a dancer managing their weight while changing their body position and orientation. Such studies helped the ATAP team to create a set of movements so that nonverbal communication could take place easily between humans and machines.

She did put some light on a few examples like a computer starts showing unread emails after sensing the user’s presence, pauses a video when no one is looking into the screen and resumes it after sensing the ideal face direction, suggests the user switch

to the only-audio mode after sensing a lack of concentration during a video call.

How far is Soli from being a mainstay After reading this far, it is natural to be curious about experiencing this technology, but it is not ready yet because some challenges are due to be addressed. For example, if multiple people are present in a room, it would be difficult for devices to decide which action they need to take. This is the prime reason why Bedal was putting stress while saying that this technology is still in the research phase, and there’s no point in launching it hastily, as it would end up ruining the user experience and drive unwanted backlash. It’s pretty much understandable because we will not be able to react calmly if our computer deletes an ultra-important file, takes illegal action on the internet, or does anything worse.

This is why the ATAP team has to take every small thing into account before launching this technology globally. The most important thing for them is to zero in on the timing because if a device reacts too early or late, users won’t get a pleasant experience.

Let’s say there is a TV equipped with a Soli sensor. And the user leaves their couch to get some snacks or due to some other reason in the meantime, the TV automatically turns off because it didn’t detect anybody in front of it. Should this be OK? No, of course not, because it would be frustrating to see the TV turning on and off after every few minutes. These kinds of problems are keeping the ATAP team busy in the study phase.

Apart from such complicated challenges, privacy is the major concern because people will hesitate to be present in front of their devices running on the sensor in fear of losing sensitive information.

All in all, we will have to wait a bit longer to see this technology running at its full potential.

This technology is still in the research phase, and there’s no point in launching it hastily, as it would end up ruining the user experience and drive unwanted backlash. It’s pretty much understandable because we will not be able to react calmly if our computer deletes an ultra-important file, takes illegal action on the internet, or does anything worse.

Global Business Outlook | Jan - March 2022| 53

News

Technology

Visa unveils Africa’s Ist innovation hub

L

eading payments firm Visa has opened an innovation studio in Nairobi, Kenya, the first in the continent of Africa.

The studio was inaugurated by the country’s Central Bank Governor Dr Patrick Njoroge.

The innovation studio is poised to upgrade and innovate the banking system, and host an array of subject matter experts in finance and tech domains from across Sub-Saharan Africa.

This hub will serve the entire sub-Saharan region and is Visa’s sixth such innovation hub after the likes of London, Dubai, and Singapore. The new center will work towards Visa’s goal of establishing its payments business and introducing newer products and services in the fintech segment. This development comes after Visa last year collaborated with Kenya's biggest telco firm

Safaricom to permit M-Pesa's 24 million clients and 173,000 nearby traders to be connected to Visa's 61 million shippers and its multiple billion cards. Kenya’s central bank is insistent on launching a national payments strategy to increase inclusiveness and expand the scope of digital payment in the country.

In Kenya, before Visa, Cisco and Philips had opened similar development studios.

Twitter overestimates user base Twitter currently has 229 million daily users, but the social media giant has been overestimating its user base for three years in a row as it was counting multiple accounts used by the same person as different.

This anomaly was overlooked by the company from Q1 2019 to Q4 2021. These revelations came in wake of the earnings report of Q1 2022.

However, this was not the first time that the company was guilty of the

54 | Jan - March 2022 | Global Business Outlook

Safaricom to permit M-Pesa's 24 million clients and 173,000 nearby traders to be connected to Visa's 61 million shippers and its multiple billion cards

same. In 2017 too, the company had overstated its user base by millions for three years by double-counting users who use the platform via third-party apps including its own Tweetdeck.

While this is a big embarrassment for the company listed on the Wall Street, the issue may be a non-matter soon. Once Elon Musk gets control of Twitter as a private company, it will no longer need to disclose its vital metrics to the wider world.

In line with this, the company said that they are not focusing on its previously stated goals. However, the company performed true to its own estimations despite the present global crisis triggered primarily by the Russia-Ukraine war. Both its revenue and operating losses were in line with its quarter-to-quarter guidance.

Mergers and Acquisitions

Elon Musk buys Twitter

Microsoft to incubate 10,000 African startups Leading IT player Microsoft has announced that they will accelerate the growth of 10,000 African startups and fast-track investment in Africa’s startup ecosystem for the period of next five years. As a part of Microsoft for Startups Founders Hub, members get access to tailored learning paths to fill in the gaps in your experience and help you get to the next stage, with learning modules on topics ranging from product naming to raising capital to technical how-to. The company said its Africa Transformation Office (ATO) will be the nodal point for this initiative.

The Founders Hub is a self-service hub that provides startups with a wide range of resources, including access to mentors, skilling content, tools like Microsoft Azure and GitHub, and go-to-market and business support.

Further, the company said that they are building partnerships with accelerators and incubators across Africa, including Grindstone, Greenhouse, FlapMax, and Seedstars to provide industrybased startups with access to markets, technical skills, and funding opportunities. These partnerships will provide African startups with access to skilling programs, access to markets, including opportunities to co-sell.

The world’s richest man Elon Musk, who runs Tesla and SpaceX, has now successfully bought Twitter too. According to Twitter, they have entered into a definitive agreement to be acquired by an entity wholly owned

by Elon Musk, for $54.20 per share in a transaction valued at approximately $44 billion. Upon completion of the transaction, Twitter will become a privately held company. This will mean that Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own upon closing of the proposed transaction. The purchase price represents a 38% premium to Twitter's closing stock price on April 1, 2022, which was the last trading day before Mr. Musk disclosed his approximately 9% stake in Twitter.

The company said that

the deal which has been unanimously approved by the Twitter Board of Directors is expected to close in 2022, subject to the approval of Twitter stockholders, the receipt of applicable regulatory approvals, and the satisfaction of other customary closing conditions.

According to the announcement, Musk has secured $25.5 billion of fully committed debt and margin loan financing and is providing an approximately $21.0 billion equity commitment.

Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own upon closing of the proposed transaction

Global Business Outlook | Jan - March 2022| 55

Technology Fintech

Xendit achieved unicorn status in 2021 with its Series C fundraising via venture capital investment firms like Tiger Global, Accel

GBO Correspondent

E

stablished in the year 2014, Xendit was developed on the lines of WhatsApp instant messaging service

by Moses Lo, an alumnus of the University of New South Wales business school.

Lo serves as CEO of the company. But now the company has become a significant player in the digital payments sector in Indonesia as a Peerto-Peer (P2P) payment platform. The idea to move to the fintech space came from the hassles faced by a friend of Moses Lo, who was trying to move money from Australia to his home country of Indonesia, which was a costly thing.

Despite being incorporated just in 2014, it has catapulted itself as not only a major national entity but also as a leader in the Southeast Asian fintech ecosystem. The company provides payment infrastructure

56 | Jan - March 2022 | Global Business Outlook

services and related solutions across Indonesia and the Philippines. The company focuses on providing services related to payment processes, financial marketplaces, disbursing payroll, and loans, among other related offerings.

Xendit also comes with a homegrown fraud detection service known as Xenshield, which combines fraud management tools with risk scoring to review payments for fraud risk.

The company’s primary function is to make payments in Indonesia simple, secure, and easy for all, including SMEs, tech start-ups, and even MNCs. While the company forayed into the financial space as a payment gateway, initially, It has now extended its services

Feature \ Xendit

Feature

Riding the fintech wave to success to facilitate invoicing, risk management, fraud prevention, tax payment, and even organize finance for merchants if they cannot do so through the traditional route from banks.

The growth story The patronage of the platform has been unparalleled, clocking more than 65 million transactions per year. The company saw its user base grow by over 500% in 2020.

The sharp increase in its user base has been primarily attributed to growth in demand for digital and e-commerce products such as video

prescriptions and online games. The value of total transactions was a whopping US$ 6.5 billion in 2021. The company collects its revenues via fixed charges or percentage-based fees from user merchants. After paying the fees, merchants can use the platform to send and receive payments.

Building on its surging user base, the firm is expected to register handsome growth in revenue in the coming years as it consistently introduces new products that facilitate secured e-payments, such as fraud protection and the KYC process. The company’s revenues are

Global Business Outlook | Jan - March 2022| 57

Technology Fintech

Payment mode on Xendit in 2020 E-Wallet

24%

Virtual accounts

58%

QR-code systems

0%

Retail cards

12%

Credit cards

6%

expected to be fuelled further as it associates with significant players in other areas to facilitate Buy Now Pay Later payment options. Currently placed at number two as a payment gateway company in Indonesia, the company is expected to continue its forays into newer areas related to payment.

The coveted unicorn status Xendit achieved unicorn status in September 2021 with its Series C fundraising via venture capital investment firms like Tiger Global and Accel. They had earlier pumped in $64.6 million in Series B fundraising in March 2021. With $200 million funding by Coatue Management, Insight Partners is expected to raise the valuation of Xendit from the current $1billion to $2.7 billion. The company has also registered more than 200% year-onyear (YoY) increase in total payment volume handled and has recorded a Total Payment Volume (TPV) of $9 billion per annum.

Xendit is expected to use these additional funds to expand its reach into new geographical areas and develop and launch new products. The company, banking on its focus on creating efficient digital infrastructure, is expected to use the funding to strive towards becoming a market leader in the banking and financial sector not just in Indonesia and the Philippines but also in other Southeast Asian nations. The next phase of expansion is likely to be in Malaysia, Thailand, and Vietnam in the next few years helping businesses to verify and manage their end-user customers.

Xendit seeks to become a one-stop shop for merchants who want to jump onto the digital transformation bandwagon, automate, and simplify their payment-related activities as per the requirement in their country on its platform with transaction methods such as digital wallets and credit cards.

Using the pandemic as a springboard For a region like Southeast Asia that mainly relies on cash for payment, the pandemic has

58 | Jan - March 2022 | Global Business Outlook

been a boon for adopting digital payment methods, and Xendit has been quick to seize the opportunity. The company saw a sharp increase in its user base, primarily attributed to growth in demand for digital and e-commerce products.

This was necessitated because most people confined to their homes due to the pandemic- induced lockdown were looking for means to keep themselves busy and for digital options for online purchases.

Also, the region is rife with over 100 languages, and people live in various islands scattered over thousands of miles. This makes the problem of the inaccessibility of monetary transactions, especially during a pandemic. As a fintech service provider, Xendit is working towards making the region’s electronic wallet payments system the most accessible and affordable. Also, as brickand-mortar stores were forced to shut shop due to the pandemic, going online allowed them to reach out to customers in geographic locations that were not possible earlier, and the company helped make it possible for them to execute online transactions.

The company also became the first Indonesian company to be accepted into the Y Combinator accelerator program. Xendit receives funds on one island and delivers funds on behalf of its client merchants, both big and small, on another island, allowing them to complete an online transaction.

In Indonesia, regulators want to push QR code payments because most people make payments via e-wallets. In the Philippines, however, it's slightly different. Xendit intends to educate the market and global MNCs who want to sell products in South East Asia to help increase the increased use of technology-based payment solutions.

Foraying into newer markets The company which mainly focused on clients that provided travel-related services is now shifting its focus. It is now trying to combine a global approach with localization.

The company intends to make it a point to

Feature \ Xendit

build partnerships as it approaches newer market segments. The company is also investing in dedicated customer success teams for every region to boost interaction can help increase its reach.

Besides providing a reliable and secure payment gateway, the company also plans to launch value-added services. Focusing on technology, the company has highlighted the benefits of the digital economy for businesses across the region.

So far the company has maximized its focus on customers primarily from SMEs and telecom companies, who mainly operate through retail outlets in shopping malls.

Due to pandemic-induced lockdowns, the shopping malls were closed, so they found it challenging to communicate with customers and execute financial transactions like bill payments, phone recharge and other value-added services. Now Xendit, through its technology platform, is helping telecom companies to service their customers.

Besides them, the company is also tying up with prominent technology players like Traveloka, Wish, Wise, and Grab. Digital payments in most Southeast Asian markets are highly fragmented. Consumers prefer using various services like digital wallets, Buy Now Pay Later (BNPL), virtual accounts to traditional debit and credit cards. The company now intends to provide a single platform that can be integrated with any service allowing customers to make payments easily.

Acting as an intermediary, Xendit, through its technology solutions, allows businesses to accept payments from any methods customers use. The services include live URLs which allow sellers to message customers for payment, web and mobile checkouts that work with e-commerce platform plug-ins and APIs. The company is also focusing on diversifying its business. It intends to expand its portfolio by tying up with financial institutions to provide working capital loans for merchants, and issue credit cards, which has enormous potential as

credit card usage is still shallow in countries like Indonesia and the Philippines.

Helping women do business In Indonesia, many small and microbusinesses are run by women who don’t have a good credit rating or any property ownership that can be used as collateral to access loans from banks. Faced with inherent challenges that created obstacles in their path to access banking and financial services, women in Indonesia were looking for alternative solutions that the company introduced. This proved to be crucial for women who owned small and micro-businesses to get out of the vicious cycle of capital-starved businesses that could not otherwise grow.

It has enabled these female small and micro-business owners to bypass existing rules and regulations regarding executing large numbers of financial transactions through its payment platform. Using the payment gateway and other services, women entrepreneurs are now sending and receiving money more affordably and flexibly.

Positioning as a market leader By building hyper-localised products ideally suited for a geographically fractured region of Southeast Asia with over 23,000 islands, Xendit has tried to meet all types of customer needs. Xendit, building on its reach, has been able to milk the advantage of being the first mover to develop first-in-market products that provide unparalleled customer service by adapting to their dynamic requirements.

This is all the more important since electronic wallet payments that clocked over US$ 22 billion in 2019 are expected to touch US$ 114 billion in 2025 according to analysts.

E-commerce players are already burdened with building a whole new platform to promote online payment and figure out an algorithm to ensure that the right products are in place or that the right merchants are there. Devoting time to facilitate online payment can be distracting for e-commerce businesses.

Payment mode on Xendit in 2021 E-Wallet

43%

Virtual accounts

41%

QR-code systems

7%

Retail cards

6%

Credit cards:

3%

Source: Xendit

Global Business Outlook | Jan - March 2022| 59

Geidea

Advertorial As we enter 2022, Global Business Outlook Magazine caught up with Abdullah Al Othman, the Founder and Chairman of Geidea, the market-leading fintech in KSA – as well as one of Saudi Arabia’s successful young entrepreneurs - to talk about where he sees the payments industry heading, trends in the sector and his predictions for the future As we enter 2022, how have you seen the payments industry evolve over the past year, and what are some of the key drivers behind digital payments?

The dynamics of the payments industry have changed forever - resulting in payments being completed primarily through digital-first platforms. 2021 served as proof that the shift in consumer behavior toward digital transactions was indeed permanent.

In 2022 and beyond, we see technologies such as e-wallet providers and QR-enabled solutions continue to accelerate moves away from cash and are also seeing trends such as ‘account-to-account’ transfers playing an increasing role in payments.

Although contactless cards dominate in-store transactions, mobile wallets such as Apple Pay are increasing in adoption and paving the way for further innovation.

This demand for digital payments will only continue as consumers enjoy unparalleled convenience from solutions such as e-commerce – which in the Middle East, Africa, and South Asia (MEASA) region, is expected to grow at a compound annual growth rate (CAGR) of 18.4%. To stay ahead of the curve, businesses are paying attention not only to changing consumer preferences but also to evolving technology, regulations, and trends such as open banking which are altering the experience from the status quo.

The implication for fintechs such as us at Geidea is that we now have unparalleled opportunities to serve businesses and help them to grow – and I strongly believe we are at the forefront of immense change and are well positioned to help merchants.

Are you seeing your clients stick to digital transactions now? Do you expect that economies will be pre-dominantly cashless

Exciting time for the fintech industry in Saudi

Digital payments in the Middle East, Africa, and South Asia (MEASA) region is expected to grow at a CAGR of

18.4%

Advertorial \ Geidea

from now on, and why?

Everybody is more accustomed to technology now than ever before, especially as it brings more convenience.

Solutions such as ‘Tap on Phone’ technology—a solution we pioneered across KSA earlier this year. These solutions are only set to grow further in terms of overall volume and sophistication. It is no surprise that we have seen a major uptick in the demand for digital solutions over the last two years—and that we've already added several new customers who want these same solutions.

As people engage in e-commerce, we believe there will be a lot of pent-up demand for goods and services, which will lead to extraordinary volume growth in the years ahead. All of these factors make it inevitable for businesses—especially those working across borders to invest in a digital strategy as opposed to sticking with cash or traditional means such as cheques. While we don’t see cash being completely removed from economies, digital transactions are going to dominate.

How has e-commerce changed the nature of digital transactions? How do you see this changing in the future?

The growth of e-commerce has revolutionized the way people shop and interact with businesses. It has paved the way for a more convenient and efficient shopping experience, while also providing greater trust between buyers and sellers.

We expect to see consumers gravitate even further to e-commerce as the shopping experience gets more immersive. For example, more use of technologies such as augmented reality and virtual reality will enable consumers to check out products in more detail than before - while not compromising on their convenience. Additionally, we are seeing e-commerce platforms build in more information about the ‘eco-friendliness’ of the products—including how they were manufactured and the nature of materials used among other things.

These trends can make the whole experience more expansive than before, which will lead to more digital payments emerging within the eco-system. There is no doubt in my mind that there will be even more innovation in this space as businesses race to offer customers better quality products and services.

In your opinion, what is the significance of open-banking and how will it support the customer experience?

It is exciting that the Kingdom of Saudi Arabia has already developed an open banking framework that will go live in 2022, and that many other countries in the MENA region have followed suit. Put very simply, open banking is a secure way to give providers access to consumer data

We are fully aligned with the Kingdom of Saudi Arabia’s clear cashless transaction targets of 70% by 2030 information. It's a system designed to bring more competition and innovation to a financial service ecosystem in today's market.

As an example, KSA consumers will have access to new products, more diverse pricing of each product, and will have the ability to be able to share the parts of the data they need to access the service they want.

For businesses, it will help create an ecosystem that can not only drive innovation and more personalized customer experiences but will also create additional venture capital for fintech firms in the region—giving them more opportunities to scale globally.

I believe it is an exciting time that we can take advantage of - if all stakeholders come together as an ecosystem.

Tell us about some of Geidea’s most recent significant achievements, and your focus areas going forward?

We are fully aligned with the Kingdom of Saudi Arabia’s clear cashless transaction targets of 70% by 2030 - and are heavily involved in the development of the country’s cashless society. To support this objective, we actively work to diversify ourselves across the transaction value chain through PoS license expansion, aiming for an Electronic Money Institution license, and offering a host of value-added SaaS and LaaS-based solutions.

Recently, we have developed a solution to provide loan financing and repayment services for Saudibased small and medium-sized enterprises (SMEs).

It enables businesses to make automatic repayments on their loans through point-of-sale (POS) terminals by allowing them to set aside a percentage or part of their monthly revenue towards their loan repayments.

This builds on the contactless Tap-on-Phone solution we launched earlier this year, which essentially helps businesses to turn their smartphone into a fully-fledged POS terminal; helping to realize our vision of making payment technologies accessible, affordable, and intuitive for SMEs. I believe solutions such as this are tremendously important to helping business owners, as they remove the hassle of making cash or physical payments, automating the entire process and making it safe and convenient.

News Banking

S&P revises outlook for Indonesia

S

tandard and Poor's (S&P) revised the outlook to Stable from Negative and affirms the Sovereign Credit Rating of the Republic of Indonesia at BBB (Investment Grade). This development came in wake of the strict COVID-related closures in China and the continuing war in Ukraine. S&P states that the revised rating outlook to stable has been

supported by Indonesia's improved external position, gradual progress toward fiscal consolidation, and the continuing improvement in Indonesia's economic recovery for the next two years.

In response to the statement, Governor of Bank Indonesia, Perry Warjiyo, stated that “The rating affirmation coupled with revised outlook to stable shows strong

confidence from international stakeholders on Indonesia's maintained macroeconomic stability and economic prospects in the medium-term, in the midst of escalating global risk stemmed from the geopolitical crisis of RussiaUkraine, the global economy slows down and heightened inflation pressures. This is supported by the credibility of the policies and effective coordination of policy mix between Bank Indonesia and the Government.”

The Indonesian economy recovery is expected to continue supported by normalization in the economic activities, as the vaccination coverage is becoming broader. S&P projects that in 2022 the Indonesian economic growth will accelerate to 5.1% following the 3.7% growth in 2021.

Market Inflation

Zimbabwe hikes interest rates to record high Zimbabwe's national bank has raised its repo rate to 80% in hopes to get control over market inflation deteriorated by the conflict in Ukraine, this marked leap from the past 60% set in October is the world's highest lending rate, after Venezuela and Argentina. Earlier in September 2019, the South African nation had fixed its key interest rate at 70%. According to financial observers, the country is suffering from high inflation in the region of 72.7% in April from 66.1% in March on a yearon-year basis. The country’s central bank blamed rising inflation on the

global scale as a result of the Russia-Ukraine war which has “secondary pass-through effects on domestic and international prices” as the reason behind this step. It further added that unavoidably adversely affected homegrown expenses of these commodities and was also shaking up the foreign exchange market. The World Bank had recently stated that the Zimbabwean economy had rebounded

62 | Jan - March 2022 | Global Business Outlook

in 2021 driven by the recovery of agriculture, industry and relative stabilization of prices and exchange rates. GDP is estimated to have grown by 5.8% in 2021 after contracting by 6.2% in 2020.

Aviation

Boeing lost $1.1 billion on Air Force One contract

Standard Chartered exceeds profit expectations Global lender Standard Chartered bettered its first-quarter profits for 2022 by beating the 6% benchmark on the bank of tightened monetary policies enforced by central banks in most parts of the developing world. The bank said that it expects to grow within the band of 5-7% and is likely to surpass the same by riding the hot market scenarios in Asia, Africa, and the Middle East. The bank's statutory pretax profit grew to $1.49 billion in January-March from $1.4 billion a year earlier. The bank earns the majority of its revenue in Asia.

This compares to a $1 billion average estimate compiled by the bank from 16 analysts.

However, the COVID-19 pandemic is continuing to have an impact on the bank's China business, as branch closures and ongoing limitations resulted in an 18% drop in wealth management income compared to the same period a year ago.

The commercial bank further suffered a $107 million charge as a result of Sri Lanka's ratings downgrading, as well as a $160 million charge for its exposure to China's real estate market which is on a debacle.

Boeing has revealed that it has lost an astounding $1.1 billion in costs connected with its arrangement with the Trump administration to change two 747 jumbo planes to act as Air Force One. CEO Dave Calhoun conceded the goliath airline should not have agreed to the arrangement in the first place. Air Force One is the authority assignment for any plane conveying the leader of the United States. Boeing on April 27 uncovered a total deficit of $1.2 billion for the primary quarter, with a charge of $660 million related to delays and greater expenses for the Air Force One program.

The company said the

first-quarter charge on the Air Force One program brings the complete misfortune attached to it to more than $1.1 billion.

Under that fixed-cost agreement, Boeing is being paid about $4 billion for the work. The first of the two planes was set to be conveyed in 2024, however, an Air Force financial plan proposition from prior this month does not expect that until 2026. A month in the wake of being chosen president in November 2016, Trump had fussed on Twitter about the "crazy" expenses of Boeing's then arrangement to fabricate another Air Force One.

Global Business Outlook | Jan - March 2022| 63

News Banking

The Kenya Bankers Association (KBA) is seeking to increase the implementation of a two-step verification process for lenders in order to combat fraud, particularly in online payments.

When users and consumers trade online, banks will send them a one-time personal identification number (PIN) as part of the security approach. The COVID-19 pandemic has spurred the growth of e-commerce in the country, with 60% of users estimated to use digital payments, fueling card theft. Card usage continues to face risk threats of fraud through social engineering, phishing, and identity theft.

Fidelis Muia, technical services director at KBA said that a second one-time authentication password will be sent to the message or emails by the banks. If all banks incorporate the feature then can see a decrease in fraud cases, he added.

Many cases of online payment fraud occur

without the use of real cards, implying that criminals gain the information they need without the knowledge of the bank clients who are affected.

On online payment fraud, Fidelis Muia said, that KBA is seeking to reduce PIN exposure by investing in contactless payment so that consumers do not have to leave their pins, especially for minor purchases.

Image:kba.co.ke

KBA to combat fraud with tech

Fidelis Muia, technical services director at KBA said that a second onetime authentication password will be sent to the message or emails by the banks.

UK Economy

BOE raises key interest rate The Bank of England has raised the base rate of interest to 1%, the fourth straight hike as it tries to fight rising inflation—despite issuing a warning about a coming recession.

The central bank predicts that the UK economy will contract later this year in the face of double-digit inflation

and an unprecedented squeeze on household wages.

The bank warned in its first projection since Russia's invasion of Ukraine that the energy price squeeze will have a long-term impact, raising unemployment and contributing to weak or negative growth until 2023.

64 | Jan - March 2022 | Global Business Outlook

Despite this, the bank's monetary policy committee (MPC) voted to raise interest rates by a quarter percentage point to 1%, the highest level since 2009. Three of the nine members of the MPC even voted for a half-point hike.

According to the bank's projection, higher energy costs, higher taxes, and higher interest rates are expected to decrease household expenditure considerably as the year progresses.

According to the bank, real household disposable income and real post-tax labor income, two measures of the impact on families, would both decline considerably this year as those energy price rises feed through into the system. The bank cut its GDP growth prediction for next year from 1.25% to -0.25%, the closest it has ever been to predicting a recession.

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