International Finance - November-December 2024

NOV-DEC 2024

Issue 43 Volume 24

UK £4 Europe ¤5.35 US $6

Microsoft@50

Transforming tech with growth mindset Satya Nadella’s cultural transformation at Microsoft focused not only on leadership style but also on diversity and inclusivity, which laid the groundwork for innovation

Switzerland: A tax haven for the ultra-wealthy

Savings clubs: Good or bad for Zimbabwe?

Turkish Airlines: A 91-year journey to global reach

EDITOR’S NOTE

NOV - DEC 2024 VOLUME 24 ISSUE 43

Microsoft@50: The future is now

T

hroughout 2024, the Middle East remained a focal point for global attention, due to the ongoing armed conflicts and their profound impact on the world's economy. The ripples have been far and wide, affecting everything from energy supplies to financial markets, food prices, and global trade.

As the recent events unfold, it becomes crucial to analyse what it means for the interconnected global economy. The conflicts involving Israel, Palestine, Lebanon, and Iran have resulted in significant loss of life and economic damage. Will there be any armistice on the way? We will have to wait and watch.

Shifting our attention to the technology sector, AI initiatives are creating digital resurrections of deceased individuals. One of the most talked about projects in recent times is Replika, a chatbot designed to replicate texting behaviours. This AI-driven platform allows users to interact with digital versions of people who have passed away.

Another interesting development comes from Zimbabwe, where informal savings clubs have emerged as a popular financial avenue among women and people in the informal economy who don’t have access to traditional savings and loan options.

The final edition of this year’s International Finance will feature a cover story on Microsoft, which is just few months shy of celebrating its 50th anniversary. Under Satya Nadella's leadership since 2014, Microsoft has transformed from an outdated tech giant into an AI powerhouse. His focus on cultural change, collaboration, and empathy reshaped the company's internal environment.

Strategic acquisitions like Minecraft, LinkedIn, and GitHub, along with a pivotal $1 billion partnership with OpenAI, strengthened Microsoft's position in AI and cloud computing.

Nadella's vision emphasises growth, innovation, and open ecosystems, positioning Microsoft at the forefront of AI, quantum computing, and future technological breakthroughs.

editor@ifinancemag.com www.internationalfinance.com

INSIDE

IF NOV - DEC 2024

IN CONVERSATION

22

CANADA PROVIDES 54 'MONEX HIGHEST LEVEL OF SECURITY' Monex Canada leverages advanced technology to provide a seamless, secure, and efficient experience for our clients through our online platform

MICROSOFT@50: TRANSFORMING TECH WITH GROWTH MINDSET

Satya Nadella’s cultural transformation at Microsoft focused not only on leadership style but also on diversity and inclusivity, which laid the groundwork for innovation TECHNOLOGY

BANKING AND FINANCE

INSIGHT A TAX HAVEN 50 SWITZERLAND: FOR THE ULTRA-WEALTHY

16

44

TOOL-ASSISTED SPEEDRUNS STIR DEBATE IN ESPORTS

SAVINGS CLUBS: GOOD OR BAD FOR ZIMBABWE?

Hacker Allan Cecil wants to contribute to the growth of the competitive esports activity that he has helped pioneer

Savings clubs have become a source of capital for many people on the economic margins in the African country

ECONOMY

INDUSTRY

Corporate tax rates in Switzerland are highly competitive, offering numerous advantages for multinational companies

38 Varuna: Leading Thailand's eco-

72

104

VOLATILE MIDDLE EAST RIPPLES THROUGH GLOBAL MARKETS

IS RANGELY READY FOR END OF OIL BOOM?

The global inflationary impact of a wider Middle East armed conflict extends beyond energy prices

Rangely provides an example of how regions dependent on oil and gas will require specific strategies based on their locations

4 | Nov - Dec 2024 | International Finance

tech movement 66 TEB AM redefines asset management with ESG focus 86 Qardi: Empowering SMEs with innovative digital financial solutions 102 Empowering MSMEs: Asialink Finance’s rich legacy of customised financial solutions

www.internationalfinance.com

ANALYSIS

12

Reimagining AI under Trump 2.0

30

Video game controllers: New instruments of death

40

DORA: A universal standard for financial resilience

62

Africa's currency crisis: A global problem

88

Global shipping faces unprecedented challenges

68

Recession signs: Are they just false alarms?

98

Turkish Airlines: A 91-year journey to global reach

78

Cameroon’s post-Biya future: Hope or chaos?

OPINION

60

ASHLEY GROVES REVOLUTIONISING FX STRATEGIES

For FX professionals, the AI tools are game-changers, helping them anticipate how shifts impact positions, reduce risks, and refine strategies with precision

REGULAR EDITOR'S NOTE

03

Microsoft@50: The future is now

06

TRENDING

08

NEWS

Global smartphone shipments rise in Q3 FCC, NAICOM collaborate to clean up insurance sector

International Finance | Nov - Dec 2024 | 5

# TRENDING BANKING

Nokia X200 5G: A game-changer

Qatar Central Bank clarifies use of Himyan card

A formal statement was released by the Qatar Central Bank (QCB) in response to recent debates concerning the exclusive use of the Himyan national card for payments at government establishments. This payment method, according to QCB, is a component of a phased digital transformation initiative that is scheduled to start in February 2025. The programme seeks to reduce the expenses related to payment processing while also improving the security of government transactions. The QCB stressed that during this transition, the calibre of services offered to Qatari citizens, residents, and tourists will not be compromised.

The much-awaited Nokia X200 5G is poised to change the rules of low-cost smartphones. At a price that almost seems too good to be true, this upcoming gadget promises to deliver cutting-edge features. In the fiercely competitive smartphone market, Nokia is establishing itself as a major player with a 108MP camera, a 6000mAh battery, and 5G connectivity. The Nokia X200 5G, which has a 5.2-inch punchhole display and is small, combines affordability with a remarkable visual experience.

At Glance Top six leading generative AI companies and their market share (In Billion US Dollars)

Global smartphone shipments rise in Q3

Marquee Developments expands in Egyptian market

Gl obal smartphone shipments increased 5% in Q3 of 2024 compared to the same period in 2023, according to the market research firm Canalys. It stated that the increase is the fourth consecutive quarter of growth. IDC, on the other hand, estimates that the increase for the same period will be 4%, which would be the fifth consecutive quarter of growth.

Canalys ascribed the expansion to the early phases of a replacement cycle in North America, China, and Europe as well as demand in emerging economies.

Chinese vendors drove the spike in Q3 shipments.

Marquee Developments, a company supported

by European-Egyptian investment, has formally entered the Egyptian market with several national development projects to leave a big impression on the Egyptian real estate market. Marquee's vision to build premium communities through targeted investments in high potential regions was unveiled by Hazem Salama, chairperson of Marquee Developments. The official also highlighted the company's mission to promote sustainable development, bolstering Egypt's real estate industry and drawing in foreign investments.

TECHNOLOGY

INDUSTRY

NVIDIA

445

Apple

228

Microsoft

137

Alphabet (Google)

122

Meta Platforms (Facebook)

117 Tesla

106 Source: Source:mordorintelligence.com stash.com

NEWS | INSIGHTS | UPDATES | DATA

Ones to Watch

ECONOMY

German economy to underperform euro zone until 2026

JOHN DOERR CHAIRPERSON OF KLEINER, PERKINS, CAUFIELD AND BYERS His company Kleiner, Perkins, Caufield and Byersis entering the explosively growing Chinese market with a $360 million fund and a team of veteran local investors

According to the European Commission's forecasts, the German economy will continue to perform much worse than the eurozone's average growth until 2026. The GDP growth in 2024 is predicted by the European Commission's Autumn Forecast to be 0.8% in the euro area and 0.1% in Germany, which is a decrease from the growth of 0.1% in the earlier projections.

The EU in its report stated that high uncertainty has been weighing on

consumption and investment, and the trade outlook has worsened as global demand for industrial goods weakened.

Germany, the third-largest economy in the world, has underperformed the Group of Seven wealthy democracies, lagging behind the average of the European Union since 2021 and is predicted to contract for the second consecutive year in 2024.

The commission predicts that rising real wages will fuel growing domestic demand in Germany in the future.

By the Numbers

MASSIMO BATTAIN CEO OF PRYSMIAN GROUP Prysmian, global cabling solutions provider leading the energy transition and digital transformation, celebrated the new CEO, Massimo Battaini, and the new brand strategy, created together with the brand consultancy Interbrand

Global agriculture market revenue between 2013 and 2022 (In Trillion US Dollars) 2013

2014

2015

2018

2019

2020

4.52

4.61

5.04

5.06

2021

2022

5.12 Source: Statista

5.67

4.78 4.95

2016

4.83

2017

4.95 BARRY LAM TAIWANESE BUSINESSMAN AI-fuelled growth drove Quanta Computer’s shares up to record highs in the past year, bumping Chairman Barry Lam to the top of the list for the first time

IN THE NEWS

FINANCE

BANKING

INDUSTRY

TECHNOLOGY

Olusegun Ayo Omosehin said that in order to maintain stability and sanity, the EFCC seeks to protect the insurance industry from rogue activity

Kasco's project includes cutting-edge wellness amenities like a running track, an advanced gym, and a premium spa

FCC, NAICOM collaborate to clean up insurance sector Nigerian federal agencies, the Economic and Financial Crime Commission (EFCC) and the National Insurance Commission (NAICOM) have indicated a desire to work together more closely, particularly in the fight against financial crimes that hinder the expansion of the insurance industry.

Olusegun Ayo Omosehin, the Chief Executive Officer and Commissioner for Insurance (CFI) of NAICOM, made this statement during a working visit to the EFCC's Abuja headquarters, where he was welcomed by Olu Olukoyede, the EFCC Chairman.

The CFI emphasised NAICOM's mission and primary duties, which include ensuring policyholders' protection and the public interest, advising the Federal Government on all insurance-related issues, and regulating, overseeing, and growing the insurance sector in Nigeria.

He conveyed his faith and hope that Dot Olukoyede, the EFCC's new leader, will continue to give NAICOM the assistance it needs to build and sanitise the Nigerian insurance sector.

EFCC Chairman Dot Olukoyede thanked the

8 | Nov - Dec 2024 | International Finance

Commissioner for Insurance and his team for the visit and promised them the full support of the EFCC in NAICOM's continued efforts to sanitise and strengthen the industry, and protect the policyholders.

He claimed that, when examining other nations where insurance is a major component of their economies, the insurance industry has enormous growth potential.

The chairman of the EFCC reaffirmed the agency's commitment to thoroughly enforcing financial laws and regulations to sanitise the insurance sector and promised to assist financial regulators in keeping an eye on regulated companies and looking into financial crimes.

He said that in order to maintain stability and sanity, the EFCC seeks to protect the insurance industry from rogue activity. Dot Olukoyede further pledged to strengthen the division in charge of banking and insurance operations.

A stronger and more stable insurance industry in Nigeria can be achieved by enhancing the collaboration between the EFCC and NAICOM, the meeting concluded.

Kasco launches residential project in Dubai's Business Bay The Kasco Group's most recent project, ONDA, is a residential development situated in Dubai's Business Bay neighbourhood and was recently launched by Kasco Developments.

Kasco aims to deliver 1 million sqft residential space by 2025. With a focus on warmth, elegance, and space, this upscale 23-story freehold community offers 348 well-designed homes, including 190 onebedroom plus apartments, 69 two-bedroom apartments, four opulent three-bedroom penthouses, and 85 studios.

Mustafa Al Kaissi, Chairman of Kasco Developments, said, "ONDA is not just a residential project; it’s our statement piece, a portrait of our identity. We are committed to creating spaces that inspire well-being and create a sense of genuine community.

Our philosophy, encapsulated in our slogan ‘InspireYour Soul,’ reflects our dedication to user-centred design principles to enhance the living experience."

To ensure that residents incorporate fitness into their daily routines, the project includes cutting-edge wellness amenities

like a running track, an advanced gym, and a premium spa.

All-year access to leisure and fitness will be made possible by ONDA's unique indoor and outdoor swimming pools, and calm areas for rest and renewal will be provided by wellness cafes.

The three-bedroom apartments on the top floor will have private pools, offering an unmatched living space that blends comfort and environmentally friendly design.

“We believe that a home should be a sanctuary that revitalises your energy. ONDA embodies this belief, providing residents with a variety of ways to recover and decompress, all within the heart of the city,” Kasco Developments CEO Issa Abdul Rahman noted.

Unmatched convenience and connectivity will be provided to residents by the excellent location that provides quick access to Dubai's main attractions, such as the Museum of the Future, Burj Khalifa, Dubai Mall, Dubai Airport, and Jumeirah Beach. Families and young professionals alike are among the varied populations that ONDA is intended to serve.

International Finance | Nov - Dec 2024 | 9

IN THE NEWS

FINANCE

BANKING

INDUSTRY

TECHNOLOGY

The Mazoon Copper Project is expected to play a key role in meeting the growing global demand for copper

According to Ugandan traders, the nontariff barriers are expensive, costing the region roughly $16 million annually

Egypt unveils new tax facilitation package

Oman’s largest copper project breaks ground

The new tax facilitation package is part of the ongoing efforts by the Minister of Finance and the Tax Authority to increase transparency and offer taxpayers and registrants comprehensive support, according to Rasha Abdel Aal, chairperson of the Egyptian Tax Authority.

The creation and implementation of the Advance Ruling System, which has the legal authority to render legally binding rulings on tax treatment for transactions that registrants and taxpayers intend to carry out that may have tax ramifications, is part of this package.

Abdel Aal also told the media that the system's goal is to make the tax treatment of these transactions clearer, which will help investors create accurate feasibility studies for their projects in a transparent manner.

The largest integrated copper concentrate production project in Oman, the Mazoon Copper Project, was recently unveiled by Minerals Development Oman (MDO) through its subsidiary Mazoon Mining Company. The Mazoon Copper Project is situated in the Dhahirah Governorate's Yanqul Wilayat. Five open-pit mines with an estimated 22.9 million tonnes of copper ore reserves make up the project, which spans 20 square kilometres. Additionally, a 56,000-squaremetre, state-of-the-art processing facility that can process 2.5 million tonnes of copper ore a year will be built. The project is anticipated to produce 115,000 tonnes of copper concentrate annually. The Mazoon Copper Project is expected to play a key role in meeting the growing global demand for copper.

Return rate on crude oil investments worldwide from 2013 to 2022 (In Percentage)

2013 2014 2015 2016

7.19% 10.26% 11.32% 12.47%

2017 2018 2019 2020

10 | Nov - Dec 2024 | International Finance

12.75% 13.22% 14.17% 17.22%

2021 2022

18.38% 19.22%

Source: Statista

Iconic game World of Warcraft turns 20

Ugandan traders lament persistent non-trade barriers

The New York Times commemorated World of Warcraft's 20th anniversary by listing the numerous ways that the massively multiplayer online roleplaying game continues to influence society. Blizzard Entertainment first released the game in November 2004. For starters, even though early social networks like MySpace and multiplayer games were already in existence, World of Warcraft offered a realistic sneak peek at a time when people would interact with each other virtually. The game eventually became a huge cash cow for Blizzard and paved the way for future internet business models by generating billions of dollars through a business model that combined monthly subscriptions with in-game purchases (including for pets and wildlife that players could ride).

Inconsistent tax policies, erratic road user fees, and logistical challenges continue to be significant barriers to cross-border trade between landlocked Uganda and the other EAC countries. At the roundtable with the secretary general of the East African Community (EAC) and the East African Business Council-Private Sector Foundation Uganda (PSFU), traders were expressing their frustration. The regional private sector lobby, the EABC, is holding meetings throughout the area to get local perspectives on the business climate. Kenyan and Rwandan traders have met with it. According to Ugandan traders, the non-tariff barriers (NTBs) are expensive, costing the region roughly $16 million annually. The growing NTBs have a total impact of $94 million on Uganda.

Annual oil production by world region from 2013 to 2022 (In Equivalent Terawatt Hours)

2013 2014

2,321 2,847

Source: Statista

2015 2016 2017 2018

3,272 3,981 4,362 5,682

2019 2020 2021 2022

5,883 6,439 7,483 9,221

International Finance | Nov - Dec 2024 | 11

TECHNOLOGY

ANALYSIS

DONALD TRUMP ARTIFICIAL INTELLIGENCE

According to Donald Trump's own first-term AI order, federal AI systems must adhere to civil rights, which will necessitate social harm analysis

Reimagining AI under Trump 2.0 IF CORRESPONDENT Chances of the development of artificial intelligence (AI) being free from restrictions have gotten brighter, as Republican Donald Trump is about to enter the White House for his second Presidential stint from January 2025.

The president-elect has promised to dismantle the incumbent Joe Biden's landmark AI executive order. Experts suggest that stateEven if the level regulations and the drive Trump for AI innovation will likely continue administration regardless of federal oversight dismantles changes, though concerns remain federal about balancing technological adregulations, vancement with safety and ethical this won't standards. Under the executive order change (EO) signed by Biden in October state laws.

2023, the federal government was California, monitoring and counselling AI for example, companies. has the AI

Transparency Act, signed Republicans' stand on AI into law by The US government's current AI Governor Gavin policy attempts to balance innovation Newsom in with safety, security and ethical September 2024 standards through several key

initiatives, including the US Artificial Intelligence Safety Institute Consortium (AISIC) established in February 2024 and the executive order on AI that Joe Biden signed into law in October 2023.

The order mandated federal agencies to establish standards for AI safety and security, protect privacy and promote equity. It also required the creation of 12 | Nov - Dec 2024 | International Finance

a chief artificial intelligence officer position within major federal agencies to oversee AI-related activities.

Before this order came along, the "Blueprint for an AI Bill of Rights" was released by the White House Office of Science and Technology Policy (OSTP) in October 2022. It proposed five principles to protect the public from harmful or discriminatory automated systems. Many of these were incorporated into the executive order.

The Republicans claim that the order was "hindering AI innovation" and "imposing radical leftwing ideas" on AI development. Donald Trump's pledge further enthused those opposing the executive order, who believed it to be unlawful, risky, and a hindrance to the United States' digital arms race with China.

Even if the Trump administration dismantles federal regulations, this won't change state laws.

California, for example, has the AI Transparency Act, signed into law by Governor Gavin Newsom in September 2024. This mandates providers of generative AI systems to make AI detection tools available in their solutions, thereby offering the users the option to include a manifest disclosure indicating the content is AI-generated, include a latent disclosure in AI-generated content and enter into contracts with licensees to maintain the AI system's capability to include such disclosures.

"A Trump administration might ease federal AI regulations to boost innovation and reduce what they might perceive as regulatory burdens on businesses, however, this wouldn't impact state laws like those

that have recently passed in California," Sean Ren, associate professor in computer science at University of Southern California (USC) and CEO of Sahara AI, told Newsweek.

"This could create a patchwork of rules, making it more complex for businesses operating nationally to stay compliant. While companies may see less federal red tape, they'll still face varying state regulations," he added.

With the lack of federal rules specifically targeted at frontier AI companies, Markus Anderljung, director of policy and research at the Centre for the Governance of AI and adjunct fellow at the Centre for a New American Security (CNAS), told Newsweek the biggest difference "will be intensified efforts to make it easier to build new data centres and the power generation, including nuclear reactors, needed to run them."

"Beyond the potential dismantling of the executive order, I expect the biggest difference will be on social issues, stripping out anything that's seen as woke.

With other things, I think you can expect more continuity," Anderljung said of possible changes when Donald Trump returns.

"There's bipartisan consensus on the importance of supporting the US artificial intelligence industry, of competing with China, of building out US data centre capacity," he added.

“The focus on competing with China was an element of the previous Trump administration,

which started imposing stricter AI-related export controls on China, beginning with the controls on [telecoms firm] Huawei, followed by export controls on semiconductor manufacturing tools," Anderljung noted.

"This suggests a new Trump administration might keep or strengthen controls imposed since then by the Biden administration, especially in light of recent reports of Huawei chips being produced by TSMC (Taiwan Semiconductor Manufacturing Company)," he added.

Oversight and advice, hand in hand Joe Biden's order covered a wide range of topics, including establishing protections for AI's application in drug discovery and leveraging AI to enhance veterans' healthcare.

However, two provisions in the section addressing digital security risks and real-world safety impacts were the main source of political controversy surrounding the EO. According to one clause, owners of strong AI models must inform the government how they train the models and safeguard them against theft and tampering, including by submitting the findings of "red-team tests," which simulate attacks to identify weaknesses in AI systems.

As per the other clause, the National Institute of Standards and Technology (NIST) of the Commerce Department was required to create guidelines that International Finance | Nov - Dec 2024 | 13

TECHNOLOGY

ANALYSIS

DONALD TRUMP ARTIFICIAL INTELLIGENCE

assist businesses in creating AI models that are impartial and secure against threats.

These projects have a lot of work in progress. NIST has launched several initiatives to encourage model testing, and the government has proposed quarterly reporting requirements for AI developers.

Additionally, NIST has published AI guidance documents on risk management, secure software development, watermarking synthetic content, and preventing model abuse.

Proponents of these initiatives argue that basic government oversight of the rapidly expanding AI industry is essential to promote security improvements among developers.

Joe Biden's attempt to gather data regarding how businesses are creating, evaluating, and safeguarding their AI models caused 14 | Nov - Dec 2024 | International Finance

a stir on Capitol Hill practically immediately after it was introduced.

Republicans in Congress took advantage of Biden's use of the 1950 Defence Production Act, a wartime law that permits the government to control private-sector operations to guarantee a steady supply of goods and services, to support the new requirement.

Joe Biden's action was deemed unnecessary, unlawful, and inappropriate by GOP lawmakers.

According to the Conservatives, the reporting requirement is a burden on the private sector. Representative Nancy Mace stated during a hearing she chaired in March 2024 on "White House overreach on AI" that the clause "could scare away wouldbe innovators and impede more ChatGPT-type breakthroughs."

Steve DelBianco, the CEO of the conservative tech group NetChoice,

says the requirement to report redteam test results amounts to de facto censorship, given that the government will be looking for problems like bias and disinformation.

Conservatives contend that the United States will suffer greatly in the technology competition with China if any regulations are implemented that hinder AI innovation.

Woke safety standards The NIST guidelines are criticised by Republicans as being a kind of covert government censorship. NIST's "woke AI safety standards," according to Senator Ted Cruz, are a component of the Biden administration's "plan to control speech" because they are based on "amorphous" social harms.

AI models have biases that support discrimination in hiring, law enforcement, and healthcare, as studies and investigations have

repeatedly demonstrated. Research indicates that when people encounter these biases, they may unintentionally adopt them.

Conservatives are more concerned about the overcorrections made by AI companies to this issue than they are about the issue itself.

Republicans wanted NIST to concentrate on the physical safety risks of AI, such as how it could aid terrorists in creating bioweapons, which is something Biden's EO does address.

According to Representative Ted Lieu, the Democratic co-chair of the House's AI task force, these initiatives "allow the United States to remain on the cutting edge" of AI development "while protecting Americans from potential harms."

Reporting requirements are vital for alerting the government about potentially dangerous new capabilities in advanced AI models, according to a US government official focused on AI issues.

The official, who spoke on condition of anonymity, cites OpenAI's acknowledgement of its most recent model's "inconsistent refusal of requests to synthesise nerve agents."

According to the official, the reporting requirement isn't very onerous. They contend that Biden's EO represents "a very broad, lighttouch approach that continues to foster innovation," in contrast to AI regulations in China and the European Union (EU).

Nick Reese, the first director of emerging technology at the Department of Homeland Security from 2019 to 2023, denies conservative arguments that the reporting requirement will compromise businesses' intellectual property.

Expected artificial intelligence market size in the United States from 2025 to 2030 (In Billion US

Dollars) 2025

2028

2026

2029

2027

2030

125.84 190.82 149.07 213.23 168.84 237.09 Source: Statista

He suggests that it may even assist start-ups in developing AI models that are more computationally efficient, require less data, and are not subject to the reporting threshold.

Experts say that NIST's security guidelines are an essential tool for incorporating security features into new technology. They point out that bad AI models have the potential to cause major societal problems, such as unfair loss of government benefits and discrimination in lending and rental arrangements.

According to Donald Trump's own first-term AI order, federal AI systems must adhere to civil rights, which will necessitate social harm analysis. For the most part, the AI community has embraced Joe Biden's safety agenda.

Reversing Biden's executive order would send a worrying message that "the US government is going to take a hands-off approach to AI safety," according to Michael Daniel, a former presidential cyber adviser who currently serves as the head of the nonprofit information-sharing group Cyber Threat Alliance.

Regarding competition with China, the EO's supporters argue that safety regulations will help

America win by guaranteeing that the American AI models outperform their Chinese counterparts and are shielded from Beijing's economic espionage.

With the announcement of the creation of DOGE (Department of Government Efficiency), to be headed

by Tesla and X boss (also a hardcore Trump backer) Elon Musk, AI regulation—or deregulation—could potentially come under the tech billionaire's remit.

"Elon Musk's role as CEO of AIdriven companies like Tesla and Neuralink presents inherent conflicts of interest, as policies he helps shape could directly impact his businesses," said Sean Ren, associate professor in computer science at University of Southern California (USC) and CEO of Sahara AI, as he told the Newsweek further, "This complicates any direct advisory role he might take on. That said, Elon Musk has long advocated for responsible AI regulation and could bring valuable insights to AI policy without compromising the public interest."

However, given the complexity of AI policy, Ren believes that "effective guidance requires more than just one mind," adding that "it's essential to have experts from multiple fields to address the diverse ethical, technological and social issues involved."

Ren suggested that to better address AI issues, Donald Trump could establish a multi-adviser panel that includes experts from academia, technology and ethics, balancing Elon Musk's influence and ensuring a wellrounded perspective.

International Finance | Nov - Dec 2024 | 15

TECHNOLOGY

FEATURE SPEEDRUNNING

VIDEO GAME TASBOT

16 | Nov - Dec 2024 | International Finance

FEATURE SPEEDRUNNING

Hacker Allan Cecil hopes that by holding speedrunners accountable, he will contribute to the growth of both conventional speedrunning and the tool-assisted sort of speedrunning that he has helped pioneer

Tool-assisted Speedruns stir debate in esports IF CORRESPONDENT

T

he competitive sport of speedrunning video games, which involves moving through them as quickly as possible, has evolved in recent years into a hybrid of highly sophisticated science and virtuoso finger-and-thumb sports. The greatest speedruns combine uncanny ability with glitch-enabled shortcuts to finish big games that should take dozens of hours in a matter of minutes.

Sometimes a bit too inhumane. It turns out that cheaters who splice together video footage to fabricate proof or employ software that violates rules to obtain unfair advantages are the ones who create bogus records in speedrunning. Allan Cecil, a speedrunner and hacker, has made it his duty to find them.

International Finance | Nov - Dec 2024 | 17

TECHNOLOGY

FEATURE SPEEDRUNNING

VIDEO GAME TASBOT

Bans in the past After admitting to cheating during the 2022 marathon, Done Quick has banned a speedrunner from participating in any future competitions. Additionally, it appears that the Russian player Mekarazium set a world record by completing the Metal Gear Rising: Revengeance expansion.

Mekarazium, on the other hand, presented a pre-recorded film that was assembled utilising segments of different runs rather than live gameplay. To promote the hoax, they responded to the video in real time.

While Summer Games Done Quick returned to an in-person setting for the first time since 2019, some speedrunners took part virtually. According to PCGamesN, Mekazarium was one of them that let them cheat.

After reaching a charitable donation target, the player tackled the Blade Wolf DLC after first dominating MGR: Revengeance's main campaign in a legal run.

On the other hand, spectators observed differences in the Blade Wolf gameplay. Some pointed out that while Mekarazium was playing the primary game, there were hardly any audible moments when he pressed keys on the keyboard. Mekarazium raises their right hand briefly while their persona is surveying their surroundings, despite their assertion that they were manipulating the mouse with their left hand.

Mekarazium later played down the fact that their run broke records as well.

One would assume that a speedrunner who beat their own world record by 25 seconds would be ecstatic.

Mekarazium sent a message to the GDQ enforcement team that PCGamesN 18 | Nov - Dec 2024 | International Finance

was able to receive.

"The Blade Wolf DLC run reward people paid for is a pre-recorded, segmented run. After switching the saves, I've decided to change my decision at the last minute from a real-time run," he said.

Mekarazium stated that they wished to showcase the Blade Wolf run's potential.

They did, however, apologise and admit that they had done "an real awful thing."

They also feared what would happen to other fast runners. They went on, "I didn't spend more time thinking about others and I acted selfishly."

"GDQ informed Engadget in a statement that they learned yesterday that Mekazarium performed a segmented video for his DLC run at Summer Games Done Quick 2022," he added.

Since then, Mekazarium has acknowledged this to GDQ employees as well as to certain community members. He got in touch with us and provided a paper that showed he had been planning this for more than a month, proving it was deliberate and planned.

"This is a blatant attempt to compromise the integrity of the speedrunning community, which we adore and encourage. It's unclear from the document what precise outcome they were hoping for, but it's obvious that they thought we wouldn't be ready to call them out on their actions. Nonetheless, we think it is essential for the community to understand why GDQ withdrew this run. Mekazarium will not be able to run in the future, and we have removed his runs from our YouTube collection,” GDQ continued.

Unfortunately, the incident tarnished another GDQ event that was otherwise quite successful. For Doctors Without Borders, spectators and speedrunners raised just over $3 million. Still, there

were a few more difficulties. The organisers had to remove a few games from the schedule because certain runs took longer than anticipated. On the last day, though, they managed to squeeze in one more Pokémon game in an attempt to maximise donations.

The diable hack of 96 During a speech at the recent Defcon hacker conference in Las Vegas, Cecil intended to provide what he claims is proof that a speedrunning record for the 1996 Personal Computer game Diablo, which has been in the Guinness Book of World Records for over 15 years, was, in fact, the product of rule-breaking methods that ought to disqualify it.

Cecil will have assisted in disproving three high-profile speedruns in 2023 alone if he and the group of investigators he has been working with are successful in shattering the ostensibly unbreakable standard.

FEATURE SPEEDRUNNING

Cecil, better known in the gaming community as dwangoAC, started an equally obscure pastime that led him into this peculiar role as a speedrun debunker: Using emulator software to run a game in a controlled environment and discover the limits of that game's speedrun, he is renowned for being an adept practitioner of so-called "tool-assisted speedruns"—a subset of speedrunning that some purists formerly thought to be a form of cheating.

Cecil contends that speed runs using tools, where competitors painstakingly rewind, replay, refine, and polish their runs frame by frame, can be their legitimate kind of competition or even art.

DwangoAC claims that part of the reason he became obsessed with apprehending cheaters was his desire to safeguard the little-known sport of speedrunning from people who would use the same tools covertly and misleadingly, thereby transforming tool-assisted speedruns into a form of

speedrun doping rather than a legitimate pastime.

Cecil has established himself as a mainstay in the speedrunning community. He works as a staff member at the tool-assisted speedrun website TASvideos.org and has organised numerous epic speedrunning feats, including one that rewrote the game's conclusion in Ocarina of Time using coding errors.

In addition, he is the inventor of TASBot, a robot that attaches to video game console controller ports to mimic controller inputs. This allows players to watch and validate recorded speed runs on actual gaming hardware. The robot is such a hit that, according to Cecil's count, live streams of it have generated $1.5 million in donations for charitable organisations.

But the gamer has recently pushed his fixation with tool-assisted speedrunning in a new direction, using it to track down

cheaters who jeopardise the credibility of his hobby. As he has done in all three of the records he has tried to disprove, if he can demonstrate that even a well-honed tool-assisted speedrun in a particular game isn't faster than a supposed human record, then demonstration can act as a precursor to a suggestion that a record was probably fabricated. Additionally, he has discovered that the process of designing that tool-assisted run frequently yields fresh insights into the bounds of what is feasible or impractical for an unaided human endeavour.

Cecil may have embarked on his most contentious project yet with his latest record-breaking endeavour. He plans to showcase proof at Defcon that he believes should nullify the record of Maciej "groobo" Maselewski, a Polish speedrunner who currently owns the Guinness record for the fastest roleplaying game speedrun of all time in addition to the fastest Diablo speedrun.

Since 2009, Maselewski's 3-minute and 12-second Diablo run has defeated all opponents.

Cecil claims that when he and another speedrunner, Matthew "funkmastermp" Petroff, attempted to complete a tool-assisted speed run for Diablo in January 2024, he became suspicious that Maselewski had broken the norms of speedrunning. They soon realised that no matter how good they became at running or how fortunate they were with the randomly generated dungeon layouts in the game, they would never be able to beat Maselewski's time of 3 minutes and 12 seconds.

This prompted them to put together a team of investigators who eventually discovered what they believed to be a lengthy list of discrepancies in the items and software versions, missing International Finance | Nov - Dec 2024 | 19

TECHNOLOGY

FEATURE SPEEDRUNNING

VIDEO GAME TASBOT

frames, and other indications of possible tampering in the video of Maselewski's run. They have compiled all of this information into a comprehensive document that has been uploaded to Cecil's website.

When Maselewski was contacted for comment, he promptly refuted any such foul conduct. He mentioned in an email that his run was always regarded as "segmented," edited together level by level, which is a widely recognized classification for speedrunning.

It was never mistaken for anything else, according to Maselewski.

It's amazing to learn that a group of researchers has been working on this.

Cecil shared a later text discussion between Maselewski and his associates, in which Maselewski called the effort to disprove his record a "witch hunt."

Cecil counters that Maselewski's straightforward explanation, that the speedrun was divided, is insufficient.

He alleges that a piece of performanceenhancing software known as a "trainer" must have been used and that some dungeon layouts in Maselewski's run could not have been generated even in a single segment of a run without changing the game's data.

In a farewell email to WIRED the evening before Cecil's Defcon talk, Maselewski stated that he thought individuals who were accusing him of cheating were employing inaccurate instruments and a partial understanding of Diablo's intricacies. Dwango wants to share a narrative. Have I cheated? No, writes Maselewski.

"But the wonder of discovery has already overstayed its welcome for a select few, and the script has already been written, so it doesn't matter what is true or not at this point," he noted.

Cecil's proof seems to have more of an impact on an administrator of 20 | Nov - Dec 2024 | International Finance

Speed Demos Archive, or SDA, another speedrun record-keeping website where Maselewski owns a comparable Diablo record. The administrator, who goes under the pseudonym "ktwo," claims that SDA hasn't formally taken a decision and is still awaiting Maselewski's explanation.

Ktwo states, "To be clear, we have reached a preliminary conclusion, based on the information provided."

The staff is in agreement that the analysis presents issues regarding the legitimacy of the run, which must be resolved to prevent SDA from publishing the run. The runners and the administrative staff are currently debating these issues.

Speedrunner Eric "Omnigamer" Koziel started re-examining a record set by Todd Rogers for the Atari 2600 racing game Dragster in 2017 while doing research for a book about speedrunning.

This is how Cecil got involved in the investigation of gaming records. Rogers has maintained his record time of 5.51 seconds for an astounding 35 years.

However, upon deconstructing Dragster's code to attempt to decipher Rogers's time-stamp, Koziel discovered that the strategies Rogers claimed to have employed, like shifting into second gear at the beginning of the game, wouldn't have yielded the desired benefit.

Knowing Koziel from the speedrunning community, Cecil offered to aid in creating a tool-assisted speedrun that they could replay on a real Atari 2600 via TASBot, demonstrating that Rogers' record was unattainable even on that original hardware. They discovered that TASBot performed theoretically flawlessly in 5.57 seconds, which was less than Rogers' claimed time.

Despite Rogers' protests, his threeand-a-half-decade-old record was removed from Twin Galaxies' records,

along with all of his other records on the website, and Guinness removed his title for the "longest-standing video game record" worldwide.

A group of players set out to defeat every level of Super Mario Maker, and Cecil became involved in the investigation of another renowned speedrun early 2024, after taking a seven-year break to work on TASBot projects.

When that Wii U game was published in 2015, players could post their levels for other players to play, that is, assuming they could upload a video of themselves beating the level.

However, "Trimming the Herbs," one of these levels, seemed unachievable.

Only its inventor had been able to finish it for years.

Cecil offered to create a tool-assisted speedrun for the level in an attempt to assist this group of Super Mario Maker devotees. He discovered that, partly because of differences in the Bluetooth communications between the Wii U and its controllers, it was almost hard to clear it consistently.

FEATURE SPEEDRUNNING

Global active gamers from 2015 to 2024 (In Billions) 2015

2019

2023

2016

2020

2024

2017

2021

2018

2022

2.03 2.17 2.33 2.49

2.64 2.81

3.22 3.32

2.96 3.09

Source: explodingtopics.com

In that instance, the level's developer came forward during the investigation to admit he'd defeated the level by tampering with the internal components of his Wii U gamepad, a move he had always meant to be amusing but had never before disclosed to the public.

Cecil is not anticipating a confession or any kind of cordial agreement on the facts in his latest attempt to refute Maselewski's Diablo record. However, he is sure that he and the researchers he has collaborated with will be able to overthrow Maselewski's record and allow speedrunners to resume their approach to the game.

He was shocked to learn that, thanks to new Diablo strategies they discovered during their investigation, they could beat Maselewski's record with a toolassisted speedrun, finishing the game in 2 minutes and 45 seconds without using any of his purported rule-breaking modifications.

Cecil reports that Diablo speedrunner "xavier_sb" has finished a run of the game in less than four minutes and 40 seconds,

setting a new record should Maselewski's be wiped out.

He claims that this already demonstrates how the alleged unachievable record's "chilling effect" is wearing off.

Cecil claims that people had just given up since there was no point. The Diablo speedrunning competition has resumed.

Cecil hopes that by holding speedrunners accountable, he will contribute to the growth of both conventional speedrunning and the tool-assisted sort of speedrunning that he has helped pioneer.

According to him, the secret is to distinguish between people who utilise software tools to play games with superhuman accuracy as an honest kind of art and others who use them for dishonest purposes.

While tool-assisted speedruns push the limits of what is possible in games, they should not be confused with human achievement. Cecil believes that speedrunning, whether tool-assisted or not, should remain a space for creativity, innovation, and fairness.

The distinction between art and fraud in speedrunning comes down to transparency. Tool-assisted runs are a legitimate form of competition as long as they are presented as such. But when players use similar tools covertly to gain an unfair advantage, it threatens the credibility of the entire sport.

Cecil hopes to ensure that speedrunning continues to evolve as a thriving, legitimate sport, one that celebrates skill, creativity, and integrity.

Speedrunning: Preserving the art As Cecil continues to fight for honesty in the speedrunning community, his efforts highlight a larger issue in competitive gaming: the fine line between legitimate optimisation and outright cheating.

editor@ifinancemag.com

International Finance | Nov - Dec 2024 | 21

COVER STORY TECHNOLOGY

22 | Nov - Dec 2024 | International Finance

Microsoft@50

Transforming tech with growth mindset IF CORRESPONDENT

I

n 2014, when Satya Nadella took the reins as CEO, Microsoft was seen as outdated and struggling to stay relevant in a rapidly changing tech landscape. Today, it's an AI powerhouse, leading one of the biggest transformations in technology since the personal computer. But how did Microsoft get here, and what lessons can we learn from Nadella's transformative leadership?

The Nadella renaissance

Nadella, a Microsoft veteran with 22 years at the company, was chosen as CEO because of his intimate understanding of the company and his vision for change. One of his earliest moves was a cultural overhaul, breaking away from the cutthroat, competitive "know-it-all" culture that characterised the company during the Steve Ballmer and Bill Gates eras. Instead, Nadella introduced a culture focused on learning, collaboration, and empathy, which emphasised the value of shared knowledge and growth.

International Finance | Nov - Dec 2024 | 23

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SATYA NADELLA OPENAI

Satya Nadella’s cultural transformation at Microsoft focused not only on leadership style but also on diversity and inclusivity, which laid the groundwork for innovation Nadella made it clear that his goal was not simply to continue the old ways of working but to fundamentally transform how the company approached its business and culture. This meant redefining success, not by market dominance, but by the depth and breadth of partnerships, creativity, and a willingness to adapt. He famously shifted Azure, the company’s cloud platform, to embrace open-source software—a significant departure from Microsoft's historically proprietary approach.

He also brought a fresh empathetic approach, emphasising transparency and openness.

"Come with your brain. Be sharp, and let’s talk about it," he encouraged employees, transforming Microsoft’s internal atmosphere into one that promoted ideation without fear of mistakes.

Under his leadership, the company began celebrating a "growth mindset," where learning from failure was prioritised over simply proving oneself.

This transformation laid the foundation for Microsoft's reemergence as an industry leader.

Nadella’s cultural transformation at Microsoft focused not only on leadership style but also on 24 | Nov - Dec 2024 | International Finance

diversity and inclusivity, which laid the groundwork for innovation. He introduced various initiatives that aimed to break down silos and promote a more open and collaborative work environment.

For instance, he focused on increasing diversity in the workforce, seeing diverse perspectives as key to fostering a more creative and innovative company.

Nadella's efforts towards inclusivity also meant that employees felt more empowered to contribute, which fostered a sense of collective ownership and pride in Microsoft’s products and services.

Nadella also implemented a major internal shift in how success was measured at Microsoft. Rather than traditional metrics like market share or profitability, the company began focusing on customer satisfaction and user engagement. This new focus influenced every department, from engineering to sales. By aligning success metrics with customer happiness, Nadella ensured that the company stayed true to the goal of creating value for its users, not just profits.

Crucial strategic acquisitions Nadella understood the value of adding new assets

COVER STORY MICROSOFT

Revenue of Microsoft from 2015 to 2024 (In Billion US Dollars) 2015

93.58 2016

85.32 Source: Statista

2017

to Microsoft's ecosystem—but not by assimilating them into its traditional architecture. He acquired Minecraft in 2014, noting that the game provided a unique opportunity to build relationships with younger generations who may not have had a strong connection to Microsoft. Instead of bringing Minecraft into the Windows family, he decided to keep it largely independent, allowing it to continue to thrive and innovate.

Minecraft was more than just a game; it was a community and a platform for creativity that connected with younger audiences, educators, and developers.

Nadella saw the potential of a generation growing up with Minecraft, not just as a game but as a tool that taught kids the basics of coding, architecture, and teamwork.

By promoting the Minecraft community without altering its DNA, Nadella ensured that the franchise would remain popular while also showcasing Microsoft's ability to nurture different types of digital experiences.

This approach was also evident when Microsoft purchased LinkedIn in 2016 for $26 billion. Link-

89.95 2018

110.36

2019

2023

2020

2024

125.84 143.02

211.92 245.12

2021

168.09 2022

198.27

edIn provided a unique professional network that complemented Microsoft’s product offerings, particularly those aimed at enterprise customers.

Nadella’s emphasis on "reverse acquisitions" encouraged these acquired brands to utilise Microsoft’s vast resources without becoming stifled by its bureaucracy. In LinkedIn’s case, this meant leveraging Microsoft's cloud services while retaining LinkedIn’s independent operations. It was a different approach to integration—one that prioritised innovation over control.

LinkedIn’s acquisition was more than just a strategic move to expand Microsoft’s enterprise offerings; it provided deeper insights into how professionals were using technology. Microsoft integrated LinkedIn data with its Dynamics 365 CRM, making it possible for businesses to better understand their customers.

This synergy between LinkedIn and Microsoft’s cloud services became a powerful tool, reinforcing Microsoft's status as a critical player in enterprise productivity and customer relationship management.

In 2018, the acquisition of GitHub for $7.5 billion brought the open-source community into Microsoft’s sphere of influence. This acquisition was particularly symbolic given Microsoft’s historically antagonistic stance towards open source. By allowing GitHub to function independently, Nadella fostered positive relationships with the global developer community—a group Microsoft had previously alienated. It wasn't just about the technology; it was about winning back the hearts and minds of the developers who drive the tech ecosystem.

These acquisitions were crucial in transforming Microsoft’s image from a lumbering tech giant to a company willing to embrace and nurture communityInternational Finance | Nov - Dec 2024 | 25

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SATYA NADELLA OPENAI

The broader goal was to introduce Copilot across all major Microsoft products. Office tools like Word, Excel, and PowerPoint were enhanced with AI capabilities that could draft emails, summarise data, and create slide decks with minimal input from the user driven platforms. They were not just business deals; they were commitments to engage with diverse audiences in new and respectful ways.

Nadella's strategy was to provide support without imposing Microsoft's bureaucracy, thereby ensuring that acquired companies retained their unique culture and strengths, which allowed them to thrive within Microsoft's ecosystem.

The game-changing OpenAI partnership The 2019 partnership with OpenAI, led by Sam Altman, involved a bold $1 billion investment from Microsoft in artificial intelligence. While many in the industry doubted AI's immediate potential, Nadella saw an opportunity for growth that extended beyond the immediate bottom line. He envisioned AI as a fundamental force that would redefine productivity and creativity.

OpenAI's work on GPT-3 and GPT-4 quickly bore fruit, with early demos proving that the technology could change the software landscape.

Kevin Scott, Microsoft's CTO, recognised that AI’s coding abilities could expedite and automate programming tasks—a vision that eventually materialised as GitHub Copilot. The Copilot tool allowed developers to leverage AI for code suggestions, dramatically improving coding speed and accuracy, which hinted at how AI could augment human creativity rather than replace it.

The OpenAI partnership was more than just a financial investment; it represented a philosophical alignment. Both organisations shared a belief that AI, if developed responsibly, could transform human productivity and create new growth opportunities.

Microsoft’s $1 billion investment was followed by additional funding, and the relationship evolved into a strategic partnership where Microsoft provided the infrastructure for OpenAI’s ambitious models. This gave Microsoft early access to groundbreaking AI technologies and positioned Azure as the go-to cloud platform for AI research and applications.

Microsoft's partnership with OpenAI gave it a 26 | Nov - Dec 2024 | International Finance

significant edge, leading to an exclusive agreement allowing Microsoft to incorporate OpenAI’s language models into its suite of products.

This exclusive partnership also helped Microsoft integrate AI into Azure, making it a preferred platform for developers using AI models. This move signalled Microsoft’s shift from being a builder of AI tools to a platform enabler for global AI innovation. Nadella aimed to position Microsoft at the centre of the next big platform—the AI Copilot.

AI integration across products Scott declared 2023 "The Era of the AI Copilot."

Microsoft launched AI-driven features across its offerings, from Microsoft 365 tools to its Windows operating system. The flagship was the integration of GPT-4 into Bing, making Microsoft’s search engine a viable contender against Google for the first time in over a decade. Nadella saw this as a moment of reckoning: after years of being a runner-up in search, Microsoft could finally force Google to respond.

Despite some initial embarrassments—like Bing’s chatbot confessing love for a reporter during its early rollout—Microsoft pushed forward, refining the technology. The Bing Copilot wasn't just about search—it was a demonstration of the integration of AI into everyday tasks.

It could summarise information, provide direct answers, and even assist in creative writing. This "Copilot" branding represented the next wave of software development: tools that worked alongside users, improving efficiency and productivity.

The broader goal was to introduce Copilot across all major Microsoft products. Office tools like Word, Excel, and PowerPoint were enhanced with AI capabilities that could draft emails, summarise data, and create slide decks with minimal input from the user. This was a significant redefinition of productivity software, where the user wasn't just interacting with static tools but collaborating with an intelligent system.

Copilot in Microsoft Teams revolutionised how virtual collaboration took place. Users could rely on AI to transcribe meetings, summarise discussions, and even suggest action items. This changed the dynamics of remote work, making virtual interactions more efficient and actionable. By making AI an integral part of communication, Microsoft helped its customers save time and focus on strategic decision-making rather than administrative tasks.

By the end of 2023, Copilot had also made its

Photo Credits: Wikimedia Commons

COVER STORY MICROSOFT

way into Microsoft Teams, Azure, and the Windows operating system itself, bringing a new level of personal assistance to digital work environments.

Nadella’s vision of AI was not as a replacement but as an augmentation—a Copilot to help users navigate through the complexity of their digital tasks and make sense of vast amounts of information.

The integration of Copilot into Azure also enabled developers to create smarter applications more easily. Azure AI services became more user-friendly, offering pre-built models and customisation options that allowed businesses of all sizes to incorporate AI capabilities without needing extensive expertise.

This democratisation of AI meant that even small startups could harness the power of machine learning, thus expanding Azure’s user base and solidifying Microsoft's position as a leader in cloud computing and AI services.

Antitrust and competitive tactics: Old habits die hard The "Copilot" success wasn’t without controversy.

Microsoft's expansion plans, including its integration of Teams into Office 365, faced scrutiny from regulatory bodies, particularly in the EU. Slack's founders argued that Microsoft’s bundling strategy stifled competition by making Teams a default product for millions of Office users. The European Commission launched an investigation, eventually forcing Microsoft to unbundle Teams from its Office products.

Additionally, Microsoft’s acquisition of Activision Blizzard for $69 billion brought scrutiny from the US Federal Trade Commission (FTC). Critics argued that Microsoft’s moves risked monopolising sectors of the gaming industry, similar to its earlier battles over Internet Explorer’s dominance. Nadella maintains that these moves are part of Microsoft's strategy to extend into mobile gaming and grow Xbox’s reach, rather than squelch competition.

The broader debate over Microsoft's practices touched on the issue of market influence and whether the company’s massive acquisitions were about strengthening innovation or eliminating competition.

This scrutiny highlighted the tightrope that Nadella International Finance | Nov - Dec 2024 | 27

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COVER STORY MICROSOFT

SATYA NADELLA OPENAI

Nadella's commitment to open source was also about community building. He emphasised that Microsoft could only grow if it helped grow the broader tech community had to walk—balancing aggressive growth with the perception of fair competition. It was a reminder that even as Microsoft embraced new ideals, its size and influence would always invite careful examination from regulators.

Nadella’s defence of Microsoft’s strategies also included emphasising how acquisitions like Activision would benefit consumers by accelerating innovation.

He argued that bringing Activision’s capabilities into Microsoft’s ecosystem would create new opportunities for cross-platform experiences, thereby benefiting gamers.

Nadella made a point of outlining how increased investment in game studios could lead to more diverse and inclusive gaming experiences, which in turn could open up new markets for Microsoft.

Turning adversaries into allies One of Nadella’s most effective shifts was embracing open-source technologies, a stark contrast from Microsoft’s earlier era, which saw Linux as a threat.

Nadella and Scott Guthrie, who led the Azure cloud services division, understood that for Azure to grow,

28 | Nov - Dec 2024 | International Finance

it needed to support Linux, which had become the operating system of choice for startups and developers.

Nadella made the decision swiftly, ignoring years of anti-Linux sentiment at Microsoft.

This was emblematic of the change Nadella brought: instead of protecting old revenue streams at the cost of stifling innovation, he shifted Microsoft’s vision towards embracing the wider tech ecosystem.

By integrating Linux into Azure and acquiring GitHub, Microsoft built credibility with the very developers it had once alienated.

The impact of this change went beyond public relations. By embracing open source, Microsoft found itself contributing to projects that it once saw as a threat. This change allowed Azure to become the backbone for many of the world’s most innovative startups and enterprises. The company also encouraged collaboration within the developer community, which was vital for the adoption of new technologies, especially AI. Nadella's commitment to open source was also about community building. He emphasised that Microsoft could only grow if it helped grow the broader tech community. By launching initiatives like the Open-Source Programmes Office and contributing to significant open-source projects, Microsoft demonstrated that it was serious about being an active member of the open-source ecosystem. This approach not only helped Microsoft improve its technology but also changed perceptions of the company from a monopolistic giant to a supportive partner.

COVER STORY MICROSOFT

Microsoft as a platform for AI innovation

The balancing act

With Mustafa Suleyman, DeepMind co-founder, joining Microsoft AI in 2024, the company’s commitment to dominating the AI space became even more apparent. As Suleyman puts it, "Microsoft is a platform of platforms," signalling that the company’s vision is not to monopolise AI but rather to facilitate a marketplace where innovation can thrive.

Yet, despite these lofty goals, the nature of Microsoft’s relationship with OpenAI remains complex, and the question of whether Microsoft will eventually launch its own AI language models remains open.

Suleyman's arrival marked a new era for Microsoft's AI ambitions. He brought a wealth of experience and a different perspective on how AI could evolve responsibly. Microsoft made it clear that it wanted to be the primary platform where developers could build, train, and deploy AI models. By making Azure the default home for AI development, Microsoft aimed to be at the forefront of all major AI advancements.

As Nadella drives Microsoft towards the AI future, he appears intent on balancing two imperatives: enabling an open ecosystem for developers while maintaining a competitive edge.

The emphasis on Copilot and integrated AI tools across its product lines suggests that Nadella sees Microsoft’s future less as a builder of standalone software and more as a foundational platform that users leverage to achieve more—guided by AI, of course.

In addition, Microsoft’s focus on partnerships with AI research labs and its continued investments in quantum computing demonstrate its vision of the future. Microsoft wants to ensure that it is a leader not just in current AI technology but also in the next generation of disruptive tech. This commitment to ongoing research and development positions the company as a thought leader in multiple facets of technological innovation.

Microsoft’s pursuit of quantum computing is an example of how it aims to stay ahead of the curve.

Quantum technology holds the promise of solving computational problems that are currently impossible for classical computers, and Microsoft’s investments in this area highlight its ambition to not only remain relevant but to be at the cutting edge of future technological revolutions. By combining AI, quantum computing, and cloud infrastructure, Microsoft is aiming to create a technology stack that can solve some of the world’s most pressing challenges.

As Microsoft enters its 50th year, Nadella’s leadership has restored the company’s reputation and fuelled its most profitable years to date. From $1 billion investments in small AI labs to $69 billion gaming acquisitions, Nadella's strategies have consistently placed Microsoft at the intersection of innovation and opportunity.

However, familiar criticisms remain. Antitrust investigations, security vulnerabilities, and competition complaints echo the old Microsoft—a corporate giant that once wielded its influence with little restraint.

Nadella’s success is tempered by the realisation that the very size and influence Microsoft has regained also make it a target for regulatory scrutiny.

The story of Microsoft at 50 is one of reinvention, calculated risks, and a renewed focus on innovation.

Nadella turned Microsoft from a fading tech giant into a dynamic leader in AI—but the challenge now lies in maintaining that balance: encouraging innovation, learning from failures, and avoiding the pitfalls of past hubris.

As the company aims to be the platform that shapes the next generation of technology, the question isn’t whether Microsoft is still relevant. It is whether it can stay at the forefront, ethically and responsibly, in the next wave of technological change.

The company’s ambition is clear: to be the essential platform for developers, businesses, and individuals navigating an increasingly AI-driven world. Microsoft's trajectory will be determined not just by its technological prowess but also by its ability to adapt and learn—qualities Nadella has strived to embed into the company culture. As Microsoft looks ahead, the hope is that it can continue to innovate without repeating the mistakes of its past, maintaining its relevance by being a force for positive technological change.

By embracing change, prioritising empathy, and nurturing a culture of growth, Nadella has led Microsoft back to the forefront of technology.

The lessons from this journey are profound: with the right mindset, even a company as large and seemingly set in its ways as Microsoft can transform itself.

The future remains challenging, but if Nadella’s past successes are any indicator, Microsoft is wellpositioned to lead the way into the next era of technological innovation.

International Finance | Nov - Dec 2024 | 29

TECHNOLOGY

ANALYSIS

VIDEO GAME US MILITARY

Operating cutting-edge military weaponry with inexpensive controllers reminiscent of video games has obvious benefits

Video game controllers: New instruments of death IF CORRESPONDENT

In future wars, American soldiers operating the newest combat vehicles won't be using expansive control panels or futuristic touchscreens, rather, they will be using controls that are recognisable to anyone who grew up with an Xbox or PlayStation at home.

According to publicly availMeasurement able imagery posted to the Systems, a department's Defence Visual British defence Information Distribution System media hub, the US Defence Departcontractor ment has been gradually integrating subsidiary what appear to be variations of the Freedom of Movement Control that Unit (FMCU) handsets as the specialises primary control units for a variety in humanof advanced weapons systems over the past few years. machine The United States Air Force's interfaces, MRAP-based Recovery of Air Bases has been Denied by Ordnance (RADBO) manufacturing truck uses a laser to clear away improvised explosive devices and the FMCU other unexploded munitions. The since 2008 Army's new Manoeuvre-Short Range Air Defence (M-SHORAD) system, which is armed with FIM-92 Stinger and AGM-114 Hellfire missiles and a 30-mm chain gun mounted on a Stryker infantry fighting vehicle, is also considered a vital anti-air capability in a potential conflict with Russia in Eastern Europe. Finally, the Marine Corps is currently testing the Humvee-mounted High Energy LaserExpeditionary (HELEX) laser weapon system.

30 | Nov - Dec 2024 | International Finance

A 2023 Navy contract states that the FMCU will be essential to the functioning of the AN/SAY3A Electro-Optic Sensor System (also known as "I-Stalker"), which is intended to assist the service's future Constellation-class guided-missile frigates in tracking and engaging inbound threats. The FMCU has also been used on several experimental unmanned vehicles.

Measurement Systems (MSI), a British defence contractor subsidiary that specialises in humanmachine interfaces, has been manufacturing the FMCU since 2008. Its rugged design protects its delicate electronics from any hostile environments that US service members might encounter. The FMCU's form factor is comparable to that of a standard Xbox or PlayStation controller.

According to data compiled by federal contracting software GovTribe, MSI, a longtime developer of joysticks used on various US naval systems and aircraft, has worked as a subcontractor to major defence "primes" like General Atomics, Boeing, Lockheed Martin, and BAE Systems to provide the handheld control units for "various aircraft and vehicle programmes."

According to Ultra, "[Ultra] has continued to make the FMCU one of the most highly adaptable and capable controllers available today with the vision to foresee the form factor that would be most accessible to today's warfighters."

The infinitely adaptable FMCU is not entirely a novel technological advancement: The system, according to Ultra, has been in use since at least 2010 to run the Ground Based Operational Surveillance System (GBOSS), which the Army and

Per capita defence expenditure of the United States from 2015 to 2024 (In 2015 US Dollars)

Source: Statista

2015

2016

2017

2018

2019

1,991

2,006

1,916

1,947

2,115

2020

2021

2022

2023

2024

2,123

2,211

Marine Corps have both used during the global war on terror, as well as the now-owned Navy's MQ-8 Fire Scout unmanned autonomous helicopter.

However, the recent widespread use of the handset across highly advanced new weapon platforms is indicative of a growing trend in the US military toward controls that are not only distinctively tactile or ergonomic in their operation, but also naturally recognisable to the next generation of prospective warfighters before they even enlist.

An Air Force spokesman told WIRED that "with RADBO, the operators are often a considerably younger audience." Thus, using a controller similar to the FMCU, which is a PlayStation or Xbox type, seems like a logical step for the gaming generation.

Even so, it should come as no surprise that the US military is implementing custom-made controls on video games: For a long time, the different service branches have been experimenting with

2,108

2,100

2,239

console handsets that are available commercially to operate new technologies. For over ten years, the Army and Marine Corps have been using Xbox controllers to control tiny autonomous vehicles.

These include airborne drones and ground units used for explosive ordnance disposal, as well as bigger vehicles like the M1075 Palletised Loading System logistical vehicle.

Simultaneously, the Navy's new Virginia-class submarines, which formerly had periscopes, now have "photonics masts" instead, and both the service's Multifunctional Automated Repair System robot and surface warships use the same low-cost Xbox handset for various tasks, including shipyard maintenance and in-theatre battle damage repair.

Those in the military sector who are vying for new Pentagon contracts likewise follow this trend: Look no further than the BlueHalo-developed LOCUST Laser Weapon System, which serves as International Finance | Nov - Dec 2024 | 31

TECHNOLOGY

ANALYSIS

VIDEO GAME US MILITARY

the Army's Palletised-High Energy Laser (P-HEL) system. Similar to the service's earlier forays into laser weapons, this system specifically uses an Xbox controller to assist soldiers in targeting incoming drones and burning them out of the sky.

Tom Phelps, an iRobot product director at the time, told Business Insider in 2013 that the business adopted a standard Xbox controller for its PackBot IED disposal robot because "by 2006, games like Halo were prominent in the military.

Thus, in order to standardise and popularise the idea, we collaborated with the military. The fact that younger soldiers with a lot of gaming expertise could adjust fast made it a huge success."

Outside of the US military, commercial video game consoles 32 | Nov - Dec 2024 | International Finance

have also shown popularity. Examples include the British Army's remote-controlled Polaris MRZR all-terrain vehicle and Israel Aerospace Industries' Carmel battle tank, whose controls were developed based on input from teenage gamers who reportedly preferred a standard video game console to a traditional fighter jet-style joystick. In a more recent development, Ukrainian troops have directed machine gun turrets and armed unmanned drones against Russian invaders using Steam Decks and PlayStation controllers.

The Marine Corps stated that the new Navy-Marine Corps Expeditionary Ship Interdiction System (NMESIS) launcher, a Joint Light Tactical Vehicle-based anti-ship missile system developed to fire the new Naval Strike Missile that's

essential to the Marine Corps' plans for a hypothetical future war with China in the Indo-Pacific, also uses a controller similar to one from a video game.

Furthermore, these controllers have peculiar non-military uses as well: The most notorious example is the OceanGate submarine, which, as CBS News noted at the time, was using a Logitech F710 joystick to handle its fatal implosion on a dive to the Titanic wreck in June 2023.

"They have a far lower fear of technology and are far more prepared to experiment...Optimising the controls of the Carmel tank for younger operators is something” that Israeli Defence Forces colonel Udi Tzur told The Washington Post in 2020, while adding, "It comes to them naturally. It's not quite like playing Fortnite, but it's similar, and

they quickly elevate their abilities to a functional level. To be honest with you, I didn't anticipate it would happen so soon.”

Operating cutting-edge military weaponry with inexpensive controllers reminiscent of video games has obvious benefits. First, it has to do with control: In addition to being more ergonomic, video game consoles have buttons and joysticks arranged to provide tactile feedback that is not typically possible from, for example, one of the US military's now-ubiquitous touchscreens.

Following the 2017 collision between the Arleigh Burke-class destroyer USS John S. McCain and an oil tanker off the coast of Singapore, the Navy had to learn this the hard way.

As a result, the service replaced the touchscreens on its bridges with mechanical throttles throughout its fleet of guided-missile destroyers after the National Transportation Safety Board reported that sailors preferred the latter because "they provide[d] both immediate and tactile feedback to the operator."

Although it may not be possible for a US service member to use an Xbox controller with a "rumble" feature, several studies seem to support the idea that video-gamestyle controllers, such as the FMCU, offer considerable tactile (and tactical) advantages over dynamic touchscreens.

However, as military officials and defence contractors have pointed out, the Pentagon benefits from the controllers since they are known to the average US service member.

According to a yearly report from the Entertainment Software Association trade group, as of 2024, over 190.6 million Americans of all ages, or approximately 61% of the population, played video games.

Meanwhile, data released in May by the Pew Research Centre shows that 85% of American teenagers say they play video games, with 41% indicating they play every day.

Regarding specific video gaming platforms, the ESA analysis shows that Gen Z and Gen Alpha, two groups that may end up participating in America's next major conflict, are the biggest fans of consoles and their unique controllers.

According to military technologist Peter W. Singer, the Pentagon is "free-riding" off the video game industry, which has spent decades educating Americans on a set of controls and ergonomics that are standard across most game systems (sorry, Wii remote—the Army considered using it for bombdisposal robots almost two decades ago). At least since the PlayStation introduced elongated grips in the 1990s.

In an interview from March 2023, Singer said, "The gaming companies spent millions of dollars designing an ideal, intuitive, easyto-learn user interface, and then they went and spent years training up the user base for the US military on how to utilise that interface.

These designs are not accidental; the military draws from the same pool that they do for their clientele, and the training is essentially precompleted."

Exactly how many US military systems use the FMCU is unknown at this time. The Pentagon referred the US-based media outlet to the respective military branches for further information after confirming the system's use on the NMESIS, M-SHORAD, and RADBO weapons systems when contacted for comment. The Air Force reaffirmed the handset's usage with the RADBO, while the Marine Corps

verified its use with the GBOSS. The Army did not reply to queries for information. The Navy said that the service does not currently use the FMCU with any existing systems.

It is unclear to what extent the FMCU and its commercially available versions will permeate the US military. However, once introduced, controls that successfully convert human inputs into machine action typically last for decades, after all, since the beginning of military aircraft, the joystick, also referred to as the "control column" in the military, has been an essential component. Hopefully, by the time the next major conflict arises, the Pentagon hasn't already moved on to the Power Glove.

The integration of video gamestyle controllers like the FMCU into advanced military systems highlights a shift toward leveraging familiar, intuitive designs for nextgeneration soldiers. These controllers not only offer ergonomic and tactile advantages over touchscreens but also capitalise on a user base already skilled in their operation, thanks to decades of video game industry development. As more weapons systems and vehicles adopt these familiar control interfaces, it's clear that the military is reaping the benefits of pre-trained personnel.

It suggests a future where intuitive and cost-effective solutions continue to shape military technology.

International Finance | Nov - Dec 2024 | 33

TECHNOLOGY

FEATURE ARTIFICIAL INTELLIGENCE

ETERNOS CHATBOTS

AI resurrections: Reviving the dead or exploiting grief?

34 | Nov - Dec 2024 | International Finance

FEATURE ARTIFICIAL INTELLIGENCE

A significant concern is that businesses might employ artificial intelligence resurrections to personalise their user marketing

IF CORRESPONDENT

T

he use of AI-generated Tupac Shakur vocals

by Canadian singer Drake and speeches by politicians years after their deaths show how technology is blurring the lines between life and death. Beyond their alluring appeal in politics and entertainment, however, several innovative but somewhat divisive projects could soon make AI "zombies" a reality for bereaved families.

Thus, how do AI "resurrections" function, and are they as horrible as we would think?

Artificial intelligence initiatives worldwide have produced digital "resurrections" of deceased people, enabling friends and family to communicate with them.

Usually, consumers give the AI tool details about the departed. This might be responses to questions depending on personality, or it could be emails and texts.

After processing the data, the artificial intelligence tool converses with the user, like the deceased. Replika, a chatbot that mimics texting behaviours, is one of the most well-liked initiatives in this field.

But other businesses now let you see a video of the deceased individual while you converse with them.

For instance, StoryFile, a Los Angeles-based company, employs AI to let people speak during their own funerals.

A person can record a video in which they share their ideas and life stories before they die away. When guests ask questions during the funeral, artificial intelligence will pull

pertinent answers from the prerecorded video.

Additionally, US-based Eternos made news in June when it developed a digital afterlife for a person using AI. This project, which got underway early this year, gave Michael Bommer, (83), the opportunity to leave behind a digital legacy that his family could use to stay in touch with him.

Touching the emotional chords A video of the tearful reunion between a South Korean mother and an AI replica of her deceased daughter in virtual reality in 2020 provoked a heated online discussion on whether or not this kind of technology benefits or impedes its users.

These projects' creators emphasise the agency of the users and claim that their work alleviates a deeper pain.

The majority of users are often experiencing an "extraordinary amount of sorrow and grief," according to Jason Rohrer, founder of “Project December,” which likewise utilises artificial intelligence to facilitate discussions with the dead. Rohrer stated that most users saw the programme as a coping mechanism.

Many of the individuals who wish to use “Project December” in this way are so overcome International Finance | Nov - Dec 2024 | 35

TECHNOLOGY

FEATURE ARTIFICIAL INTELLIGENCE

with pain from their grief that they are willing to try everything to get over it.

According to Rohrer, many people who use the programme to have thoughtprovoking conversations with the deceased find that it aids in their quest for closure.

Robert LoCasio, the creator of Eternos, stated that he started the business to record people's life experiences and enable their loved ones to go on.

According to LoCasio, Bommer, his former colleague who died in June, he was intended to leave a digital legacy that belonged only to his family.

"Just a few days before he passed away, I spoke with [Bommer] and he told me to always remember that this was for me. This was significant to me, even if I'm not sure if they will use it in the future," the Eternos founder remarked.

Some observers are more cautious 36 | Nov - Dec 2024 | International Finance

ETERNOS CHATBOTS

when it comes to AI resurrections, raising concerns about its potentially harmful psychological repercussions and doubting the ability of severely bereaved individuals to make an informed decision to use it.

Alessandra Lemma, a consultant at the Anna Freud National Centre for Children and Families, said, "As a clinician, my main worry is that grief is genuinely a very significant process.

The ability to acknowledge the absence of another person is a crucial component of growth."

Lemma cautioned that prolonged use could prevent people from accepting the other person's departure, putting them in a condition of "limbo."

A crucial element of one AI service is its perpetual connection to the departed.

Before its recent change, the company's website said, "Welcome to YOV (You,

Only Virtual), the AI startup pioneering improved digital communications so that we Never Have to Say Goodbye to those we love."

According to Rohrer, his sorrow bot has a "built-in" limit: customers must pay $10 for a constrained chat.

The cost of processing for each response varies, but the fee purchases time on a supercomputer. This means that $10 can cover one to two hours of chat, but it does not guarantee a set number of responses. Users receive a notification as the allotted time expires, allowing them to say their final goodbyes.

Lemma, a researcher on the psychological effects of grief bots, notes that although she is concerned about the possibility of their use outside of a therapeutic setting, they might be utilised safely as an addition to professional therapy.

TECHNOLOGY

FEATURE ARTIFICIAL INTELLIGENCE

ETERNOS CHATBOTS

Artificial Intelligence market size worldwide from 2024 to 2030 (In Billion US Dollars) 2024

2027

2029

2025

2028

2030

184.04 415.61 667.74 243.72 529.23 826.73 2026

320.14 Source: Statista

The other side of the coin Proponents of this technology say that new methods of preserving life tales are simply being brought about by the digital era, maybe filling a gap left by the decline of customary family storytelling techniques.

"In the past, when a parent knew they were going to die, they would leave boxes full of items or books that they would want to give to a child," Lemma said.

In light of that, this may be the parentcreated, passed-down version of that for the 21st century, predating their demise.

According to LoCasio in Eternos, "It's actually the most natural thing for a human to be able to share the stories of their life to friends and relatives.”

Studies and experts alike have voiced concern that these services might not be able to protect the privacy of user data. Third parties may be able to access personal data, including text messages that you share with these services.

Renee Richardson Gosline, senior lecturer at the MIT Sloan School of Management, noted that even if a corporation claims it would keep data private when someone first signs up, privacy cannot be guaranteed due to

frequent adjustments to terms and conditions and potential changes in company ownership.

LoCasio and Rohrer emphasised that privacy was the main focus of their initiatives. Eternos restricts access to the digital legacy to authorised families, whereas Rohrer can only view discussions when users submit a customer support request.

Both acknowledged, though, that these worries might materialise in the case of tech behemoths or for-profit businesses.

One major concern is that businesses might use artificial intelligence resurrections to personalise their marketing strategies.

A loved one's voice might be an advertisement or a product pusher in their text.

"What you've created is a pseudoendorsement based on someone who never agreed to do such a thing when you're doing it with vulnerable people.

Thus, agency and power asymmetry are the true issues,” Gosline noted.

Gosline argues that these tools, designed for grieving individuals, can be dangerous, especially with the

involvement of large tech companies.

“We should be concerned because the items of the most vulnerable people are usually the first to break in the fastpaced, 'break everything' ethos of internet businesses,” according to the expert.

And it's difficult for me to think of someone who is more defenceless than those who are mourning.

The ethics of bringing the dead back to life digitally have drawn criticism from experts, especially when the users feed AI data about them without their consent.

An increasing number of people are worried about how AI-powered tools and chatbots may affect the environment, especially when they use large language models (LLMs), which are programmes designed to comprehend and produce writing that is similar to that of a human.

Large data centres are required for these systems, and these facilities produce a lot of carbon dioxide and water vapour during cooling, not to mention the e-waste that results from regular hardware updates.

Because of the strain, artificial intelligence was placing on its data centres, Google revealed in a July 2024 report that the business was behind its aggressive net-zero targets.

Gosline acknowledged that no software is flawless and that many people using these AI chatbots would stop at nothing to rekindle a relationship with a loved one who has passed away. However, she stated that it is the responsibility of scientists and leaders to give more attention to the kind of world they wish to build.

editor@ifinancemag.com

International Finance | Nov - Dec 2024 | 37

Business Dossier - Varuna

Varuna

Leading Thailand's eco-tech movement

I

n an era where technological innovation intersects with environmental consciousness, Varuna emerges as a beacon of hope for sustainable development in Thailand. Leveraging advancements in unmanned aerial vehicle (UAV) technology, artificial intelligence (AI), and satellite analytics, Varuna has embarked on a transformative journey beyond the confines of the energy sector, branching into agriculture and environmental conservation.

The genesis of Varuna can be traced back to the convergence of UAV and AI technologies in the energy industry.

Recognising the potential for broader application, Varuna set its sights on addressing the challenges plaguing the agriculture and environmental sectors in Thailand. With a vision to seed a sustainable future and a mission to provide crop sustainability and zero-carbon solutions, Varuna (Thailand) Co., Ltd. was established under AI & Robotics Ventures Co., Ltd. Varuna is committed to harnessing intelligent technology to maximise benefits for Thailand's agricultural and environmental domains. Through the Varuna Analytics

38 | Nov - Dec 2024 | International Finance

Varuna is committed to harnessing intelligent technology to maximise benefits for Thailand's agricultural and environmental domains platform, which amalgamates satellite imagery with UAV data and AI analysis, the company offers a suite of innovative solutions tailored to the specific needs of these sectors.

Varuna's offerings revolve around its 3S solutions: Smart Forest, Smart Farm, and Service Matching. The Smart Forest solution focuses on green area management, utilising multispectral drones and satellite analytics to monitor changes in natural resources and the environment. By employing advanced AI algorithms, Varuna facilitates efficient forest management and contributes to carbon sequestration efforts.

The Smart Farm solution represents Varuna's commitment to revolutionising agricultural practices through integrated intelligent farming management. By leveraging UAV technology and AI-driven insights, farmers can optimise crop yields while minimising resource utilisation, thereby promoting sustainable agricultural practices.

Additionally, Varuna facilitates Service Matching, connecting agricultural drone pilots with farmers to enhance production capacity through UAV-assisted farming techniques. This collaborative approach not only improves agricultural productivity but also encourages knowledge exchange within the farming community.

Central to Varuna's ethos is the belief that technology-driven solutions can catalyse socioeconomic development while preserving environmental integrity.

By empowering communities with cutting-edge tools and expertise, Varuna envisions a future where every stakeholder in Thailand's agricultural and environmental sectors can thrive.

Moreover, Varuna's impact extends beyond mere technological innovation. By promoting skill development and knowledge transfer, Varuna is nurturing a workforce equipped to navigate the complexities of modern agriculture and environmental management.

Through reskilling and upskilling initiatives, Varuna aims to create pathways for sustainable livelihoods and economic prosperity.

The Varuna Analytics platform serves as the linchpin of its operations, offering geospatial data analysis and processing capabilities essential for informed decision-making. From crop health monitoring to yield prediction, Varuna Analytics provides actionable insights that drive operational efficiency and environmental sustainability.

Meanwhile, some of Varuna's projects have stood as a testament to their vision.

Khung BangKkachao Project Varuna employs the Varuna Analytics platform to monitor

the impact of maintaining green areas spanning over 10,000 Rai. This initiative fosters a green identity in the region while promoting safe agricultural practices in collaboration with the Khung BangKachao community.

Additionally, the platform enables efficient and precise planning for the staff. The goal is to set an example and provide guidance for the restoration of other green areas in the future.

Wangchan Forest Project Varuna uses cutting-edge satellite technology to monitor and calculate the amount of carbon absorption occurring across 170 Rai of the Wangchan forest area. By integrating data and processing it using artificial intelligence (AI) technology, this has now become a new field of research for calculating carbon credits.

Varuna denotes a significant change in how technology, agriculture and environmental conservation intersect with each other. Through its innovative solutions and collaborative principles, Varuna is at the forefront of driving a sustainable revolution within Thailand's agricultural and environmental sectors. As the country embraces the promise of a greener, more prosperous future, Varuna stands as a testament to the transformative power of technology in building a sustainable tomorrow.

International Finance | Nov - Dec 2024 | 39

BANKING AND FINANCE

ANALYSIS

DORA FINANCIAL INSTITUTIONS

DORA mandates that financial institutions enforce strong ICT risk management protocols not only for themselves but also for their third-party suppliers

DORA: A universal standard for financial resilience IF CORRESPONDENT The digital landscape of finance is rapidly evolving, and this growth brings vulnerabilities within the digital infrastructure of financial institutions. The European Union Digital Operational Resilience Act (DORA) is a legislative measure addressing these vulnerabilities by establishing essential standards for cybersecurity across the Firms financial sector in the European Union. managing In this analysis, we examine the ICT risk implications, goals, and potential inconsistently, impact of DORA, focusing on its four due to main pillars: ICT Risk Management, acquisitions Incident Management, Third-Party across various Risk Management, and Threat-led Penetration Testing (TLPT). This jurisdictions data-driven piece highlights why or disparate DORA is more than just a regulatory ICT policies, framework; it is a guide for achieving will now face proactive digital resilience in a stringent new globally interconnected financial expectations ecosystem.

under Digital Operational Resilience Act

Strengthening digital defences

The first and foundational pillar of DORA is Information and Communications Technology (ICT) Risk Management, which mandates financial institutions enhance their digital defences.

This requirement goes beyond basic cybersecurity measures. This is the basis upon which financial institutions must build their cybersecurity stra-

40 | Nov - Dec 2024 | International Finance

tegies. DORA requires that every financial entity under its jurisdiction develop a robust framework for managing ICT risks, one that moves beyond merely protecting systems from cyberattacks.

This approach ensures that all firms, regardless of their size, meet a consistent level of ICT risk management requirements. Larger institutions may already have sophisticated systems, but smaller firms or those formed through acquisitions may struggle with inconsistencies. Companies operating across multiple regulatory environments must now synchronise their ICT risk management practices, ensuring uniformity across all branches.

Firms managing ICT risk inconsistently, due to acquisitions across various jurisdictions or disparate ICT policies, will now face stringent new expectations under DORA. These include ongoing assessments of risks linked to new ICT initiatives and continuous reviews to ensure practices keep up with evolving threats.

Data from the European Commission shows that over 62% of cybersecurity incidents faced by European financial institutions involve vulnerabilities that could have been mitigated with standardised ICT procedures. In 2022 alone, over 280 major incidents were attributed to weak ICT practices. DORA's approach to ICT risk management aims to close this gap by encouraging a proactive, risk-centred strategy. While this change will require considerable investment, particularly for those with disorganised risk management systems, the goal is a more secure digital environment through enhanced

systems, dedicated staff, and consistent monitoring.

The second pillar of DORA is Incident Management, which ensures a quick and organised response to digital disruptions. In today's digital world, incidents, ranging from minor errors to major cyberattacks, are unavoidable. DORA focuses not only on resolving these incidents but also on reporting them properly and learning from them to enhance resilience and prevent future occurrences.

Under DORA, financial institutions are required to report incidents promptly and in detail.

This includes classifying incidents based on severity, according to the draft Regulatory Technical Standards (RTS). Seven classifications are used to standardise incident reporting, which promotes transparency and helps others learn from each event to strengthen their defences.

Financial institutions must update their Standard Operating Procedures (SOPs) to incorporate these new classification and incident management requirements. Detection systems, response frameworks, training programmes, and audit schedules must be revamped to support these standards.

Recent studies by IBM indicate that early detection and rapid response can reduce the cost of a data breach by nearly 30%. The average cost of a data breach for financial institutions is $5.85 million, meaning early detection could save approximately $1.76 million per incident. By mandating effective SOPs, combined with ongoing training, incident simulations, and audits, DORA aims to ensure

financial institutions not only respond to incidents but do so in a way that builds systemic resilience. Although this approach requires substantial investment, it will foster a culture of preparedness and strength across the European financial sector.

Financial institutions are not isolated entities; they operate within interconnected systems that depend on numerous third-party service providers, each with risks.

DORA's third pillar, Third-Party Risk Management, acknowledges the risks that these partnerships pose and aims to eliminate vulnerabilities arising from them.

The interconnected nature of finance means that a cybersecurity breach involving a minor third-party provider can have major consequences for a financial institution. DORA mandates that financial institutions enforce strong ICT risk management protocols not only for themselves but also for their third-party suppliers.

Regulators will oversee these suppliers to ensure that third-party entities do not become weak links in the financial chain.

One significant aspect of DORA's approach is its emphasis on accountability. Financial entities cannot outsource their responsibility for compliance, even if a service is managed by an external party, the primary financial institution remains accountable for managing the related ICT risks. This fundamentally changes how financial institutions approach outsourcing, particularly in ICT, by requiring firms to set clear expectations for their suppliers and conduct regular audits to ensure compliance.

A survey by the Ponemon Institute found that 53% of organisations experienced at least one data International Finance | Nov - Dec 2024 | 41

BANKING AND FINANCE

ANALYSIS

DORA FINANCIAL INSTITUTIONS

Share of adults in the United States who experienced financial cybercrime or online financial fraud as of 2023, by age group

42 | Nov - Dec 2024 | International Finance

(In Percentage) 18-34 Years

36%

35-55 Years

34%

55 Years & Above

22%

Source: Statista

breach involving a third-party vendor in the past two years, and the average cost of such a breach was approximately $4.29 million.

Under DORA, financial institutions establish stricter controls over their outsourcing processes and conduct frequent audits to mitigate risk and meet regulatory requirements.

Implementing DORA's thirdparty risk management standards will increase procurement costs and necessitate more complex contract negotiations. Financial institutions must align third-party contracts to ensure suppliers meet the same obligations as the primary institution. This will change how service providers are evaluated, prioritising their ICT resilience and regulatory adherence.

The fourth pillar of DORA introduces Threat-Led Penetration Testing (TLPT) as a proactive cybersecurity measure. TLPT, inspired by the Threat Intelligence Based Ethical Red Teaming (TIBEREU) framework, involves simulating cyberattacks across the attack surfaces of major financial institutions. The purpose is straightforward: identify vulnerabilities before they can be exploited by malicious actors.

Unlike traditional audit exercises, TLPT is dynamic and strategic. It involves ethical hackers attempting to identify weaknesses within an institution's security. The findings are crucial for understanding an institution's vulnerabilities and enhancing cybersecurity defences.

Systemically important financial institutions are the primary targets of TLPT, ensuring that critical parts of the financial system are prepared for real threats.

According to the European Central Bank, TLPT exercises provide insights that lead to improved incident response capabilities and better threat intelligence. Institutions that implemented TLPT saw a 25% reduction in the time to respond to simulated threats. TLPT isn't just about compliance; it's about developing preparedness through simulated attacks, ensuring that executives and boards are ready for real cyber threats.

To implement TLPT, financial institutions will need to invest in specialised expertise, both inhouse and contracted. However, the benefits, including increased system integrity and reduced vulnerability, outweigh the costs. TLPT is an essential component of transitioning from a reactive to a proactive cyber risk management strategy.

Accountability in the digital age Accountability and transparent governance are crucial components of DORA. Financial institutions are accountable not only to regulators but also to their boards of directors.

Under DORA, the role of boards in overseeing cyber risk will expand,

requiring executive teams to acquire the knowledge and skills needed to manage cybersecurity effectively.

This requirement aligns with the NIS 2 Directive, which mandates that senior management be trained to understand cyber risks and integrate these risks into broader operational strategies. Robust reporting structures ensure that boards remain informed about ICT risks and resilience efforts, shifting their role from passive recipients of information to active participants in digital risk management.

DORA encourages an assetcentric approach to ICT risk management. IT assets should be seen as just as important as business assets, forming the foundation of a financial institution's capabilities.

Failing to protect these assets adequately can disrupt business continuity.

The concept of Integrated Risk Management (IRM) is crucial here.

Unlike traditional approaches that manage risks separately, IRM provides a comprehensive view, linking ICT risk directly to business continuity and resilience.

By treating IT assets as core components of business capability,

financial institutions can align risk management strategies to be more proactive and effective.

In practical terms, institutions will need to automate risk management processes. Automated systems allow financial institutions to efficiently identify, assess, and respond to risks, helping them build a fully integrated defence mechanism.

The focus is on using digital tools to not only meet compliance standards but also improve efficiency through process automation.

DORA's broader impact Although DORA is an EU regulation, its influence will likely be felt globally. Over 45% of non-EU financial institutions with EU clients are already updating their risk management frameworks to align with DORA's requirements.

Financial institutions outside the EU that do business with EU clients or have operations in the EU must adhere to DORA's stringent ICT and third-party risk management requirements. In this way, DORA sets a new global standard for digital resilience in finance.

Other jurisdictions may soon adopt similar frameworks to ensure

that their financial institutions remain compliant and competitive when dealing with European counterparts. Just as GDPR sets a precedent for global privacy standards, DORA's focus on ICT resilience may establish a benchmark for cybersecurity and operational risk management across the international financial sector.

DORA is more than just a set of regulatory requirements, as it represents a vision for the future of finance that is grounded in resilience, accountability, and proactive digital risk management. While these requirements may seem burdensome, especially for smaller firms, the long-term benefits are undeniable: a secure and stable financial system capable of handling the complexities of the digital age.

For financial institutions, successfully navigating DORA's requirements will depend on adopting an integrated approach to compliance. ICT risk management, incident management, third-party oversight, and TLPT must all function as part of a cohesive strategy that protects digital infrastructure.

Management must be prepared to transition from traditional, isolated

risk management practices to a unified, future-oriented strategy that acknowledges the interconnected nature of digital threats.

The financial sector must understand that DORA requires more than just checking off compliance boxes, it calls for a cultural shift within organisations. Digital resilience should be as central to operational success as financial health. Executive management and boards play a critical role in driving this change, moving cybersecurity from a peripheral concern to a core element of strategic planning.

By setting high standards for ICT risk management, transparency, and third-party governance, DORA challenges financial institutions to advance their digital capabilities and build strong defences against an evolving threat landscape. Although these changes may be demanding, they promise a financial system that is compliant and genuinely resilient in the face of ongoing digital evolution.

International Finance | Nov - Dec 2024 | 43

BANKING AND FINANCE

FEATURE SAVINGS CLUBS

44 | Nov - Dec 2024 | International Finance

ZIMBABWE

FEATURE SAVINGS CLUBS

Savings clubs have become a source of capital for many people on the economic margins

Savings clubs: Good or bad for Zimbabwe?

IF CORRESPONDENT

I

nformal savings clubs have emerged as a popular financial avenue in Zimbabwe in recent years, especially among women and people in the informal economy who may not trust banks or have access to traditional savings and loan options, experts say.

Known locally as mukando, meaning contribution, these clubs usually have about a dozen members who come together to save money.

Some clubs are being run by central members who collect everyone’s contribution and keep it until the saving cycle has ended, after which it is distributed. Throughout the cycle, members are allowed to borrow money from the pot and pay it back to the club with interest.

"In a slightly different version of the savings club, contributions are collected and the full amount is given to a different member at certain intervals. When the member pays back the money, they do so with interest. In both cases, the interest gets added to the full pot of money, which is then shared at the end of a savings cycle, letting members get their original savings with an extra amount added," Al Jazeera reported.

International Finance | Nov - Dec 2024 | 45

BANKING AND FINANCE

FEATURE SAVINGS CLUBS

While many who join these clubs find this system an essential source of support, these clubs are also unregistered, unregulated, and depend on good faith between members, which, as per the experts, leaves members open to the dangerous scenario of being swindled.

Knowing the system In December 2017, Reuters reported on a phenomenon known as "Savings Clubs." These are local groups that have formed to circulate scarce hard currency among their members. This enables the members to run small businesses, avoid poverty, and helps the African country to avoid a liquidity crunch.

Lynet Sigauke, one of the unbanked individuals in the country, while interacting with the Media agency, upvoted the "Savings Club" concept, stating that it was a good option to mitigate cash shortage in the country. She was a pioneer member of the Shingairai Savings Club, which used to operate under this principle: Anyone borrowing money from the club, including individuals recommended by members, must pay it back in hard cash at an interest rate of 15%.

Sigauke, treasurer of the 30strong Shingairai club back in 2017, said members take turns to make contributions of $300 each into its coffers, to ensure adequate levels of cash.

In recent years, with the African nation's economy repeatedly going through headwinds like high inflation, these savings societies are giving citizens precious access to scarce hard currency.

Even economists agree indigenous savings clubs are the way to go as Zimbabweans, back in 2017, were seeing the arrangement as the potent option to avert the deepening cash deficit.

"Before, I was extremely poor, in fact a 46 | Nov - Dec 2024 | International Finance

ZIMBABWE

charity case, but after I became a member of Shingairai Savings Club, I now have a home under construction here in Harare," said Sigauke, who also owns a thriving transport business ferrying children to and from private schools by mini-bus.

Like other club members, she was able to borrow money to invest in her projects to generate income. While back in 2017, there were no official statistics about the number of savings societies that have sprung up in Zimbabwe, there were allegations about many of these informal financial institutions operating illegally.

However, the Reserve Bank of Zimbabwe stated that in that year, $7 billion was circulating in the informal sector, which savings clubs were drawing on.

How do savings clubs work?

Al Jazeera, in September 2023, reported about Unity Gope, a hawker by profession, who is a member of one such "Savings Clubs." Gope, a mother of four, lives in a small two-room home in Dzivarasekwa, a low-income neighbourhood and one of the oldest suburbs of the Zimbabwean capital city of Harare. Her total monthly income from market stall ranges between $350 and $550, which lessens during times of low economic activity. Her total monthly expense, back in 2023, stood at $685.

Gope and her children found their economic condition worsening by the rising cost of living and Zimbabwe’s stagnating economy back in 2023, as the yearly inflation has risen from 75% in April to 77% in August. The savings club became her primary supporting mechanism.

These clubs are largely dominated by women, and tend to have about 20 or more members, usually belonging to a

similar social group or area where they live or trade from. The Matapi savings club that Unity joined in January 2023 had 23 members who all contribute a minimum of $10 each week over four months.

The contributions are then pooled together and then given out as borrowings to different members at an interest rate of 5% per week. At the end of each savings session, usually every four or five months, each member gets back their full contribution plus a share of the interest that’s been accrued.

Till September 2023, the largely informal Zimbabwean economy covered 76% of the country's population (as per the International Labour Organisation), with women constituting a massive portion of the tally (65%).

Only 5% of Zimbabweans have savings through formal banking channels, according to financial non-

FEATURE SAVINGS CLUBS

first session, members bought a bucket of chicken and chips as they distributed their savings. But they soon realised they could do more with the extra money, and decided it was better to convert the chicken and chips savings into a grocery club," Al Jazeera reported.

Unity was concerned about Zimbabwe's declining economy and the possibility of her children dropping out of school. However, the savings club provided her with much-needed comfort by ensuring a steady income.

This allowed her to stock up her market stall and enjoy the benefits of having a reliable source of income.

Not everyone is lucky though

profit Finmark’s 2022 Finscope Zimbabwe Survey. Even those who are formally employed often only use the banks to get their salaries. Savings clubs have become a source of capital for many people on the economic margins. And being peer-driven, they also have criteria that are less stringent compared with banks (conditions like being formally employed or having loan collaterals), members say.

“I always find the savings club helpful in the absence of capital through normal banking channels,” says Milliscent Mataranyika, a fellow member of Unity’s club, while adding, “Zimbabwe’s economy is just unpredictable; the banking fees and charges are high, we also fear that the currency will be changed and we will lose value and these savings clubs have proven to be reliable and sustainable.”

In fact, the savings club solution was so successful for Unity and her group

that they decided to expand it to include a subcategory where each member saves specifically for groceries.

"The grocery savings club started in 2022, initially as an idea to save money to buy a celebratory meal on the last day of a saving session, when the group shared the proceeds. At the end of the

"It was two days before Christmas in the low-income neighbourhood of Mabvuku in Zimbabwe’s capital Harare. Music played, people chatted and most were in a festive mood. But not the small group of women marching down a narrow, pothole-ridden street on their way to the house of their savings club’s treasurer.

They had a much more serious matter in mind. The previous day, the women were meant to share out money they had been saving together for the last six months to use for Christmas shopping. But when they called the mobile number of their

Zimbabwe banking sector's net interest income from 2017 to 2024 (In Billion US Dollars)

2017

2018

2019

2020

2021

2022

2023

2024

13.36 14.62 16.23 18.19 21.16 23.43 25.48 27.26 Source: Statista

International Finance | Nov - Dec 2024 | 47

BANKING AND FINANCE

FEATURE SAVINGS CLUBS

club’s treasurer, they got an automated response: The number you have dialled is not available. They tried his number multiple times, but to no avail," Al Jazeera reported earlier this year.

One such affected individual was Carol Madzimo, a young hairdresser from the area. She had joined the club together with her mother so they could save money for Christmas groceries.

“My aunt invited us to join the savings club. The savings club was supposed to run from July to December, at which point we were supposed to share the money we had been contributing to the club every month (plus the extra earned from interest),” Madzimo said.

The treasurer, who had all the money the 20 members had been saving for six months, $1,200, plus an additional unknown interest amount, disappeared on the day they were supposed to share the proceeds.

48 | Nov - Dec 2024 | International Finance

ZIMBABWE

“Christmas was just two days away and we hadn’t received a single cent to buy the Christmas groceries we had saved so hard for. So you can imagine the frustrations we carried to the treasurer’s house that day,” she noted.

It was in January 2024 before the club heard from the treasurer again. It turned out that the treasurer had been using the members’ savings and the interest money for his own use, as per Madzimo's version.

She wasn’t sure exactly how much interest was accrued because the treasurer kept all the books, and the other members had simply trusted him.

Eventually, he returned to each member the amount they had input over the six months, $60, but did not give them any of the profits from the loans or interest.

“I regret (joining the savings club).

However, at least I got back all the money

I put in as monthly contributions,” Madzimo told.

However, Tanaka Mutyori, who joined a different savings club, wasn’t as fortunate. In 2023, she used to run her own beverage business in a building in Harare’s city centre. After Mutyori joined a savings club in April of that year (located in the same building where her business was operating), she used to contribute $50 every week. The money was supposed to be saved for 18 weeks, before being shared equally among its five members. The club was also supposed to distribute the interest gained from loaning out money to members throughout the saving period.

“Before I joined the club, I witnessed some members buy cars using money they got from the club, so I genuinely thought it was a good idea,” Mutyori said.

However, when the time came to share the club’s money, the group’s leader kept shifting dates.

“Initially, we were supposed to share the money on Heroes’ Day [August 12], but the leader kept changing the date. It wasn’t long till we came to the conclusion that he didn’t have our money,” Mutyori lamented.

When the club members confronted him in 2023, the leader said he had lent all the money to his pastor at church who had not given it back. However, sometimes Mutyori does receive small amounts from the club’s leader when she desperately needs money.

“I am subtracting the small amounts he gives me from the money I am owed, which is $950,” she added.

“I was planning to use the lump sum I was supposed to get in August last year to boost my business. But after I failed to get the money, everything just started going downhill,” remarked Mutyori, as she admitted that joining the savings club really set her back.

One of her big fridges was taken by the management of the building she

FEATURE SAVINGS CLUBS

was renting space from when she failed to pay rent. Her business crumbled and she now works for someone else.

Debating the legality As per Zimbabwean economist Prosper Chitambara, women and people working in the informal sector participate in savings clubs the most, with one of the key motivations for joining is access to investment capital.

“These savings clubs are making it possible for people to mobilise savings within a group, for lending to each other, either for investment purposes, to invest in businesses or to expand their businesses or even for consumption,” Chitambara said.

Savings clubs have well-documented benefits, he said, so people are eager to join them.

According to Chitambara, numerous scholars have conducted studies to explain the motivations behind these savings schemes. Some of them have even agreed that individuals use their participation in these savings schemes

as a way to commit themselves to saving money and to address self-control problems.

Then there are other scholars, who argue that individuals with no access to formal credit may choose to join informal savings groups to finance the purchase of various types of property.

In Zimbabwe, one of the biggest benefits of savings clubs, according to local press, is that they protect members’ funds from neighbours, family and friends who may be prone to asking them for money.

Another reason behind the steady blossoming of informal savings clubs is the lack of trust among the common people in Zimbabwe’s formal banking sector.

“In Zimbabwe, there is a general lack of trust and confidence in formal banking institutions by a lot of people. And in any case, our economy is largely informal.

So most people in the informal sector don’t save money in formal banking institutions. They prefer to save using these informal banking systems,” Chitambara added.

A major reason for the lack of trust in the formal banking sector is Zimbabwe’s history with an unstable currency, says a post on the Bankers Association of Zimbabwe’s website, while also contending that confidence in the banking sector has been hampered by a number of bank failures. Since 2003, there have been at least nine failed banks in the African country.

Unlike formal banks, informal savings clubs give loans to members without them needing to put up collateral, making this preferable for many.

Moses Mavhaire, a Harare-based lawyer, however, warned savings clubs against giving out loans for interest, saying they are not legally mandated to do so.

He told Al Jazeera that he was aware loans given by these clubs benefitted many people supposedly ineligible for bank loans.

However, Mavhaire said, “There is no substitute for the law. You cannot substitute the law for convenience.”

The reality is that savings clubs, however lucrative they may sound in a troubled economy like Zimbabwe, lack legally binding documents and the daily business is done on the basis of "good faith," "verbal agreements" and "on WhatsApp".

There is a serious problem with this type of arrangement, Mavhaire said, explaining that fraud cases relating to mushrooming savings clubs are a nightmare to prosecute due to a lack of legally binding documents.

Arrangements by savings clubs should be documented in a contract or trust agreement with clear rights and obligations of parties, he concluded.

International Finance | Nov - Dec 2024 | 49

BANKING AND FINANCE

INSIGHT SWITZERLAND

TAX HAVEN CORPORATE TAX

Switzerland:

A tax haven for the ultra-wealthy

50 | Nov - Dec 2024 | International Finance

INSIGHT SWITZERLAND

Corporate tax rates in Switzerland are highly competitive, offering numerous advantages for multinational companies IF CORRESPONDENT

S

witzerland has long been known for its financial privacy and wealth. Its tax system, though complex, draws businesses, wealthy individuals, and expatriates from around the world. Known as a tax haven, Switzerland offers low tax rates, favourable regulations, privacy, and a stable economic environment.

This analysis explores why the Swiss tax system stands out and why it continues to attract global interest.

The Swiss tax system operates on three levels: federal, cantonal, and local. Switzerland's 26 cantons set tax rates, creating competition to attract businesses and residents.

Federal tax revenue comes mainly from corporate income, individual income, and value-added tax (VAT). Cantonal and municipal layers of taxation significantly impact the overall tax burden. Wealthy individuals and corporations can benefit by choosing cantons with favourable rates.

Individual tax rates in Switzerland are relatively low compared to many countries, especially for high earners.

The tax burden includes federal, cantonal, and local contributions, varying based on where one lives. Federal income tax is progressive, with a top rate of 11.5%. When combined with cantonal taxes, total income tax ranges from 20% to 45%, depending on the canton.

Wealth tax, rare in other countries, is common here. It applies to worldwide assets, such as property, investments, and savings, and is determined by cantonal and municipal authorities. There is no federal capital gains tax except

for property in some cases, and inheritance and gift taxes are also managed at the cantonal level. Most cantons exempt direct descendants, making Switzerland appealing for wealthy families to pass on assets.

Corporate taxes and lumpsum taxation Corporate tax rates in Switzerland are highly competitive, offering numerous advantages for multinational companies. Corporate taxes are levied at the federal, cantonal, and local levels. The federal rate is a flat 8.5%, and when combined with local taxes, the effective rate ranges from 11% to 21%, much lower than in many other European countries.

Swiss tax regulations provide significant benefits to holding companies, which in some cantons are exempt from cantonal taxes altogether. Companies can negotiate tax rulings with cantonal authorities to gain certainty on their tax liabilities before making significant investments. Switzerland's extensive network of tax treaties also helps avoid double taxation, making it an attractive base for international businesses.

Switzerland also offers lumpsum taxation (forfait fiscal) for wealthy individuals who move International Finance | Nov - Dec 2024 | 51

Switzerland's GDP in current prices from 2014 to 2023

Ratio of government expenditure to GDP of Switzerland from 2014 to 2023

Switzerland's national taxation rate from 2014 to 2023

2014

2019

2014

2019

2014

2019

2015

2020

2015

2020

2015

2020

2016

2021

2016

2021

2016

2021

2017

2022

2017

2022

2017

2022

2018

2023

2018

2023

2018

2023

756.33 836.37 936.62

976.42 828.55 886.92 947.32

to the country but do not work there.

Under this scheme, taxes are based on expenses, often calculated as a multiple of the rental value of their property, rather than on global income. This option appeals to retirees, celebrities, and the ultra-wealthy who want to live in Switzerland while benefiting from relatively low taxes. Although some cantons have abolished this scheme, it remains attractive in others.

In response to global pressure, Switzerland has adjusted its corporate tax policies. The OECD and G20 have pushed for a minimum corporate tax rate of 15% for large multinationals. Switzerland plans to comply by amending its constitution, though the new rule will only affect the largest corporations.

Cantons will introduce supplementary taxes to meet these requirements.

Despite these changes, most businesses in Switzerland will remain unaffected, and the country will retain its competitive edge.

Switzerland has many tax treaties 52 | Nov - Dec 2024 | International Finance

41.37% 45.22%

32.66% 72.88%

41.89% 52.86%

32.58% 88.52% 46.22% 89.21% 51.43% 90.29% 63.59% 91.68%

with other countries, especially with the European Union (EU) and the United States, aimed at reducing double taxation and facilitating cross-border business. It is also a signatory to the Foreign Account Tax Compliance Act (FATCA) and the Automatic Exchange of Information (AEOI), reflecting its commitment to transparency. These agreements have reduced privacy for account holders but have helped maintain Switzerland's status as a credible financial centre.

Cantonal competition remains key to Switzerland's tax system. Each canton sets its tax rates, leading to significant variation. Cantons like Zug, Schwyz, and Nidwalden have low rates that attract corporations and wealthy individuals.

Zug, often called "Crypto Valley," draws blockchain companies with its favourable tax policies and business-friendly environment.

Privacy, VAT, and political stability Banking secrecy has been a major attraction for the wealthy in Switzerland.

(In Percentage) Source: Statista

733.45

956.38 (In Percentage) Source: Statista

721.16 (In Billion US Dollars) Source: Statista

TAX HAVEN CORPORATE TAX

INSIGHT SWITZERLAND

BANKING AND FINANCE

42.65% 55.26% 42.53% 56.87% 43.76% 59.22%

Swiss banks were famous for strict confidentiality, backed by the Banking Law of 1934, which made it illegal to disclose client information.

However, after the 2008 financial crisis, Switzerland faced international pressure and signed agreements like FATCA, effectively ending its banking secrecy.

Banks must now share account information with tax authorities, reducing Switzerland's appeal as a haven for undisclosed wealth.

This secrecy also attracted criminal elements. During World War II, Swiss banks held assets for members of the Nazi regime, allowing them to discreetly store wealth. This association with illicit funds continued into the 20th century, as organised crime and corrupt individuals used Swiss accounts to hide money.

Notable corrupt politicians accused of holding Swiss accounts include Ferdinand Marcos of the Philippines, Sani Abacha of Nigeria, and Mobutu Sese Seko of Zaire. Strict secrecy laws

INSIGHT SWITZERLAND

Revenue of the business software market in Switzerland from 2014 to 2023

2018

2021

2014

2019

2019

2022

2015

2020

2020

2023

2016

2021

2017

2022

2018

2023

1.35% 1.42% 2.55%

3,563

-3.02 4.28% 5.01%

made Switzerland a haven not only for the wealthy but also for those wanting to evade the law.

Swiss VAT is low compared to other European nations. The standard rate is 7.7%, with reduced rates for essentials like food and medicine. This low VAT helps attract consumers and businesses.

Switzerland's political stability and neutrality also make it appealing as a haven for wealth.

The country's regulatory environment is predictable, which benefits long-term financial planning. Its well-developed wealth management sector offers expertise for those looking to secure and grow their assets. Favourable tax laws, combined with political and economic stability, make Switzerland one of the world's leading wealth management hubs.

Challenges and future prospects The OECD's Base Erosion and Profit Shifting (BEPS) framework and the global minimum tax rate have forced

(In Million US Dollars) Source: Statista

(In Percentage) Source: Statista

Switzerland's budget balance in relation from 2018 to 2023

4,746 4,732 5,372 5,383

6,237 7,369 7,988 9,328 9,112

Switzerland to adapt. Some cantons have abolished lumpsum taxes for the wealthy, and public sentiment is shifting towards fairness. Switzerland has re-formed its tax policies to align with global standards while trying to stay competitive.

At the same time, Switzerland explores loopholes and strategies to bypass these regulations. Cantonal tax incentives are often structured in creative ways to ensure benefits for corporations while formally complying with international rules. Such tactics include negotiating special tax deals or exploiting legal ambiguities to minimise the impact of stricter tax rules, thus retaining its appeal to multinationals.

Switzerland remains a prominent financial hub, but its status as a tax haven is less certain as international standards change, focusing more on fairness and transparency. Furthermore, Switzerland faces stiff competition from other tax havens like Singapore, Luxembourg, and the Cayman Islands. Singapore offers competitive rates, with a top

marginal personal income tax rate of 22% and a corporate rate of 17%, along with strong financial infrastructure and confidentiality.

Luxembourg, known for its flexible tax regime, has a corporate income tax rate of 15% to 24.94% and is ranked 6th in the Financial Secrecy Index of 2022.

The Cayman Islands, with zero corporate tax and no direct taxes on individuals, ranked third on the index and continues to attract significant capital. The United States came first, mainly due to its vast financial services industry and secrecy laws that allow for substantial anonymity. Switzerland ranked second, facing intense competition from other jurisdictions. These countries offer secrecy and low tax rates, making them attractive alternatives for businesses and high-net-worth individuals.

International Finance | Nov - Dec 2024 | 53

BANKING & FINANCE

INTERVIEW

MONEX CANADA CEO ANIL SAWRUP

Monex Canada leverages advanced technology to provide a seamless, secure, and efficient experience for our clients through our online platform

'Monex Canada provides highest level of security' CL RAMAKRISHNAN Anil Sawrup is the Chief Executive Officer of Monex Canada, bringing over two decades of experience in financial services. A dynamic leader with a proven track record, Sawrup has successfully driven organisational growth and transformation throughout his career.

Prior to his role at Monex Canada, he held senior leadership positions at top financial institutions, including Cambridge Global Payments, where he served as Senior Vice President, Managing Director, and Chief Commercial Officer. There, he led strategic initiatives that significantly expanded the company’s regional footprint and positioned it for rapid growth.

Most recently, Sawrup was Head of Sales (Americas) at Moneycorp, where he reshaped the company's sales operations and optimised market strategies across North America. Known for his growth-focused approach and expertise in competitive market dynamics, Sawrup continues to lead Monex Canada with a vision for innovation, efficiency, and expanding the company's market presence in the financial sector.

In an interview with International Finance, Anil Sawrup, the Chief Executive Officer of Monex Canada, discusses the company's financial strength and governance. He also elaborates on the FX solutions available, the security measures in place to protect client data, and various other topics.

How does Monex Canada differentiate itself from other companies in the commercial foreign exchange market?

At Monex Canada, we set ourselves apart through a combination of clientcentric service, advanced technology, and a deep understanding of market trends. While some of our competitors may rely solely on automated solutions, we pride ourselves on offering a more hands-on approach, offering our clients tailored advice from experienced currency specialists, ensuring our clients not only receive the best rates but also strategic insights to help mitigate risk. What also makes us unique is our global reach, supported by our parent company, 54 | Nov - Dec 2024 | International Finance

MONEX CANADA CEO ANIL SAWRUP

Each client has unique needs that revolve around mitigating foreign exchange risk and improving their overall financial efficiency Monex Group, which allows us to leverage a vast network and liquidity, providing competitive pricing and enhanced execution capabilities. Furthermore, our commitment to transparency and innovative solutions, such as our proprietary risk management tools and currency hedging products, positions us as a trusted partner for businesses navigating the complexities of international payments and currency fluctuations.

What types of clients does Monex Canada typically serve, and what unique needs do they have?

We work with a diverse range of clients, from large corporations and financial institutions to private equity firms and growing SMEs, across industries like manufacturing, import/export, retail, and professional services. Each client has unique needs that revolve around mitigating foreign exchange risk and improving their overall financial efficiency.

Take importers and exporters, for example; they require precise timing and cost certainty in their international

transactions to protect their margins from fluctuating exchange rates. Financial institutions depend on us for liquidity and seamless execution to hedge their portfolio risks. Then some SMEs often lack the resources of larger firms, so we provide the flexible solutions and personalised support they need to navigate the complexities of currency markets.

How does the financial strength and governance of the Monex group impact its operations and client offerings?

The financial strength and governance of the Monex Group provide a strong foundation for Monex Canada's operations and greatly enhance our client offerings.

Being part of one of the largest international FX specialists means we greatly benefit from robust financial backing and global liquidity. This allows us to offer highly competitive pricing across the board, even for large and complex transactions. But it's not just about rates for our clients - It's the confidence in knowing they're working with a partner that's stable and reliable, particularly during periods of market volatility.

International Finance | Nov - Dec 2024 | 55

BANKING & FINANCE

INTERVIEW

MONEX CANADA CEO ANIL SAWRUP

Here at Monex Canada, we offer a wide range of FX solutions tailored to meet businesses' unique needs and help them navigate and mitigate currency risk in today's volatile markets

Not only that, but Monex Group's governance standards, driven by a global framework of regulatory compliance, risk management, and operational excellence, ensure that Monex Canada operates with the highest levels of transparency, security, and accountability.

Our commitment to governance not only protects our clients but also enables us to provide forward-thinking, compliant solutions in an ever-evolving regulatory landscape. Ultimately, the strength and governance of Monex Group empower us to deliver best-in-class services, supporting businesses in confidently achieving their international growth objectives.

Can you explain the various FX solutions Monex Canada provides and how they help mitigate currency risk for businesses?

Here at Monex Canada, we offer a wide range of FX solutions tailored to meet businesses' unique needs and help them navigate and mitigate currency risk in today's volatile markets. Our core solutions include spot transactions, forward contracts, and currency options.

For businesses needing to settle immediate payments, we offer spot transactions with competitive pricing and fast execution to ensure clients can manage their day-to-day foreign exchange needs seamlessly.

We also offer forward contracts, which allow businesses to lock in exchange rates for future transactions, enabling them to hedge against currency fluctuations.

By fixing rates in advance, companies can safeguard their margins and protect themselves from adverse currency movements that could impact profitability.

For clients looking for flexibility, we provide 56 | Nov - Dec 2024 | International Finance

currency options that allow businesses to protect against downside risks while still benefiting from favourable rate movements. This is especially valuable for companies that operate in highly volatile markets.

To address these needs, our experts at Monex Canada provide our clients with customised currency risk management strategies, competitive exchange rates, and innovative payment solutions that allow businesses to operate globally confidently, reducing volatility and safeguarding profitability.

What are the process and benefits of using FX forward contracts for businesses?

First, we discuss the currency pair, the amount, and the future settlement date for the forward contract.

This locks in the exchange rate for a specific date or over a range of future dates.

Then, the exchange rate is fixed for the future transaction. This means the business knows the exact amount they will pay or receive in their local currency, regardless of market fluctuations.

When the contract reaches its maturity date, we deliver the agreed-upon currency at the previously agreed rate, completing the transaction. This gives the business financial certainty and protects it from market volatility.

From a benefits perspective, businesses are protected from unfavourable currency movements, helping them avoid unexpected costs and preserve their margins, especially when dealing with large, cross-border transactions or long-term international contracts. By locking in exchange rates, companies can accurately forecast their cash flows and budget for future expenses or revenues without worrying about currency fluctuations.

How do market orders, limit orders, and stoploss orders work, and what advantages do they offer?

A market order executes a currency transaction immediately at the current market price, ensuring quick completion. This is ideal for time-sensitive payments or when clients want to secure the current rate without delay.

A limit order allows clients to set a target exchange rate for buying or selling. The order is only executed when the market reaches the

MONEX CANADA CEO ANIL SAWRUP

specified rate, helping businesses maximise profits or savings without constant monitoring. This is particularly useful in volatile markets or when timing is not critical.

A stop-loss order protects against unfavourable market shifts by setting a minimum exchange rate. If the market drops to or below this level, the order triggers, preventing further losses. This tool provides a safety net in uncertain environments while still allowing clients to benefit from positive movements.

These tools help businesses manage currency risk effectively by automating transactions based on predefined conditions, reducing the need for active market monitoring. With better control and flexibility, clients can focus on core activities, take advantage of optimal exchange rates, and improve financial performance in international markets.

How does Monex Canada utilise technology to enhance its FX services, particularly in the context of its online platform and Monex Pay? Monex Canada leverages advanced technology to provide a seamless, secure, and efficient experience for our clients through our online platform. Our online platform is built with tools that simplify

every step of the process—from analysing market trends to executing transactions and managing risks.

Through our online platform, clients have access to live exchange rates and up-to-the-minute market insights, enabling them to make informed decisions quickly. This is especially valuable for businesses managing multiple currencies or operating in volatile markets.

Our platform also allows clients to schedule and automate payments, ensuring they meet their crossborder obligations on time. Clients can manage their transactions effortlessly, whether it's a single payment or batch processing.

Through our platform, clients can set up market orders, limit orders, and stop-loss orders to automatically execute transactions based on predetermined criteria. This automation allows businesses to capitalise on favourable exchange rates and protect themselves from market volatility without constant oversight.

Our clients can access detailed reports and transaction history, giving them better visibility and control over their FX activities. The reporting tools also help businesses with financial planning, forecasting, and compliance requirements.

International Finance | Nov - Dec 2024 | 57

BANKING & FINANCE

INTERVIEW

MONEX CANADA CEO ANIL SAWRUP

Our Application Programming Interface features built-in security measures like secure token-based authentication and encrypted communication channels, while our online platform incorporates session management, encrypted logins, and timed logouts to protect client accounts

What kind of support does Monex Canada provide to clients using the Monex API for their payment processes?

We are dedicated to ensuring our clients have everything needed for seamless API integration and usage in their payment processes. Each client is assigned a dedicated team to assist from initial consultation to testing and deployment. We provide detailed technical documentation outlining connection, authentication, and various payment

58 | Nov - Dec 2024 | International Finance

functions, guiding clients every step of the way.

Scalability is a priority, as we recognise that different businesses have unique and evolving needs. Our team customises API functionality based on specific requirements, such as currency pairs and payment methods, while ensuring our APIs can handle increasing transaction volumes without infrastructure concerns.

For technical support, our team is available for troubleshooting, updates, and optimisation.

We proactively monitor API performance and provide notifications and resolutions for any issues to minimise downtime. Our APIs adhere to the highest security standards, including data encryption and secure authentication, to protect client transactions and sensitive information.

Lastly, we actively listen to client feedback and stay updated on industry trends to ensure our API solutions remain current. We regularly release updates to enhance functionality, equipping

MONEX CANADA CEO ANIL SAWRUP

our clients with the latest tools to thrive in today’s dynamic financial landscape.

How does Monex Canada ensure the security of sensitive data and payment instructions for its clients?

Security is non-negotiable for us. We take a multilayered approach to protect our clients' information throughout the transaction process. Our commitment begins with end-to-end encryption, ensuring that all data transmitted between clients and Monex Canada is securely protected. This means sensitive information, such as payment instructions, is rendered unreadable while in transit.

We also safeguard client data stored within our systems through at-rest encryption, preventing unauthorised access. To enhance security further, we implement multi-factor authentication (MFA) for all users accessing our online platform, requiring both a password and a second verification method.

Access to sensitive information is restricted based on user roles, limiting exposure to only those individuals authorised to handle it. Our APIs feature built-in security measures like secure token-based authentication and encrypted communication channels, while our online platform incorporates session management, encrypted logins, and timed logouts to protect client accounts.

We adhere to strict global standards, including GDPR and AML regulations, to ensure the secure handling of client data. Continuous system monitoring and advanced threat intelligence tools allow us to detect and respond to potential threats in real-time. By implementing these stringent measures, we build trust and deliver reliable services to our clients at Monex Canada.

How does the team at Monex Canada stay updated on regulatory changes that affect its operations and client offerings?

Our team also ensures that the API adheres to the highest security standards, including data encryption and secure authentication, to protect client transactions and sensitive information.

Finally, we listen carefully to the feedback of our clients and stay on top of industry trends to

ensure our API solutions are always up-to-date. We regularly release updates to enhance functionality and ensure our clients are equipped with the latest tools to stay ahead in today's rapidly changing financial landscape.

What innovations or improvements do you foresee for Monex Canada in the coming years, especially in relation to FX solutions and technology?

We are continually innovating to stay ahead of market trends and provide enhanced solutions that meet the evolving needs of our clients. We foresee critical growth areas in technology integration, client experience, and expanded FX solutions.

For example, we are investing in our digital platform to offer advanced, automated tools for managing FX needs, such as AI-powered forecasting tools for accurate market predictions and automated hedging strategies that optimise currency risk management in real time. We also plan to introduce smart contracts via blockchain technology for transparent and secure crossborder transactions, reducing settlement times and operational risk.

Our enhanced API offerings will enable clients to seamlessly integrate these FX solutions into their systems, featuring flexible payment options, multi-currency account integration, and improved reporting capabilities. This will automate payment workflows and real-time risk management, simplifying strategy adjustments as market conditions change.

Recognising the unique challenges SMEs and businesses in emerging markets face, we are developing cost-effective tools, including low-cost micro-hedging products for smaller businesses to protect against currency volatility without large contracts.

Finally, we are building strategic partnerships with fintechs, banks, and payment processors globally, expanding our payment networks for faster cross-border transfers and localised FX solutions tailored to specific regions and industries.

International Finance | Nov - Dec 2024 | 59

OPINION

THOUGHT LEADERSHIP

FX PROFESSIONALS FOREIGN EXCHANGE

ASHLEY GROVES DEAGLO CEO

For FX professionals, the AI tools are gamechangers, helping them anticipate how shifts impact positions, reduce risks, and refine strategies with precision

Revolutionising FX Strategies with AI

The world of foreign exchange (FX) and risk management is changing - and fast. With the rise of technologies like artificial intelligence (AI), machine learning (ML), and large language models (LLMs), FX professionals are beginning to rethink their approaches to trading and risk management. These advancements can facilitate deeper insights, more accurate forecasts, and improved portfolio management strategies, helping professionals navigate an increasingly competitive market.

If you’ve been wondering how AI is shaping the future of finance, let’s dive right in.

Forecasting the future: Predictive modelling and AI Predictive modelling, powered by AI and ML, leverages massive data to identify what’s meaningful—like forecast trends, correlations, and anomalies in currency markets.

By analysing historical and real-time data, AI-driven models uncover patterns previously too complex for traditional methods. This allows FX professionals to anticipate market shifts, helping clients mitigate risk and optimise strategies. No one has a crystal ball, but this is the next best thing—backed by science.

For FX professionals, these AI tools are gamechangers, helping them anticipate how shifts impact positions, reduce risks, and refine strategies with precision.

When markets get unpredictable, AI helps traders respond faster and smarter, giving them 60 | Nov - Dec 2024 | International Finance

the competitive edge to protect clients and capture opportunities.

LLMs: The key to smarter currency market analysis Think of large language models (LLMs) as a specialised branch of AI—while AI covers a wide range of tasks, LLMs focus specifically on understanding and generating human language. LLMs are extremely helpful for FX professionals because they process and analyse complex, language-based data such as financial news, policy announcements, and central bank communications, all of which influence currency movements.

With LLMs, users can sift through large data sets to uncover trends impacting currency rates. By integrating these models into their risk workflows, they offer clients more nuanced guidance, staying ahead of market fluctuations and making decisions faster.

Enhancing transparency and efficiency in FX markets AI isn’t just about making predictions accurately and quickly - it also improves transparency and efficiency in both developed and emerging FX markets. streamlining operations and helping users deliver more value to their clients.

In emerging markets, where data is often fragmented and less structured, machine learning excels by processing these disparate datasets and

providing more reliable market visibility. This transparency builds trust and helps users manage trades and capital deployments more effectively, even in less predictable markets.

Deaglo’s AI Tools: Powering Capital deployment in emerging markets Deaglo’s AI-powered platform simplifies FX decisions by providing real-time analytics, making it easier to manage currency exposure and hedge risks, particularly in emerging markets like Brazil and South Africa where currency volatility and hedging costs create another layer of complexity. By utilising AIdriven analytics, investors can more accurately assess hedging opportunities and manage their currency exposure in more inventive ways.

Next-gen FX hedging and risk management The FX industry is experiencing significant advancements in hedging and risk management strategies, particularly with the adoption of automated processes and AI-driven risk assessments. Simulations are often used to stress-test portfolios and hedge strategies. The classic geometric Brownian motion model is the most widely used method for financial modelling. However, its simplifying assumptions, such as constant volatility and Markov properties, significantly limit its practical application. Alternatives like stochastic volatility and jump diffusion offer a more comprehensive assessment of hedge effectiveness.

What makes AI particularly powerful is its ability

to predict and hedge against macroeconomic and geopolitical events, improving response times to market disruptions. When the unexpected happens, FX professionals can react quickly with confidence, knowing their strategies are backed by real-time insights.

The future is now By leveraging AI, users can revolutionise the way they assess risk, make decisions, and build transparency.

With platforms like Deaglo leading the charge, FX professionals and investors are better equipped than ever to navigate both mature and emerging markets, deploy capital effectively, and minimise risk.

As AI continues to advance, the future of FX trading and hedging will undoubtedly see even more sophisticated and effective tools for managing currency exposure.

Ashley Groves is an expert in cross-border transactions with over 15 years of experience in the foreign exchange (FX) industry across Europe and North America. Recognising the need to simplify foreign exchange processes, he founded Deaglo to serve his extensive network of global investors. Ashley is often invited to speak on topics related to FX strategies, economic issues, and the use of artificial intelligence and machine learning to transform global investments. Previously, he served as a Director at AFEX, one of the world’s largest FX providers, for 10 years, where he led the East Coast region and successfully doubled revenues annually

International Finance | Nov - Dec 2024 | 61

BANKING AND FINANCE

ANALYSIS

AFRICA CURRENCY

The depreciation of currencies has forced foreign companies to rethink their African investments

Africa's currency crisis: A global problem IF CORRESPONDENT In September 2023, Nigeria was hopeful. Emirates Airlines agreed to resume direct flights to the country after an 11-month pause. The reason behind this break was a dire one: $85 million in revenues had been trapped in Nigeria due to a severe currency crisis. Emirates was not alone, Etihad Airlines also pulled out. Global carriers had a staggering $812 million stuck in Nigeria in late 2022, according to the International Air Transport Association.

This airline crisis was just the Across tip of the iceberg. The reality is that Africa, the Africa has become a hot zone currency of suffering for multinational crisis is corporations. The main culprit? spreading.

South Africa, Weak local currencies. These currencies made repatriating proNigeria, Egypt, Kenya, fits a nightmare. Assets held by local subsidiaries lost value. Unlike Ghana, Emirates, which chose to make Zambia, noise, most multinationals packed Ethiopia, up and left without much fuss. and Others, unable to leave entirely, have Zimbabwe are all facing scaled back their operations, hoping to minimise their losses. the brunt of it Irmgard Erasmus, a senior economist at Oxford Economics, said, "The high cost of doing business, bureaucratic red tape, and the looming risk of further currency devaluations have rendered operations in Africa unprofitable."

Across Africa, the currency crisis is spreading.

South Africa, Nigeria, Egypt, Kenya, Ghana, Zambia, Ethiopia, and Zimbabwe are all facing the brunt of it.

Egypt's pound, for example, has lost over two-thirds 62 | Nov - Dec 2024 | International Finance

of its value since early 2022. In 2023, Nigeria's naira was ranked among the worst-performing currencies globally, having depreciated by 49.4%.

Zimbabwe has fared no better. Its dollar has lost over 70% of its value on the official market since January 2024. Traders have abandoned it, favouring US dollars. In response, the Reserve Bank of Zimbabwe launched a new currency, the ZiG, backed by gold reserves and foreign currencies.

But for ordinary citizens, the shift has not brought immediate relief. Many are struggling with rising prices and diminishing purchasing power, with basic commodities slipping further out of reach.

Out of Africa The currency crisis has led to widespread suffering and sleepless nights for policymakers. For foreign companies, the impact has been devastating. Many have found it impossible to endure the economic pain. UK's financial conglomerate Atlas Mara cited currency volatility as a key factor in its 2021 decision to exit Africa, reporting a staggering $145 million decline in the dollar value of its assets due to depreciating local currencies.

Barclays Bank, Procter & Gamble, GlaxoSmithKline, Cadbury, Eveready, Bayer, Nestle, and Unilever have all exited or drastically scaled down operations. Although other factors have been involved, weak currencies were the common denominator.

Foreign investors in Africa's capital markets are also feeling the pain. The Johannesburg Stock Exchange saw $53 billion in foreign investment outflows over the past eight years. In 2023 alone,

equities worth $8.3 billion were dumped. In Kenya, the situation has been similar: foreign investors sold $17 million worth of stocks in the first quarter of 2024.

The biggest hit for investors is not just repatriation issues; it's the conversion loss when weak African currencies are exchanged for dollars or pounds.

Jonathan Munemo, an economics professor at Salisbury University, said, "The exits and outflows are a sign of how quickly foreign investors will flee when a cratering currency shakes their confidence."

The causes of this crisis are both internal and external. Structural imbalances within countries are coupled with pressures from the outside. Tight global funding conditions, geopolitical risks, and aggressive rate hikes by the United States Federal Reserve since March 2022 have all played a role. The result? The dollar soared, and African currencies dived. Many countries are stuck in a cycle of dependency, reliant on external borrowing to stay afloat, with each new loan increasing vulnerability.

Turning up the heat Global food and energy prices soared due to the war in Ukraine, adding more fuel to Africa's inflation fire.

High debt loads meant countries spent dwindling revenues on costly debt repayments. About 40% of

Africa's public debt is external, and over 60% is in US dollars. Countries like Kenya, burdened with an $82 billion public debt, have faced persistent deficits and shrinking reserves.

Between March 2022 and December 2023, the Kenyan shilling fell by 22% against the dollar. The decline only stopped after Kenya's government concluded a buyback operation on a maturing $2 billion Eurobond in early 2024.

The broader impact of these conditions has been devastating for ordinary citizens. Inflation has eroded purchasing power, with prices for staples like bread, cooking oil, and fuel surging across the continent. In Ghana, the inflation rate hit 54% in late 2023, and many households have had to make difficult choices: cutting back on meals, delaying healthcare, and even pulling children out of school to save money.

The depreciation of currencies has forced foreign companies to rethink their African investments.

Hasty actions by governments to stabilise domestic currencies have, in many cases, made things worse.

Risks associated with repatriation are acute, especially in countries with rigid forex regimes. Even in nations with flexible regimes, currency convertibility remains a thorny issue.

Desperation has driven many African governments to take extreme measures. Nigeria's President Bola Tinubu has pursued reform policies such as unifying International Finance | Nov - Dec 2024 | 63

BANKING AND FINANCE

ANALYSIS

AFRICA CURRENCY

Exchange rate of 10 weakest African currencies to US Dollar Sierra Leonean Leone

Burundian Franc

Malawian Kwacha

Guinean Franc

Congolese Franc

Angolan Kwanza

Malagasy Ariary

Tanzanian Shilling

Ugandan Shilling

Rwandan Franc

8,521.00 4,430.00 3,608.40

2,809.43 2,475.00

824.69

2,454.00 1,166.48

exchange rates and allowing market forces to determine the exchange rate. His government aims to raise $10 billion to boost foreign exchange liquidity. These reforms have also included subsidy removal and public sector cost-cutting, moves that have made life tougher for ordinary Nigerians in the short term but aim to restore economic balance in the future.

Egypt, too, has been forced to acknowledge that economic transformation requires painful sacrifices. The country adopted a flexible exchange rate to access an $8 billion IMF bailout. Moreover, it secured $35 billion from the UAE, $7 billion from the European Union, and $6 billion from the World Bank.

These funds eased Egypt's forex crunch and allowed the pound to float more freely. But the effects on the ground have been mixed; while foreign reserves have stabilised, the impact on inflation and the cost of living has been severe. Many Egyptians are finding it hard to afford necessities like bread and electricity.

Hard road ahead The efforts to fix structural issues, such as liquidity problems, market distortions, and a lack of transparency in forex markets, have 64 | Nov - Dec 2024 | International Finance

1,043.02

yielded mixed results. Nigeria's naira took a turn for the better in early 2024, becoming one of the world's best-performing currencies, rising 12% in April after a 14% rise in March, according to Goldman Sachs.

However, it's a hard road ahead.

Many African countries are willing to accept tough measures for longterm currency stability. Ethiopia, for instance, still clings to a rigid forex regime. As a result, foreign interest in Ethiopia's ambitious privatisation and liberalisation plans remains lukewarm.

The government has tried to incentivise investment, in September 2023, the National Bank of Ethiopia approved offshore accounts for strategic investors, making it easier for them to manage their funds and guaranteeing currency convertibility for dividends and loans.

Despite these initiatives, progress has been slow. Ethiopia's economy remains under pressure, and the reluctance to fully open up its forex market is holding back potential growth. Businesses continue to struggle with access to foreign currency, which has hindered imports of essential goods and stunted industrial activity.

Meanwhile, inflation in Ethiopia climbed to 30% by early 2024,

Source: Statista

21,021.70

driven by rising food prices and a depreciating birr.

The parallel forex market is thriving across Africa. In some countries, it's a lifeline, offering better rates than official exchanges.

While the black market may provide a crucial source of foreign exchange, it also undermines stability.

When restrictions are imposed to stabilise exchange rates, companies and individuals look for ways around them. This fuels black market activity.

That entanglement with the dollar, and other hard currencies, has caused tremendous suffering for Africa. This is why leaders, including Kenya's William Ruto, are calling for de-dollarisation and the development of local currency debt markets. There is a belief that advanced economies, in pursuit of stability, often ignore how their actions create havoc for developing nations. Borrowing in their currencies would shield African nations from volatile exchange rates and the impact of rising global interest rates. But this is easier said than done.

A lack of deep financial markets, political instability, and the sheer scale of existing foreigndenominated debt make dedollarisation a daunting task. Still, some

progress is being made. In 2024, Nigeria announced plans to issue more bonds in naira rather than in dollars, attempting to wean itself off foreign dependency. Ghana is also exploring options to tap into domestic capital markets to finance public projects.

The way forward To address this crisis, Africa will need support and must continue demonstrating the resilience it has always shown. Leaders must make tough decisions, often unpopular ones, to bring stability. Citizens must keep adapting, keep working, and keep believing that better times will come. And the rest of the world?

It must not look away. Africa's struggle is a shared challenge, one that demands a collective response.

International support must go beyond loans and aid. There is a need for technology transfer, capacity

building, and fairer trade practices that allow African economies to flourish. The international community must help create an environment where African nations can stand on their own, reduce their debt burden, and build resilient economies.

Africa's currencies may be shaky, but its spirit remains unbroken. It is this resilience that will ultimately prevail, because it always has. Within the hardship lies an opportunity for change, a chance for a more balanced and just global economy, where no nation is so vulnerable to another's economic whims.

These nations are now taking steps to boost regional trade and reduce dependency on foreign goods. The African Continental Free Trade Area (AfCFTA), launched in 2021, aims to create the largest free trade area in the world by connecting

over 1.3 billion people. This initiative could be a game-changer, reducing reliance on external markets and fostering intra-continental economic resilience.

However, for AfCFTA to fulfil its promise, political will and infrastructure development must align to remove trade barriers and streamline customs processes.

If successful, such initiatives could allow African economies to diversify, boosting manufacturing and value-added services that have long lagged. For now, Africa remains at a crossroads, one path leads to deeper crisis and greater dependency, while the other points toward sustainable development and self-sufficiency. The choice will depend on the decisions made by its leaders and the support provided by the global community.

International Finance | Nov - Dec 2024 | 65

Business Dossier - TEB AM

TEB AM redefines asset management with ESG focus TEB Asset Management recognises the increasing importance of ESG in the investment landscape and the integration of sustainability into its investment philosophy

E

stablished in 1999, TEB Asset Management (‘TEB AM’) has emerged as one of Turkey’s leading asset management companies.

The business’ main shareholder, TEB Group, operates as a joint venture with BNP Paribas. Among its primary areas of business, the venture takes care of affairs like managing mutual funds and pension funds, apart from handling discretionary portfolio managementrelated activities for high-net-worthindividuals (HNWIs) and institutional clients, and indulging in investment advisory tasks.

The synergy TEB Asset Management has with BNP Paribas Asset Management (‘BNPP AM’), one of Europe’s leading asset managers, has continued to accelerate its progress in becoming a strong local player, supported by a successful global partner, and by the end of 2023 assets under management had risen to $3.42 billion.

Yağız Oral CEO, TEB AM

66 | Nov - Dec 2024 | International Finance

“TEB AM has a strong focus on Environmental, Social and Governance (‘ESG’) principles within its investment strategies, including gender diversity, and in 2023 launched a women-firstthemed fund, focused on gender equality and equal representation in professional life,” the venture told the International Finance.

Alongside its focus on sustainability, TEB Asset Management has also launched a fund to address the social aspect of its commitment to ESG (Environmental, Social, and Governance), in collaboration with a local university, Bahçeşehir Üniversitesi.

According to TEB AM CEO Yağız Oral, the women-firstthemed fund aims to support economic and social development by strengthening gender equality and equal representation in professional life.

“We aspire to transform the investment ecosystem towards the goal of equality & inclusion by encouraging companies to contribute to a holistic framework of social development. We believe investing in a mutual fund that prioritises gender equality can promote diversity and fairness in corporate leadership, ultimately leading to better financial performance and societal

progress,” CEO Yağız Oral told International Finance.

TEB Asset Management also launched a sustainability fund of funds in 2021. This was one of a number of thematic funds launched during the past three years to meet investor needs as the mutual fund landscape evolves.

Themes include the metaverse and digital technology, agriculture and food technology, healthcare and biotechnology and precious metals.

“We continuously search for new ideas to keep up with the changing world and we keep a close eye on investor needs. One of the most important points that differentiates us from our peers is the strength of our relationship with BNPP AM’s global teams, meaning that we can take advantage of them, enabling us to invest in a wide range of products globally. Our rigorous investment approach combines international standards with in-house research, local expertise, and global cooperation and risk procedures," CEO Yağız Oral added.

Overall, TEB Asset Management recognises the increasing importance of ESG in the investment landscape and the integration of sustainability into its

investment philosophy. By doing so, the venture has been able to provide investors with the solutions they need to achieve their financial goals while prioritising their values and beliefs.

“By incorporating ESG principles into our investment strategies, we aim to meet the growing demand for sustainable investing options and create long-term value for our clients. As the asset management sector continues to evolve, we remain committed to meeting the changing needs of investors and ensuring that our clients can invest with confidence in a rapidly transforming world.” CEO Yağız Oral concluded.

International Finance | Nov - Dec 2024 | 67

ECONOMY

ANALYSIS

RECESSION ECONOMY

The Federal Reserve has historically lowered the Fed funds rate to near zero to inject easy money into the economy during recessions

Recession signs: Are they just false alarms?

IF CORRESPONDENT

Recession signs that were formerly considered reliable are starting to resemble smoke detectors with dead batteries, complaining nonstop but maybe not warning of a serious threat, according to some of the world's leading economists.

The prognosis for a recession has been erratic recently, with worries peaking early and subsiding as contradictory Federal assessments on the state of the Reserve American economy emerged.

Chairman Jerome Powell Some economists are comfortable disregarding the inverted yield recently curve and the Sahm Rule, two stated that classic instruments for predicting the moment recessions, amid this whiplash. had come Since the COVID-19 outbreak for policy to began to recede, economists have change, as speculated whether the US economy the labour would experience a recession. As the market was economy expanded and prices rose quickly in 2021, their arguments cooling and gained traction. A significant inflation economic downturn usually follows remained a period of rising inflation. low Since then, inflation has decreased to levels similar to those before the pandemic, although a recession is still a possibility. Economists find some of their traditional instruments less helpful as they venture into uncharted territory because the current economic conditions differ greatly from previous recessions.

68 | Nov - Dec 2024 | International Finance

A jittery bond market The bond market is the most consistent source of recession worry. The yield on two-year Treasury bonds has been greater than the yield on 10-year Treasury bonds since July 2022. In a healthy economy, longer-term securities typically have higher yields than short-term ones, not the other way around. The yield curve inverts when investors anticipate a recession.

Bond dealers are anticipating a recession and accept lower yields on longer-term debt. One is that they believe the Federal Reserve, which frequently lowers interest rates during recessions, will eventually reduce its benchmark interest rate.

Lower Fed rates are imminent. Fed Chair Jerome Powell recently stated that the moment had come for policy to change, as the labour market was cooling and inflation remained low.

The Fed has gradually raised its significant Fed funds rate from near zero since March 2022.

To discourage borrowing and spending, slow the economy, and stop runaway inflation, this has increased the cost of borrowing for credit cards, mortgages, auto loans, and other debt. The Fed raised interest rates to their highest level since 2001 in July 2023, and they have remained at that level ever since.

Since then, inflation has decreased almost to what it was before the COVID-19 pandemic. It would be historically unusual if inflation dropped to the Fed's target 2% yearly rate without causing an economic meltdown. A recession typically follows a Fed rate

hike aimed at curbing inflation.

Nevertheless, it's plausible that bond investors are bracing for a "soft landing" instead of a recession.

CIBC analyst Avery Shenfeld commented, "Investors, as a group, aren't buying into the US recession thesis at this point."

Rather, he believes that the market's actions align with the idea that rates are down due to the defeat of inflation and that a relaxation of policy would prevent a complete economic collapse.

By September 2025, the Fed funds rate is expected to be in the range of 3% to 3.5%, according to the CME Group's FedWatch programme, which predicts changes in the Fed rate based on Fed funds futures trade data. The Federal Reserve has historically lowered the Fed funds rate to near zero to inject easy money into the economy during recessions.

Enters the Sahm Rule The Sahm Rule, which bears the name of its author, economist Claudia Sahm, is another formerly trustworthy indicator.

The rule is predicated on the finding that previous recessions have been preceded by a specific spike in the unemployment rate that rapidly spirals out of control and results in a mass loss of jobs. The

Department of Labour released a report in August 2024 that indicated the unemployment rate had increased to the point where the Sahm Rule took effect.

This is bad news for the economy because, over the past 50 years, the Sahm Rule has proven to be accurate when applied to recessions. However, several economists, including Sahm herself, doubt that there has been a real economic slowdown.

“Contrary to the historical signal from the Sahm Rule, we are not currently in a recession, but the trend is moving in that direction. There is significant room to cut interest rates, and a recession is not inevitable,” Sahm told CNBC. During previous recessions, firms laid off employees, which increased the unemployment rate.

This time, more people are looking for work, which has contributed to an increase in the unemployment rate, which simply indicates the number of job seekers without employment. Storms in July may also have caused a brief increase in it.

When he lowered his prediction for the recession to 20% at some point in the upcoming year from 25% earlier this week, Goldman Sachs chief economist Jan Hatzius rejected the applicability of the Sahm Rule to the current circumstances. He pointed out that International Finance | Nov - Dec 2024 | 69

ECONOMY

ANALYSIS

RECESSION ECONOMY

countries like Canada have recently had notable increases in their jobless rates without experiencing the total collapse of their economies.

Might there be a fire?

According to economist Richard M. Salsman of the libertarian think tank American Institute for Economic Research, the ongoing yield curve signal and the Sahm Rule's recent warning should be taken seriously.

In a week-long commentary, Salsman said, "The two measurements together are significant and informative. We receive two signals: one indicates that a recession is approaching, and the other suggests it will occur within the next 12 to 18 months. The knocks on doors are growing louder and more forceful.

There is something in the world."

Financial markets closely monitor every new report for indications that either side is correct. Early in August 2024, the S&P 500 stock 70 | Nov - Dec 2024 | International Finance

index experienced a significant decline as several indicators suggested the economy slowed down. In the following weeks, the market rose as inflation and retail sales data reduced the likelihood of a recession.

As long as the outlook for a recession remains uncertain, this whiplash could persist. More unexpected developments may occur before interest rates stabilise at a new normal. The Fed's high interest rates have already had wide-ranging effects, including fuelling an unexpected wave of bank failures last year.

While some economists, such as Salsman, urge caution, interpreting these signals as signs of an impending downturn, others remain optimistic that inflation control efforts and potential interest rate cuts will prevent a major economic collapse. The financial markets, reflecting this uncertainty, have experienced fluctuations as data

points like inflation and retail sales bring hope of stability.

Furthermore, the current economic climate has prompted some analysts to consider alternative indicators that might provide a clearer picture of what lies ahead.

For instance, consumer confidence indexes and business investment trends are closely watched as potential harbingers of economic health.

Recent data shows that consumer spending has remained robust, buoyed by a strong labour market and wage growth. This resilience in consumer behaviour suggests that households still have the financial capacity and willingness to spend, which could help sustain economic growth despite other warning signs.

Additionally, the housing market offers mixed insights. While higher interest rates have cooled housing demand to some extent, leading to a slowdown in new construction and sales, housing prices in many

Projected monthly probability of a recession in the United States from January 2024 to December 2024 (In Percentage) January

March

May

July

September

November

February

April

June

August

October

December

57.13% 57.77% 70.85% 66.01% 56.16% 51.84% 54.49% 68.22% 67.31% 60.83% 46.11% 62.94% Source: Statista

regions remain elevated due to limited supply. This indicates that the market is adjusting rather than collapsing, which differs from patterns observed in previous recessions where housing market downturns significantly contributed to economic declines.

Another factor to consider is the role of technological innovation and its impact on productivity. Sectors like artificial intelligence (AI), renewable energy, and biotechnology may drive new waves of economic growth. Innovations in these fields may offset negative economic forces by creating new industries and job opportunities, thereby supporting overall economic stability.

Global economic conditions also add layers of complexity to the US outlook. Supply chain disruptions have eased (barring the aviation sector) compared to the peak COVID period, but geopolitical tensions, such as trade disputes and conflicts, continue to pose risks.

The interconnected nature of global markets means that economic slowdowns in major economies like China or the European Union could have ripple effects on the American economy. Conversely, coordinated international efforts to stimulate growth could provide a supportive backdrop for the world’s largest economy.

Labour market dynamics further complicate the picture. The

unemployment rate has risen modestly, but job openings remain plentiful, and employers report difficulties filling positions. This suggests that the labour market is experiencing a rebalancing rather than a contraction. Structural shifts, such as increased remote work and changing worker preferences, may be influencing employment patterns in ways that traditional indicators do not fully capture.

As the debate intensifies, it becomes clear that the US economy is in an unprecedented situation. The post-pandemic recovery has shifted the dynamics, making some of the most trusted recession indicators less effective in predicting the current economic trajectory. Analysts and policymakers are caught between traditional economic wisdom and a new reality where factors like high inflation, fluctuating unemployment rates, and global economic conditions defy expectations.

The Federal Reserve's cautious approach to adjusting interest rates, alongside mixed signals from the bond market and employment reports, has left economists divided on whether a recession is imminent or if the economy can manage a "soft landing."

Financial institutions are also better capitalised compared to previous economic downturns, thanks in part to regulatory changes implemented after the 2008 financial

crisis. This improved financial stability reduces the likelihood of a banking crisis exacerbating any economic slowdown.

However, higher interest rates have increased borrowing costs, which could strain businesses and consumers with high levels of debt, potentially leading to increased default rates if economic conditions worsen.

In light of these multifaceted factors, some economists advocate for a more nuanced interpretation of the data. They suggest that while caution is warranted, the economy may be transitioning to a new equilibrium rather than heading toward a recession. This perspective emphasises the adaptability of the economy and the possibility that it can adjust to challenges without experiencing a significant downturn.

Ultimately, the path forward may depend on the agility of policymakers and the private sector in responding to emerging trends. Proactive measures, such as targeted fiscal stimulus, investments in infrastructure, and policies that support workforce development, could bolster economic resilience.

Collaboration between government, industry, and communities will be crucial in addressing both immediate concerns and long-term structural challenges.

International Finance | Nov - Dec 2024 | 71

ECONOMY

FEATURE MIDDLE EAST

OIL ENERGY

Volatile Middle East ripples through global markets The global inflationary impact of a Middle East conflict extends beyond energy prices

IF CORRESPONDENT

72 | Nov - Dec 2024 | International Finance

FEATURE MIDDLE EAST

T

he Middle East, often called the crossroads of civilisation, has long been a focal point for global attention, not just for its rich cultural and historical legacy but also for its profound impact on the world's economy.

When conflict flares up in this region, the ripples are felt far and wide, affecting everything from energy supplies to financial markets, food prices, and global trade.

International Finance | Nov - Dec 2024 | 73

ECONOMY

FEATURE MIDDLE EAST

The economic impact of ongoing conflicts in this volatile region cannot be understated, and as recent events unfold, it becomes crucial to analyse what it means for the interconnected global economy. The conflicts involving Israel, Palestine, Lebanon, and Iran have resulted in significant loss of life and economic damage.

Moreover, the escalating tensions have raised concerns about the potential onset of a broader global conflict, with some experts warning that the current situation could spark World War III if regional actors and global superpowers are drawn into confrontation.

Clash of geopolitical interests With Iran's ongoing proxy warfare, Israel's expanding occupation, and the involvement of Washington and Moscow in regional dynamics, the conditions are ripe for a scenario where a local conflict 74 | Nov - Dec 2024 | International Finance

OIL ENERGY

spirals into a full-scale global war. Such an outcome would have catastrophic economic consequences, plunging the world into recession and disrupting supply chains, global energy markets, and international trade.

The Israel-Palestine conflict has led to thousands of casualties. Lebanon, meanwhile, continues to struggle with economic collapse, worsened by clashes involving Hezbollah and Israel, which have caused hundreds of casualties and significant infrastructure damage.

The longstanding proxy conflict between Iran and Israel, on the other hand, has escalated into direct military confrontations, significantly altering the Middle Eastern geopolitical landscape.

The international community is closely monitoring the situation, apprehensive about the possibility of a wider regional war. This direct engagement underscores the fragility of Middle Eastern stability

and the potential for significant geopolitical shifts resulting from the IranIsrael confrontation.

These conflicts come at a time when fears of a global economic recession are heightened, exacerbated by the ongoing Russian-Ukrainian conflict, with Russia being one of the world's biggest oil producers. The combined pressure from disrupted energy supplies and heightened geopolitical risk creates a precarious situation for the global economy.

World’s reliance on Middle East The Middle East holds approximately 55.5% of the world's proven crude oil reserves, with countries like Saudi Arabia, Iran, Iraq, and the United Arab Emirates (UAE) playing key roles in oil production. Whenever tensions escalate in this region, oil prices immediately react as uncertainty around oil supply chains heightens.

FEATURE MIDDLE EAST

The most recent wave of conflict has already caused a sharp uptick in global oil prices. The mere possibility of disrupted supply, or even the fear of a blockade in strategic choke points such as the Strait of Hormuz, where nearly 21% of global oil passes, sends markets into a frenzy react not only to physical disruptions but also to the perception of future threats, leading to price volatility, leading to inflation and increased costs across industries.

Industries ranging from aviation to plastics and logistics are all affected by rising energy costs. This, in turn, can slow down economic growth, as higher inflation usually prompts central banks to raise interest rates, making borrowing more expensive for businesses and consumers alike.

The Middle East's geographic position is critical to global trade. The Suez Canal, for instance, is one of the world's most important waterways, linking Europe to Asia. Any conflict that poses a risk to the security of this passage immediately impacts global shipping, causing delays and raising insurance costs for vessels navigating through the region.

In times of heightened tension, the risks for commercial vessels increase substantially, often resulting in surging insurance premiums known as "war risk" insurance. These additional costs get passed on to consumers, driving up the cost of goods globally. The longer these tensions persist, the greater the likelihood of shipping companies rerouting or slowing down operations, both of which contribute to supply chain disruptions and can cause shortages of goods, from consumer electronics to essential commodities.

Conflicts often lead to the imposition of economic sanctions, not just by countries directly involved but also by global powers like the United States, the European Union, or the United Nations.

These sanctions can restrict trade, impact

foreign investment, and limit access to international financial systems for those countries involved.

For instance, sanctions on Iran's oil exports have historically caused significant shifts in the global oil market, reducing supply and causing price increases. Sanctions can also cause disruptions in the supply of other goods, such as petrochemicals, fertilisers, and metals, which are key exports from the region. As supply chains are disrupted, global industries dependent on these inputs, like agriculture, pharmaceuticals, and automotive manufacturing, feel the pressure.

The secondary impact of sanctions also reverberates across countries that have significant trade relationships with the sanctioned nations. For example, European firms, which have substantial investments in Middle Eastern energy projects, often find themselves caught in the middle, unable to engage in their ventures without risking penalties.

Investor sentiment, market volatility and inflation When war or conflict erupts, global stock markets often see heightened volatility, as investors flock toward safer assets like gold or American Treasury bonds.

In October 2023, for instance, the price of gold rose by nearly 7% following escalations in the Israel-Palestine conflict.

This movement of capital out of riskier markets can lead to temporary liquidity shortages and increased borrowing costs for businesses.

Emerging market economies, which are typically more vulnerable to shifts in investor sentiment, are particularly impacted. In 2023, emerging markets saw a collective capital outflow of $15 billion during heightened tensions in the Middle East, leading to currency depreciations and potential economic instability in these regions.

Investors tend to pull funds out of these markets and place them in "safe havens," such as US Treasury bonds.

The global interconnectedness of today's financial systems means that these effects aren't isolated, economic slowdowns in emerging markets can have a cascading impact on global trade and investment flows.

Additionally, countries within the Middle East that are engaged in or adjacent to conflict zones often experience capital flight, where both local and foreign investors pull out their money due to fears of instability. For instance, Lebanon experienced capital flight amounting to nearly $5 billion in 2022 amidst ongoing instability. This diminishes growth prospects in these nations and further deters future foreign direct investment (FDI), leading to a vicious cycle of economic stagnation.

The global inflationary impact of a Middle East conflict extends beyond energy prices. The region is also a significant exporter of petrochemicals, fertilisers, and key agricultural products, accounting for approximately 25% of global petrochemical exports and 20% of global fertiliser supply. Disruption in the supply of these commodities can lead to rising input costs for agriculture around the world, driving food prices up.

For many developing economies, where a significant portion of household income (often more than 50%) goes towards food, this can exacerbate poverty levels and create social unrest. Rising fuel prices, which have increased by over 20% in the last year alone, also increase transportation costs, which further drives food inflation, creating a squeeze on both producers and consumers. The domino effect of higher food prices often forces central banks around the world to adopt tighter monetary policies, potentially stalling economic growth and worsening income inequality.

International Finance | Nov - Dec 2024 | 75

ECONOMY

FEATURE MIDDLE EAST

OIL ENERGY

Share of consumers that earn at least the equivalent of the top 40% of global income earners worldwide in the Middle East as of 2024, by country (In Percentage) The wider impact The Israel-Palestine conflict has persisted for decades, and each resurgence brings with it a host of economic consequences.

Israel is a significant player in technology and defence exports, and its robust economy often stands in stark contrast to the Palestinian territories, which face chronic underdevelopment and resource constraints due to political and military tensions. When tensions escalate into open conflict, the implications for the global economy can be severe.

One major impact is on investor confidence. Israel, a technology hub often compared to Silicon Valley, attracts billions of dollars in foreign investment annually. In 2022 alone, Israel attracted over $22 billion in foreign direct investment. The Tel Aviv Stock Exchange can see significant fluctuations when conflicts flare up, leading to an outflow of capital and heightened risk premiums. For instance, during the May 2021 conflict, the Tel Aviv 35 Index fell by nearly 2.5%, demonstrating investor concerns. Additionally, Israel's advanced military capabilities are both a source of tension and economic burden, as resources are diverted to defence spending, which amounted to over 5.6% of its GDP in 2023.

The humanitarian situation in Gaza and the West Bank also directly affects international aid flows. As conflict intensifies, countries and international organisations funnel significant resources into humanitarian aid, which could otherwise be used for development projects elsewhere. This dynamic redirects financial resources, creating inefficiencies in global economic development initiatives and placing additional burdens on donor countries.

Lebanon's economic collapse is a critical facet of the broader Middle Eastern 76 | Nov - Dec 2024 | International Finance

SAUDI ARABIA

BAHRAIN

UAE

IRAQ

IRAN

LEBANON

QATAR

JORDAN

KUWAIT

YEMEN

100%

99.7% 76.5% 100% 98.3%

100% 69.8% 90.3% 56.4% 7.1%

OMAN

98.0% Source: Statista crisis, exacerbated by its involvement in regional conflicts, including the IsraelHezbollah tensions. Lebanon's financial system has been in a state of free fall for several years, with its currency losing over 90% of its value, unemployment surging, and banking restrictions preventing ordinary citizens from accessing their savings.

Lebanon's instability has a ripple effect across the region, particularly affecting Syria and the broader Levant area. Hezbollah, a powerful political and military force in Lebanon, receives backing from Iran, and its conflicts with Israel lead to frequent military engagements that disrupt stability not only locally but also in Israel's northern regions.

In recent years, there have been over 300 recorded skirmishes between Hezbollah and Israeli forces, leading

to dozens of casualties and significant damage to infrastructure in both Lebanon and northern Israel. These conflicts have impacted regional stability, contributing to widespread economic losses and infrastructure damage, including the destruction of residential buildings and energy facilities. Such disruptions often impact the wider energy markets, as the risk of conflict spilling over into neighbouring oil-rich countries raises the stakes for global energy supplies.

The inability of Lebanon to provide basic services has resulted in the mass emigration of its population, many seeking refuge in European countries.

The refugee crisis puts economic pressure on neighbouring countries like Jordan and Turkey, which have accepted over 1.4 million and 3.6 million refugees respectively, as well as European nations like Germany, which has taken in around 1.1 million refugees. These countries have to redirect financial resources to deal with the social and economic integration of refugees, placing significant strain on public services and infrastructure.

Iran is a significant player in the Middle East, both politically and economically. Its influence stretches across Iraq, Syria, Lebanon, and Yemen, making it a key stakeholder in regional stability. The long-standing sanctions imposed by the United States and its allies have significantly hindered Iran's economy, limiting its ability to export oil and access international financial markets. Iran's GDP has contracted by over 6% in certain years due to sanctions, and oil exports have fallen from 2.5 million barrels per day in 2017 to less than 500,000 barrels per day in recent years, resulting in an estimated financial loss of over $150 billion.

Despite sanctions, Iran continues to be a key regional player, and any

FEATURE MIDDLE EAST

conflict involving Iran has immediate consequences for global oil prices.

The Strait of Hormuz, through which approximately one-fifth of the world's oil supply passes, is a strategic chokepoint that Iran has threatened to block in times of heightened tension. In 2019, for example, Iran was accused of attacking oil tankers in the Strait, which led to a temporary spike in oil prices by 4%.

Additionally, in July 2021, Iran seized a tanker in the Strait, which again raised concerns over oil supply security and caused market jitters. Any disruption here could lead to an enormous spike in oil prices, affecting economies worldwide.

Countries that heavily rely on oil imports, such as China, India, and European nations, would feel immediate economic stress, potentially leading to increased inflation and stunted economic growth.

Iran's influence over proxy groups in Lebanon, Syria, Iraq, and Yemen adds a layer of unpredictability to the regional

dynamics. The country's support for Hezbollah and its presence in Syria has put it in confrontation with Israel. Such a conflict would not only devastate the region economically but would also disrupt global financial markets due to the uncertainty it would introduce.

A multi-front conflict could lead to a significant economic downturn, impacting various sectors worldwide.

For instance, the energy sector would face extreme volatility, with oil prices likely to spike due to potential supply disruptions from Iran and its allies targeting key infrastructure.

The risk to global shipping routes, particularly through the Suez Canal and the Strait of Hormuz, would severely disrupt global trade. Insurance costs for shipping through these areas would skyrocket, raising the prices of goods worldwide. The resulting supply chain disruptions could lead to shortages in essential goods and exacerbate the

inflationary pressures already being felt in many parts of the world.

Additionally, increased defence spending by regional powers and their allies would divert public funds away from crucial areas such as healthcare, education, and infrastructure development. For instance, the United States increased its defence budget by over $45 billion in 2023, largely attributed to rising commitments in the Middle East, while European allies have collectively raised their defence spending by approximately 10% over the last two years. This redirection of funds has led to reductions in public spending in areas like healthcare and education, exacerbating fiscal deficits and putting pressure on domestic economies.

Humanitarian costs would also rise, with millions likely displaced due to the conflict. This would necessitate large-scale international aid and assistance, putting additional strain on global humanitarian organisations and donor nations. The impact of these displacements would be felt globally, not only in terms of aid but also through increased refugee migration, which could exacerbate social and political tensions in host countries.

As the world watches the Middle East, the decisions made by global leaders, multinational corporations, and financial institutions will play a crucial role in determining whether we can navigate the turbulent waters of economic uncertainty or become swamped by the waves of conflict-induced challenges.

The key takeaway is that stability in the Middle East is not just a regional concern, it is a critical factor for the health and growth of the global economy, and world leaders must work collectively to prevent escalation and promote peace.

International Finance | Nov - Dec 2024 | 77

ECONOMY

ANALYSIS

CAMEROON FRANCE

France is Cameroon's leading trade partner, with trade between the two countries amounting to over 1.3 billion euros annually, according to France's Ministry of Foreign Affairs

Cameroon’s post-Biya future: Hope or chaos?

IF CORRESPONDENT

Cameroon stands at a crossroads. President Paul Biya, who has ruled since 1982, is 91 years old. He is the oldest leader in Africa, surpassed only by President Teodoro Obiang Nguema of Equatorial Guinea. For decades, Biya has held a tight grip on power. To most Cameroonians, 60% of whom are under 35, he is the only leader they have ever known.

Recently, rumours about Biya's Cameroon health have spread like wildfire, President prompting the government to ban any public discussion on the topic.

Paul Biya's This isn't new as whenever Biya antivanishes from public view, people corruption start talking. His most recent public drives are appearance, at Yaounde Airport often seen on October 21, ended weeks of as a tool speculation about his death.

The country depends on Biya's to silence presence rather than strong instirivals, not a real effort tutions, making succession a daunting task. Questions linger: Who to clean up will lead after Biya? How will his government departure affect a country that has known no one else? What happens to the millions struggling with poverty, corruption, and poor infrastructure?

Cameroon is rich in natural resources. It lies at a key crossroads between West and Central Africa, along the Atlantic coast. Yet more than half of Cameroonians live in poverty, and nearly 38% are severely impoverished. The country's wealth has 78 | Nov - Dec 2024 | International Finance

not translated into widespread prosperity.

This disparity is rooted in corruption and mismanagement. When Biya took power in 1982, he promised a "New Deal" to fight corruption. At first, his stance seemed genuine, and Cameroonians were hopeful. But by the early 1990s, Cameroon topped the world's corruption lists. Biya's promise of reform had become empty words.

Today, corruption is part of life. Transparency International ranks Cameroon 140th out of 180 countries for corruption. Biya's anti-corruption drives are often seen as a tool to silence rivals, not a real effort to clean up government. His ethnic group, the Beti people, hold many senior positions despite being a minority. This nepotism has fuelled resentment and division, breeding a kleptocratic state where few benefit at the cost of many.

Crisis and instability ruling the roost Cameroon became a federation in 1960, bringing together French-speaking and English-speaking regions. This union was supposed to reflect a unity of diversity. For a time, it worked. But disenchantment, especially among the Anglophone southwest, led to unrest in 2016. What began as peaceful protests turned into a violent conflict now known as the "Anglophone Crisis."

Thousands have died, and tens of thousands more have been displaced. The government responded to early protests with force, escalating the crisis.

The Anglophone regions, feeling neglected and

Photo Credits: prc.cm

marginalised, have called for autonomy, language rights, and even independence.

In an attempt to ease tensions, the government created the Commission of Bilingualism and Multiculturalism and offered "special status" to the troubled regions. However, these gestures failed to solve the underlying issues. The Anglophone population remains marginalised, and the violence continues. As Biya's era ends, this unresolved crisis poses a real threat to national unity.

Biya focused on consolidating power, not building institutions. His rule has left Cameroon without structures strong enough to handle change.

The country has no clear mechanism for succession.

It is uncertain who could take Biya's place or if any successor has been groomed. Nepotism and favouritism have ensured loyalty to Biya the man, not democratic principles or the law. When Biya is gone, this loyalty may fracture, risking chaos.

The military could also play a major role. It has been a key support for Biya. In times of uncertainty, the military might step in "to safeguard the republic."

If this happens, Cameroon could face a military dictatorship, which would be disastrous for any hope of democratic reform.

Biya has used every tool at his disposal to secure

his position, making his presidency effective for life.

This has prevented the coups or revolutions seen in Chad, Niger, and the Central African Republic.

In 1992, Biya agreed to a multiparty system under pressure. But this was democracy in name only. Biya manipulated the system to weaken the opposition.

The use of legal and extralegal means ensured that no real challenge to his power emerged. As a result, Cameroon's political landscape is fragmented. There is no unified opposition ready to take charge if Biya leaves power.

Foreign role in the region Regionally, Cameroon is important. It has been a key ally of France and the United States in the fight against Boko Haram. The fight against terrorism has made Cameroon central to regional stability, with military support from its international allies.

This cooperation has helped solidify Cameroon as a partner in regional security.

Biya also managed to settle the Bakassi Peninsula dispute with Nigeria peacefully, avoiding regional instability. His diplomatic efforts, while overshadowed by his domestic failures, helped maintain stability in the region.

But as Biya's reign ends, it's unclear if these International Finance | Nov - Dec 2024 | 79

ECONOMY

ANALYSIS

CAMEROON FRANCE

alliances will hold. France's political and economic ties may continue, but a power struggle or internal chaos in Cameroon could change priorities.

International stakeholders want a stable Cameroon, especially given their investments in the region.

Though Cameroon gained independence from France in 1960, Paris has maintained strong ties, which has shaped the trajectory of the country for decades. This ongoing influence is deeply intertwined with Cameroon's current state of governance and economic disparity.

One of the most significant symbols of France's neo-colonial control is Cameroon's use of the CFA Franc.

The currency, created during colonial times and still controlled by France, ties Cameroon's economic fortunes closely to those of France. Cameroon, like many other countries in Central and West Africa, must deposit 50% of its foreign exchange reserves with the French Treasury, effectively 80 | Nov - Dec 2024 | International Finance

limiting its monetary sovereignty.

The CFA Franc has a fixed exchange rate with the Euro, which benefits French businesses and investors while stifling economic autonomy in Cameroon. This system created a scenario where France remains the major beneficiary of Cameroon's natural resources and trade.

France is Cameroon's leading trade partner, with trade between the two countries amounting to over 1.3 billion euros annually, according to France's Ministry of Foreign Affairs.

French companies have a dominant presence in Cameroon's key sectors. This overwhelming economic presence of French corporations means that much of the profit generated from Cameroon's resources ends up overseas rather than benefiting the local economy.

France has supported Paul Biya's government for decades, providing diplomatic backing even as

corruption, human rights abuses, and nepotism have become defining features of his rule. The French want to maintain its influence in Cameroon. It is this backing that has allowed Biya to remain in power for over four decades, manipulating political structures to his advantage.

Moreover, France has also provided military aid to Cameroon, often under the guise of fighting terrorism, such as the threat posed

by Boko Haram. According to data from the Stockholm International Peace Research Institute (SIPRI), France has provided arms and military equipment to Cameroon over the past decades, bolstering the government’s ability to control dissent domestically. This military support helps sustain the current power structures, which benefit France economically and politically.

France also exerts influence through development loans and financial aid. While these funds

Cameroon's growth rate of the real GDP from 2019 to 2024 compared to the previous year (In Percentage)

are often portrayed as a form of benevolence or development assistance, they come with strings attached that primarily benefit French interests. In Cameroon, 90% of the development loans from France are directed towards projects in Francophone regions, further entrenching the inequality between French-speaking and Anglophone regions. This practice has deepened the divisions within the country, contributing to the ongoing Anglophone crisis.

For instance, between 2010 and 2020, France provided over 2.5 billion euros in development loans to Cameroon. These loans often require French contractors, reinforcing France's economic control over key projects, particularly in infrastructure and energy sectors. This pattern of lending has led to a cycle of debt and dependency, preventing Cameroon from exercising full control over its development agenda.

The direct impact of France's neo-colonial policies is evident in the socioeconomic conditions experienced by most Cameroonians.

Despite its resource wealth, Cameroon ranks 153rd out of 189 countries on the Human Development Index, with a significant portion of its population living below the poverty line. The influence of French companies, the economic straitjacket of the CFA Franc, and conditional development loans have all contributed to a situation where the economic benefits of Cameroon's resources do not reach its people. Instead, they benefit French corporations and the political elite in Cameroon who maintain close ties to France.

2019

2021

2023

2020

2022

2024

3.42% 0.54%

3.04% 3.74%

3.25% 3.90%

Source: Statista

The Anglophone regions, in particular, have suffered from this inequitable distribution of resources.

The French-driven policies that favour Francophone areas have exacerbated regional tensions, contributing to the long-standing Anglophone crisis. The fact that most development funds are concentrated in Francophone regions fuels resentment and conflict, further destabilising the country.

France's neo-colonial influence over Cameroon is pervasive, affecting everything from its economy to its political stability. The use of the CFA Franc, economic dominance

by French corporations, political backing of Biya's regime, and conditional development loans have all contributed to keeping Cameroon tethered to France. This relationship has not fostered development or democracy in Cameroon but rather entrenched inequality, corruption, and economic dependency.

As Cameroon faces the uncertainty of a post-Biya era, the legacy of France’s influence will continue to be a significant factor. For true progress to occur, Cameroon must find a way to break free from the neocolonial dynamics that have held it back for decades. Without loosening these ties, any attempts at reform will be limited, and the vision of a prosperous, independent Cameroon will remain out of reach.

The Future: Uncertain, but with hope Cameroon stands on the edge of a new era. Biya's departure could bring opportunities for change.

Some hope that his exit will lead to reforms, greater transparency, and a crackdown on corruption.

But without structural changes, these hopes may prove hollow.

Biya's legacy includes weakened institutions and a lack of democratic preparation for what comes next.

Poverty is widespread, infrastructure is crumbling, and economic prospects are bleak. Any future government must address the needs of the people. The Douala port and railway links may be modernised, but the rest of the country remains underdeveloped. Corruption must be fought head-on, and the wealth of the nation must benefit all its people, not just a select few.

In the Anglophone regions, there must be real dialogue. Reconciliation is key to bridging the divide between Anglophones and Francophones.

Autonomy or even a federal system may need to be considered to resolve these long-standing grievances.

Without addressing these issues, peace will remain out of reach.

International Finance | Nov - Dec 2024 | 81

ECONOMY

FEATURE CUBA

PESOS PENSION

The six-decade American embargo on Cuba, the communist state's ailing central planning, and the island nation's inability to recover from the pandemic are all responsible for the collapse of its economy

Living on pennies: The plight of elderly Cubans IF CORRESPONDENT

Martha Ortega has been waiting in line for hours in central Havana. She wore a checkered blouse and a denim purse that gave her the appearance of an 80-year-old cowgirl, even though she suffers from both rheumatoid arthritis and osteoarthritis, which drags her foot.

Ortega worked as a receptionist in a local Communist Party of Cuba office until five years ago. Her monthly pension is 15,575 pesos, but inflation has made it worth less than $5 for the past three years.

She explains, "I try to disperse it across meals, meds, whatever I can."

She is just one of many elderly Cubans who have become nearly penniless as the communist government, reeling from a severe economic crisis, turns to private industry.

Ortega resides with her dumb and deaf daughter. They're alone themselves. No other relatives are available to assist.

This was not how the revolutionary generation in Cuba was supposed to live. They received promises of free food and 82 | Nov - Dec 2024 | International Finance

healthcare from birth to death in exchange for their selfless dedication to society.

Che Guevara declared, "Man [will] begin to free his thinking from the irritating requirement of feeding his animal wants through work."

Even so, many older people are shocked at how quickly the revolution they dedicated their lives to has abandoned them, when they are most vulnerable, as private stores spring up all over the Caribbean island and the bodegas that supply state-subsidised rations become more empty.

According to Ortega, "We lived with a dream, with a commitment. And then, everything vanished."

A growing segment of Cuban society is the elderly. The population's increased life expectancy into the high 70s, matching that

FEATURE CUBA

International Finance | Nov - Dec 2024 | 83

ECONOMY

FEATURE CUBA

of the United States and the United Kingdom, was a victory of the 1959 revolution. Currently, 22.6% of people over 60 live alone, with 221,000 of them being women.

The current flight of young people has intensified these trends. Cubans have either joined the Latin American caravans heading for the US border or have discovered methods to migrate to Europe as the country's economy declines. Although opinions differ, estimates generally concur that the island's population has significantly decreased from the 11 million people listed in a 2012 census. It was as low as 8.62 million, according to an independent demographer's assessment recently.

Fo r m e r a mb a s s a d o r C a rl o s Alzugaray, 81, adds, "One of the hardest things for my colleagues is that their children are outside Cuba. And after making so many sacrifices, they are now financially dependent on them."

Alzugaray, a member of the Communist Party, expresses such outrage at the circumstances that he declares, "I would go to a rally in front of the Ministry of Labour and Social Security if some elderly people gathered together tomorrow."

That is an astonishing claim in a nation where protests are uncommon and virtually never accepted.

"I've worked in two different professions," Alzugaray declares, as he continues, "Both provided assistance to the Cuban Revolution's government. One was a 35-year career in the Ministry of Foreign Affairs. The other was fifteen years as a professor at a university. Additionally, I receive 2,330 pesos ($6.50) per month."

The government's lack of reaction 84 | Nov - Dec 2024 | International Finance

PESOS PENSION

surprises Alzugaray. He claims that there is no indication that they are concerned about the issue or that they intend to take action in response. They disregard the problem, as they always do when faced with one.

The six-decade American embargo on Cuba, the communist state's ailing central planning, and the island nation's inability to recover from the COVID pandemic are all responsible for the collapse of its economy. Since it appeared for a moment that the government couldn't afford to import food, shops and other small and medium-sized private enterprises (Mipymes) were authorised in 2021.

Though not everyone has benefited from these establishments, some Cubans who get money from family overseas have found them to be quite helpful. Even an ambassadorial monthly pension is insufficient to pay for a tray of eggs, which costs 2,500 pesos.

As a result, it is becoming common to see elderly people staring at necessities like cooking oil that they cannot buy.

The government has now decided to regulate the price of necessities like cooking oil and chopped chicken, blaming the Mipymes for their "speculation." But even these commodities, should the private stores keep selling them, are too expensive for retirees (cooking oil has a restriction of 950 pesos).

The head of the Ministry of Public Health's Department of Older Adults, Social Care, and Mental Health is Dr. Alberto Fernández Seco. He contends that Cuba is still in a better position than other nations to handle "a worldwide problem" of ageing because of its "high level of education, balanced nutrition, sports, and access to culture."

Gross national income in Cuba from 2022 to 2029 (In Billion US Dollars) 2022

2026

2023

2027

2024

2028

2025

2029

57.14 92.72 93.69 94.48 Source: Statista

95.23 95.90 96.64 97.31

FEATURE CUBA

He outlines Cuba's remarkable efforts to care for the elderly, citing the establishment of 304 Casas de Abuelos, or drop-in centres, where senior citizens can congregate, get meals, and get medical assistance.

Also, 158 care facilities provide beds for the poorest of the poor. Claiming the reverse to be true, he brushes away claims that care facility beds are disappearing and that fewer people are visiting the Casas de Abuelos as rates rise.

To share this duty with the private sector, he argues, "We're starting to design policies."

These are private businesses that would have been unimaginable a few years ago. For instance, TaTamania provides "personalised care" to senior citizens through the use of "health sector professionals" from six locations

located throughout Cuba. Monthly costs begin at approximately $150 and quickly increase according to the individual's demands.

Most of the money comes from overseas families. The government intends to let these businesses branch out into care homes in addition to home care, with 10% of the costs going toward meeting the needs of individuals without families.

According to Fernández Seco, "Sharing responsibilities with the private sector does not contradict the successes of the revolution."

Elaine Acosta, a sociologist from Florida International University who founded Cuido 60 to investigate the living conditions of Cuba's elderly, noted that the expatriate families are aware that 10% of their fees are being redistributed, but the money raised is insufficient to address the problem.

She said, "A bigger issue is that organisations in civil society that could be of assistance are unable to secure funding from foreign foundations or others."

According to Fernández Seco, the government is also giving older people more rights, such as the option to postpone retirement.

"You can continue working and collecting your income and pension as long as you maintain the appropriate level of mental and physical fitness," he explains.

He continues, saying that although it might not be what was promised, Cubans should keep in mind how fortunate they are in comparison to citizens of other nations where drug use, human trafficking, and organ theft are issues.

"There are moments when we are

unable to recognise our blessings," he added.

Elvio Agramonte de los Reyes, a bit stooped but carrying himself like the Camagüey man he is, raised in the most courtly of the Cuban provinces, pushes a wheelchair up San Lázaro Street. He is selling a basket of coriander and mangoes to bystanders from the chair.

The 85-year-old said, "I get 1,100 pesos from the government. That's what I live with, along with what I search for on the streets. I am in a better position. I don't drink coffee, smoke, or use rum. I did consume a lot of rum, but I developed cerebral ischemia, so they advised me not to touch it anymore.”

Like Martha Ortega, all he has to go on in life is a crippled daughter. She was born with a mental illness. She receives a 2,000 peso pension while not working.

He heard Che Guevara's call when he was a young man.

"Cher invented volunteer labour.

I took part in every activity. I cut, cleaned, and planted cane. Although there are benefits to building schools and hospitals with free medical care, it's now backfiring like a cow's tail. For those of us who are elderly and without relatives..." He pauses, and a woman who has come to purchase coriander says, "They are dying of hunger, to fill the void.”

International Finance | Nov - Dec 2024 | 85

Business Dossier - Qardi

Qardi: Empowering SMEs with innovative digital financial solutions

Qardi's success is attributed to its ability to identify and address the unique financial needs of SMEs in the Kingdom In alignment with Saudi Arabia's Vision 2030 and the accelerating pace of digital transformation, Qardi Platform for Digital Brokerage was established to support the financial sector. Our platform provides a secured and digitalised process to request financing facilities from our financial partners, in the shortest time and with the least effort.

Saud Al Harkan CEO - SIDB

86 | Nov - Dec 2024 | International Finance

S

mart Interaction for Digital Brokerage (SIDB) introduced Qardi, a leading digital brokerage platform in providing digital financial solutions to support and assist the small and medium enterprise (SME) sector. The platform was innovatively designed to be user-friendly in order to bridge the financial gap in the market between business owners and all lenders in the Kingdom.

The platform is distinguished as a trusted and accredited provider of digital brokerage services, offering an integrated digital experience on a secure platform. It aims to provide a variety of financing options for enterprises digitally, in the shortest time and with the least effort.

Smart Interaction for Digital Brokerage (SIDB) has achieved clear distinction in this field, winning two awards from the 2024 International Finance Awards.

The first award SIDB received was "Best Digital Transformation Initiative in Financial Aggregation - Kingdom of Saudi Arabia 2024". This award affirms Qardi's ability to integrate advanced digital technologies into financial

brokerage processes, contributing to increased efficiency and transparency of services provided to customers.

SIDB also won the award for "Most Innovative Digital Brokerage Platform - Kingdom of Saudi Arabia 2024". This award reflects the level of innovation and distinction Qardi enjoys in providing advanced digital brokerage services, which enhances the experience of investors and customers.

These outstanding achievements reflect Qardi's commitment to leveraging modern technologies to drive a fundamental transformation in financial brokerage operations.

This has contributed to achieving economic stability and reaching financial freedom for users, cementing Qardi's leadership in the field of digital brokerage in the kingdom.

Qardi's success is attributed to its ability to identify and address the unique financial needs of SMEs in the Kingdom. By providing tailored digital brokerage solutions, the platform has empowered entrepreneurs to access multiple financing options, manage

their cash flow, and grow their businesses more efficiently. The platform's user-friendly interface and streamlined processes have made it a preferred choice among SMEs seeking to overcome traditional financing barriers.

Moreover, Qardi's focus on data-driven insights and advanced analytics has enabled it to develop innovative products and services that cater to the evolving needs of its customers. This commitment to innovation has solidified Qardi's position as a trailblazer in the Kingdom's digital brokerage landscape.

Looking ahead, Qardi aims to further expand its reach and impact, leveraging its digital prowess to drive financial inclusion and foster the growth of Saudi Arabia's vibrant SME sector.

As the Kingdom continues its journey towards economic diversification and technological advancement, Qardi stands as a shining example of how digital brokerage solutions can transform the financial landscape and unlock new opportunities for businesses and entrepreneurs.

International Finance | Nov - Dec 2024 | 87

INDUSTRY

ANALYSIS

SHIPPING PANAMA CANAL

With the usual passages either unsafe or impassable, shipping companies have had to chart new courses, often at great expense

Global shipping faces unprecedented challenges IF CORRESPONDENT

Global trade has always been the lifeblood of the world economy, coursing through the arteries of oceans, rivers, and canals. Yet today, these vital shipping lanes face unprecedented threats that could choke the flow of goods and destabilise economies worldwide.

War and climate change have emerged as two formidable foes challenging the movement of commodities through critical At the height waterways. From missile attacks of the drought in strategic straits to recordin early 2024, breaking droughts in crucial canals, the Panama the global shipping industry stands Canal Authority had at a crossroads, needing urgent to halve the solutions to navigate these turbulent number of times.

daily transits.

Ships with deeper drafts were unable to pass, forcing them to find alternative routes or wait indefinitely

Choke points under fire

Known as "choke points," certain narrow passages like canals and straits are essential for global maritime trade. These include the Strait of Bab-el-Mandeb in the Red Sea and the Strait of Hormuz near the Persian Gulf. Recently, these areas have become hotspots of geopolitical tension and conflict.

Missile attacks originating from Yemen have severely disrupted traffic through the Bab-el-Mandeb Strait, affecting access to the Suez Canal. This narrow passage connects the Indian Ocean to the Red Sea and ultimately to the Mediterranean Sea via the

88 | Nov - Dec 2024 | International Finance

Suez Canal, serving as a historical conduit for trade between East and West.

The escalating security risks have made maritime companies hesitant to send ships through this route. It may take years before confidence is restored enough for regular passage to resume.

Simultaneously, long-standing tensions between Iran and neighbouring countries have put the Strait of Hormuz in a precarious position. As the only sea passage from the Persian Gulf to the open ocean, Hormuz is a critical artery for the world's energy supply.

More than half of the world's shipped crude oil passes through the Strait of Hormuz, Bab-el-Mandeb, and the Suez Canal. Any disruption in these areas does not only affect oil prices, but also causes ripples throughout economies that depend on these energy supplies.

Drought-stricken Panama Canal While geopolitical tensions threaten some waterways, others face a different peril: climate change. The Panama Canal, a marvel of engineering drastically reducing shipping times between the Atlantic and Pacific Oceans, is grappling with an existential threat: drought.

In typical conditions, about 1,000 ships traverse the Panama Canal each month, carrying approximately 40 million tonnes of goods. The canal reduces sailing distances by 8,000 nautical miles, making it indispensable for the shipping industry.

An estimated 6% of global trade passes through this canal, according to the International Monetary Fund.

However, prolonged droughts, exacerbated by climate change and phenomena like El Niño, have led to significant water shortages in Central America.

The Panama Canal relies on vast amounts of freshwater to operate its lock systems. When water levels drop, the canal authority imposes restrictions on ship drafts and the number of daily transits.

At the height of the drought in early 2024, the Panama Canal Authority had to halve the number of daily transits. Ships with deeper drafts were unable to pass, forcing them to find alternative routes or wait indefinitely. The impact on global supply chains was immediate and profound. According to maritime consultancy Clarksons Research, tonnage passing through the canal collapsed by a third due to these restrictions.

Alternative routes and their costs With the usual passages either unsafe or impassable, shipping companies have had to chart new courses, often at great expense. The most viable alternative for many has been to reroute ships around Africa's Cape of Good Hope. While this route is free from geopolitical tensions and droughts, it adds up to two weeks to the voyage and exposes vessels to the notoriously rough seas of the Southern Atlantic.

The financial implications are significant.

Consulting firm LSEG Shipping Research notes that diverting a tanker from Asia to northwest Europe via the Cape of Good Hope doubles the transit time to 32 days and adds nearly $1 million in additional costs per voyage. Container ships, while incurring less extra cost, still face substantial increases in fuel and operating expenses. These added costs ultimately trickle down to consumers through higher prices for goods.

Asia's longest river, the Yangtze, often referred to as China's "golden waterway,” is another critical artery feeling the strain of climate change. In a typical year, the Yangtze ferries around three billion tonnes of diverse products to about 100 countries. However, a severe drought in late 2022 brought water levels to their lowest since records began in 1865.

The river's width was effectively halved, and its many tributaries dried up, severely limiting navigability. The drought raised alarming questions about the future of shipping on the Yangtze. If such climatic events become more frequent, the reliability of this essential trade route could be in jeopardy, affecting global supply chains dependent on Chinese exports.

Other major waterways in peril The threats are not confined to Asia. The Rhine in Europe and the Mississippi in the United States are also experiencing the adverse effects of climate change. The Mississippi River, which ranks second globally in inland waterways freight with 600 million tonnes transported International Finance | Nov - Dec 2024 | 89

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SHIPPING PANAMA CANAL

annually, faced drought-induced bottlenecks in 2022. Similarly, the Rhine, carrying 300 million tonnes of goods each year, has seen water levels drop to points where shipping becomes challenging, if not impossible.

In Southeast Asia, the Mekong River, home to around 60 million people who rely on it for their livelihoods, has been suffering increasingly severe droughts over the past two decades.

While floods often grab headlines due to their immediate and visible destruction, droughts inflict longterm socio-economic hardships, destroying crops, causing freshwater shortages, and decimating fish populations.

The combined pressures of war and climate change are impacting global shipping lanes, prompting experts to advocate for a fundamental rethinking of how goods are transported across the world. A 2024 report from the Atlantic Council, a respected US think tank, underscored the urgency of this issue.

"Climate change is now threatening the shipping lanes that underpin global commerce," the report stated.

The disruption of the Earth's hydrological cycle, how water moves between the land and atmosphere, is affecting the volume of water in rivers and canals worldwide. As extreme weather events become more frequent due to climate change, the reliability of traditional shipping routes is decreasing. The report calls for innovative solutions and alternative logistics strategies to mitigate these risks.

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Potential solutions and alternatives Addressing these complex challenges requires a multifaceted approach.

Some have proposed designing ships with shallower drafts to navigate lower water levels. While feasible, this would necessitate a massive overhaul of the existing fleet and could reduce cargo capacity, making shipping less efficient.

Deep dredging of rivers and canals is another option to increase depth, but this is a temporary fix. Dredging is costly, environmentally disruptive, and cannot keep pace with the rapid changes in water levels caused by severe droughts.

Overland transport methods, such as rail and trucking, offer supplementary options. These "road bridges" can bypass impassable waterways but come with limitations, including capacity constraints and higher per-unit transport costs.

One of the most ambitious pro-

posals is the construction of a new canal through Nicaragua to connect the Atlantic and Pacific Oceans. A Chinese company has claimed a 100year concession for a 173-mile route that could accommodate ships larger than those Panama Canal can handle.

However, the project faces significant hurdles, including a $40 billion price tag, environmental concerns over pristine ecosystems, and the region's susceptibility to hurricanes and seismic activity.

In addition to infrastructural changes, technological advancements in shipping could offer some respite.

Developing more efficient ship designs, incorporating advanced materials and engineering, could allow vessels to operate effectively in challenging conditions. For instance, ships equipped with adjustable ballast systems can modify their draft to navigate varying water depths.

Moreover, adopting alternative fuels and propulsion methods, such

Ten largest container ports worldwide in 2023, based on throughput (In Million TEUs)

Shanghai

Shenzhen

Busan

Singapore

Qingdao

Tianjin

Ninbo-Zhoushan

Guangzhou

Los Angeles

49.16 39.01 35.05

29.88 23.04 28.75 22.19 25.41 16.65 Dubai

14.47 Source: Statista

as liquefied natural gas (LNG) or hydrogen fuel cells, can reduce the environmental impact of shipping and improve operational efficiency.

These innovations not only help mitigate climate change by reducing greenhouse gas emissions but also comply with stricter environmental regulations being implemented globally.

Digital technologies like advanced navigation systems and realtime monitoring can optimise routes, allowing ships to avoid areas affected by geopolitical tensions or adverse weather conditions. The use of big data analytics and artificial intelligence can provide predictive insights into potential disruptions, enabling more proactive decisionmaking.

International cooperation and policy reform Securing global shipping lanes also requires robust international cooperation. Multilateral agreements focused on maritime security can help mitigate the risks posed by geopolitical tensions. Organisations like the

International Maritime Organisation (IMO) play a crucial role in facilitating dialogue and establishing regulations that enhance the safety and security of international shipping.

Additionally, investment in climate resilience is imperative.

Governments and industry stakeholders must collaborate to fund infrastructure projects that strengthen the adaptability of ports and canals to extreme weather events.

This includes building higher sea walls, improving water management systems, and developing early warning mechanisms for natural disasters.

Economic policies that incentivise sustainable practices can also make a significant difference. Subsidies for research and development in green technologies, tax breaks for companies that reduce their carbon footprint, and penalties for excessive emissions can drive the industry toward more sustainable operations.

In response to these challenges, new supply chains are beginning to emerge. Abu Dhabi has signed a preliminary agreement with Iraq to develop the Al-Faw Grand Port

near Basra on the northern tip of the Persian Gulf. Expected to open by the end of 2025, the port aims to link Eastern and Western trade routes and will be equipped to handle containers, dry bulk, and tankers.

Similarly, Turkey and Iraq have unveiled a $17 billion road and rail project that will connect Iraq's main port to the Turkish border and further into Europe. This 1,200-kilometre "land bridge" offers an alternative to maritime routes and could significantly alter trade patterns in the region. Notably, it bypasses the Suez Canal entirely, which could have economic implications for Egypt.

China's Belt and Road Initiative is another example of an emerging supply chain designed to circumvent traditional maritime routes. By investing in overland routes through Central Asia and into Europe, China aims to reduce its reliance on vulnerable sea lanes. This massive infrastructure project includes the development of railways, highways, and ports, reshaping global trade dynamics.

There is a need for global cooperation, innovative thinking, and significant investment in alternative routes and technologies. The solutions are not simple, nor are they without cost. However, the stakes are high. The seamless movement of goods around the world involves not only economics but also the interconnectedness of societies and the collective prosperity of nations.

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FEATURE AUSTRALIA

New data has revealed that the province of Victoria is grappling with an unprecedented property crisis, with more people in housing stress than any other part of Australia

Australia’s housing conundrum IF CORRESPONDENT

T

here is a concern that Australia's housing market is in dire straits. The country has now decided to limit the enrolment number of international students to 270,000 for 2025, as the government looks to rein in record migration that has contributed to a spike in home rental prices.

The decision follows a raft of actions since 2023 to end COVID-era concessions for foreign students and workers in Australia that helped businesses recruit staff locally while strict border controls kept overseas workers out.

Concerns over immigration “There are about 10% more international students in our universities today than before the pandemic and about 50% more in our private vocational and training providers,” Education Minister Jason Clare told a press conference, while adding, "The reforms are designed to make the international student sector better and fairer, and this will set it up on a more sustainable footing going forward."

International education is one of Australia’s largest export industries and was worth A$36.4 billion ($24.7 billion) to the economy in the 2022-2023 financial year. However, polls have shown voters' concerns about large influxes of foreign students and workers putting excess pressure on the housing market, making immigration one of the potential major battlegrounds in an election less than a year away.

Net immigration hit a record high in the year to September 30, 2023, surging 60% to a record 548,800, higher than the 518,000 people in the year ending June 2023. Australia boosted its annual migration numbers in 2022 to help businesses recruit staff to fill shortages after the COVID-19 pandemic brought strict border controls, and kept foreign students and workers out for nearly two years.

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Average price of residential dwellings in Australia from 2015 to 2024 (In 1,000 Australian Dollars) However, a new report asserts that there is no basis for blaming international students for an undersupply of housing or rising rental fees in Australia.

Research commissioned by the Student Accommodation Council, a peak body for the country’s purpose-built student accommodation sector (PBSA), found no alignment between the return of international students to Australia and rents increasing.

Instead, the report mentions, “Rents began rising in 2020, when there was no international student migration and most students had returned home. Between 2019 and 2023, median weekly rent increased by 30%. Over the same period, student visa arrivals decreased by 13%.”

The research further found that international students make up only 4% of all renters in Australia. Domestic students compose 6.2%, and the remainder are non-students. Also, the majority of international students do not live in the houses. Only 3% live in detached houses suitable for couples or families, while 74% live in PBSA (Purpose Built Student Accommodation) close to universities.

The Student Accommodation Council attributed the housing crisis in Australia to “a complex web of supply and demand drivers, including the rise of smaller and solo-person households, intrastate migration, rising construction costs, planning delays and a trend to repurposing second bedrooms into home offices, amongst others.”

The study has pointed out a great need for increasing the supply of PBSAs, since vacancy rates in major Australian cities are currently around 1%, and rental prices have been climbing for months.

The Student Accommodation Council also mentioned that looking at the pipeline of new PBSA currently (7,770 94 | Nov - Dec 2024 | International Finance

new beds), there will not be enough supply to ease pressure on the rental market from international students by 2026. That would only be accomplished if there were 84,000 beds ready by that time.

Provinces feel the pinch New data has revealed that the province of Victoria is grappling with an unprecedented property crisis, with more people in housing stress than any other part of Australia. Housing advocates have urged the government to urgently act on social housing, pointing out that the state needs over 6,000 new homes each year for the next decade.

The Australian Institute of Health and Welfare reported that “the top 10 months on record for people in housing stress visiting specialist homelessness services all belong to Victoria.”

"Victoria’s numbers are critical, with approximately 30% more individuals in housing stress and seeking assistance compared to New South Wales or Queensland. This is the face of Victoria having the lowest amount of social housing as a proportion of total housing stock in Australia, with just 2.9% of dwellings being public or community housing," CityHub reported.

“These unprecedented levels of housing stress will increase homelessness unless we act urgently to build more social housing,” Council to Homeless Persons CEO Deborah Di Natale told the media.

Post-COVID housing stress has been especially intense in Queensland.

Brisbane property prices have climbed by 65% since the beginning of the pandemic, almost doubling the Australian capital city average (34%).

According to new data released by CoreLogic in June 2024, Brisbane now

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2017

2022

2018

2023

2019

2024

600.1 619.5 678.8 681.1 649.3

689.4 813.9 921.2 914.9 973.3

Source: Statista

has the second-most expensive housing in the country, behind Sydney. Prices rose by 1.4% in May, with the median property price hitting $843,231. Across the state, new tenancy rents have gone up by 45% in just four years. Adjusted for inflation, that’s a 23% increase in real terms, much more than the residents' income growth.

Soaring rents have squeezed people on lower incomes particularly hard. As per the City Futures Research Centre, UNSW Sydney, the share of new lettings at rents low-income households can afford has slumped from 23% to 10% of all private tenancies since 2020. And less than 1% of available Queensland rentals in March 2024 were affordable to a single person earning minimum wage or a pensioner couple. These conditions are pushing some people into homelessness, with “tent cities” appearing across Brisbane.

To combat this, the provincial government has started a flurry of constructive housing policymaking.

Queensland has begun to reverse a

FEATURE AUSTRALIA

long-term decline in its social housing stock, apart from boosting homelessness funding and services. However, the sector called "Social Housing" has been in a long-term decline across Australia.

Investment has been minimal since the 1990s. By 2021, social housing was down to barely 3% of all occupied dwellings in Queensland.

However, in the past five years, due to the increasing state investments, the number of social housing dwellings has begun to grow. The Queensland government pledged in early 2024 to add 53,500 social housing units by 2046, expanding the stock of public and community housing by 73%.

Compatible with this target, a medium-term goal is to expand annual output to 2,000 units by 2027-28, a fourfold increase in the late 2010s.

Adding 2,000 social housing units a year by the late 2020s would reverse the sector’s historic decline. If sustained over time, it would begin to expand social

housing back towards 5% of all housing, where it once was.

All eyes on policymakers The 2024-25 Federal Budget has unveiled a series of initiatives aimed at bolstering housing supply and supporting the construction sector. The government will collaborate with states, territories, and local governments to introduce reforms enhancing housing supply and affordability as part of the National Housing Accord over the next six months.

Key measures to incentivise housing supply include reducing the withholding tax rate for eligible managed investment trust fund payments attributed to newly constructed properties. Additionally, the capital works tax deduction rate for newly constructed build-to-rent developments will increase from 2.5-4% per year, potentially unlocking 150,000 new rental properties over the next decade.

The National Housing Finance and Investment Corporation’s liability cap will

be raised by $2 billion, facilitating more lending to community housing providers for social and affordable housing projects.

Furthermore, $350 million over five years has been committed under the National Housing Accord to support the delivery of 10,000 affordable homes by states and territories.

The government is also in discussion with states and territories to make an additional 300,000 TAFE and vocational training places fee-free, focusing on industries like construction to develop a skilled workforce.

The Anthony Albanese-led government's task is straightforward: To deliver "1.2 million new, well-located homes" and to achieve this target, the authorities need to build 240,000 new homes each year, or 20,000 a month. However, the last time Australia got even close to building 240,000 new homes in a single year was 2017, when the country built 223,563 housing units.

As per property analyst Cameron Kusher, in 2017, the interest rate back was a pleasant 1.5%. In 2024, the same ratio stands at 4.5%. Even though new homes get built at a rapid pace, who will buy them in a high interest rate regime? Plus, construction companies, especially the mid-tier types that build medium-density apartment buildings, are shutting down their shops. By March 2024, according to ASIC, 1,913 construction companies had so far gone bust, three times as many as at the comparable point in 2021/22.

Banks aren't financing these companies the way they used to. Some of these ventures also got involved in fixed-price projects during COVID, and now can't afford to implement them. Also, due to the high interest rate regime, building materials have become about a third more expensive than they were before the pandemic. There is a significant International Finance | Nov - Dec 2024 | 95

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HOUSING

shortage of tradies, partly due to a decrease in apprenticeships. In 2012, there were 376,800 apprenticeships, but by 2020, that number had fallen to just 134,800. Additionally, Australia's tradie workforce is ageing and overworked.

Poorest Australians hit hardest The 2023 Rental Affordability Snapshot

by Anglicare surveyed 45,895 rental listings, only to find affordability crashing to record lows. The social advocacy organisation is now calling for more social housing to end the shortfall of 640,000 homes, apart from advocating for better protections for renters, including an end to no-cause evictions and limits on unfair rent increases, and tax reforms to make housing more affordable.

Although post-COVID factors like Aussies' preference for more space, the return of international migrants, and rising interest rates, can be blamed for 96 | Nov - Dec 2024 | International Finance

the above-mentioned distressing trend, for Rachel Ong ViforJ, ARC Future Fellow & Professor of Economics, Curtin University, the rental affordability crisis pre-dates COVID, as affordability has been steadily declining for decades, with successive governments failing to make shelter more affordable for low-tomoderate income Australians.

"At the lower end of the rental sector, the growth in the supply of social housing persistently lags behind demand, trending at under one-third the rate of population growth. This has forced growing numbers of low-income Australians to seek shelter in the private rental sector, where they face intense competition from higher-income renters.

At the upper end, more and more aspiring home buyers are getting locked out of home ownership," Ong ViforJ noted.

As per another study, more Aussie households with higher incomes are

now renting out their spaces. Households earning $140,000 a year or more (in 2021 dollars) accounted for just 8% of private renters in 1996. By 2021, this tripled to 24%.

According to Ong ViforJ, this trend is crowding out lower-income households who are now facing a shortage of affordable homes to rent.

While current policies focus on supply, more work is needed including fixing labour shortages and providing greater stock diversity. However, the housing affordability challenge is not solely a supply problem. There is also a need to respond to the supercharged demand in the property market.

"An overheated market will undoubtedly place intense pressure on the rental sector because aspiring first home buyers are forced to rent for longer, as house prices soar at a rate unmatched by their wages. Yet, governments continue to resist

FEATURE AUSTRALIA

calls for winding back the generous tax concessions enjoyed by multi-property owners," Ong ViforJ commented.

The main help available to lowincome private renters, the Commonwealth Rent Assistance scheme, has been poorly targeted with nearly one in five low-income renters who are in rental stress deemed ineligible, while another one in four receive it despite not being in rental stress.

Experts are pitching the theory of filtering: A market-based process by which the supply of new dwellings in more expensive segments creates an additional supply of dwellings for lowincome households as high-income earners vacate their former dwellings.

Proponents of filtering argue building more housing anywhere, even in wealthier ends of the property market, will eventually improve affordability across the board because lower-priced housing will trickle down to the poorest households. However, the persistent affordability crisis faced by low-income households and the rise in homelessness are crucial signs of filtering not working well as a parameter to produce lower-cost housing.

As per Leith van Onselen, Chief Economist at the MB Fund and MB Super, Australia has one of the largest construction workforces in the world relative to its population.

Citing independent economist Tarric Brooker, Onselen stated that Australia completes more homes per capita than almost anywhere in the developed world. However, when the population is constantly growing at such a large rate, "even a world-beating level of construction still can’t keep up."

Australia’s structural housing shortage has more to do with demand, and excessive levels of population growth, than an inability to build housing. To prove his point, Onselen cited the massive

rise in Australia’s net overseas migration (NOM) from the mid-2000s. In the 15 years to 2004, Australia’s NOM averaged 91,000 a year. But in the 15 years to 2019, Australia’s NOM averaged 220,500 a year, representing a 142% increase in annual NOM. Even over the last four calendar years (2020–2023), Australia’s NOM has averaged 245,500 per year. Population growth across the major cities has been extreme, with Melbourne (1.7 million) and Sydney (1.35 million) experiencing the strongest growth in numbers terms and Brisbane (60%) and Perth (59%) recording the strongest growth in percentage terms.

According to Australian Bureau of Statistics (ABS) projections, Australia’s population will grow to 43.9 million people by 2071, representing an increase of around 16.5 million from the current population of 27.4 million.

As per Onselen, this is the equivalent

of adding another Sydney, Melbourne, Brisbane, Perth, Hobart, and Canberra to Australia’s current population in only 48 years.

"It would also require the construction of at least 7.5 million homes accounting for demolitions to accommodate the projected population surge. It is also worth pointing out that it took Australia 212 years to reach a population of 19 million people in 2000. Yet, the population is officially projected to grow by another 24.9 million people in only 71 years! Melbourne (9.5 million) and Sydney (8.4 million) are projected to have larger populations than Australia’s entire population in 1950," he noted further, while concluding that the country will never be able to build enough homes as long as its population grows like "an outof-control science experiment."

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TURKISH AIRLINES AVIATION

Sustainability is a path of constant progress, teamwork, and collective influence for Turkish Airlines rather than a one-time objective

Turkish Airlines: A 91-year journey to global reach IF CORRESPONDENT In 1933, the incredible journey of Turkish Airlines started with just five planes and less than 30 employees. Fast forward to 2024, with more destinations than any other airline worldwide, it is a major force in international aviation.

By the end of 2023, the Turkish Airlines fleet of 400 aircraft had an average age of 9.3 years, making it one of the youngest in the business. Turkish Airlines Turkish continues to reach new heights in Airlines is the aviation business because of its committed adaptable organisational structure, to a more committed staff, Istanbul hub, statesustainable aviation future of-the-art fleet, and wide-ranging and has set a network. goal to become In 2024, Turkish Airlines a Carbon celebrated its 91st anniversary.

Neutral Airline The airline has continued to by 2050 as a grow quickly as the national flag way to show carrier, which is a result of effecits support for tive sustainability management. the global fight To guarantee that sustainability against climate management procedures are handchange led with a shared corporate understanding. Turkish Airlines is dedicated to its sustainability efforts, highlighted by the motto "Tomorrow On-Board," which was introduced along with its "Sustainability Vision" in 2009. This motto reflects the journey taken, the achievements reached, and the sustainable practices that lie ahead in alignment with the venture's "Sustainability Vision."

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The United Nations Sustainable Development Goals (SDGs) serve as the foundation for Turkish Airlines' sustainability initiatives, which prioritise social responsibility, environmental stewardship, and economic resilience. The sustainability strategy and targets are continuously assessed and developed to stay ahead of the curve because of its agility and sensitivity in a constantly changing environment that is affected by regulatory changes as well as new global and sectoral trends.

Sustainability is a path of constant progress, teamwork, and collective influence for Turkish Airlines rather than a one-time objective. The airline has reassessed its plans in light of Turkey's acceptance of the Paris Agreement and its pledge to achieve net zero carbon emissions by 2053, in accordance with international standards and stakeholder expectations.

Turkish Airlines is committed to a more sustainable aviation future and has set a goal to become a Carbon Neutral Airline by 2050 as a way to show its support for the global fight against climate change. With a multifaceted approach that includes fleet modernisation, the continued use of sustainable aviation fuel, expanding partnerships on this issue, sourcing energy from renewable sources, and reducing and offsetting emissions, this long-term emission reduction target has emerged as the cornerstone of Turkish Airlines' growth strategy.

To minimise its effects on the environment and cut down on carbon emissions, Turkish Airlines has implemented a thorough sustainability

strategy. The foundation of this approach is fuel efficiency research that aims to lower emissions.

By making investments in fuel-efficient aircraft, upgrading its engines, and utilising the newest technologies, it has enhanced its fleet. In order to lessen the carbon footprint, over 100 operational optimisation and aircraft configuration projects have been successfully carried out since 2008.

These initiatives prevented the release of 236,751 tons of carbon emissions into the environment and saved 75,148 tons of fuel in 2023 alone. Since 2008, 748,496 tons of gasoline have been saved, and 2,357,764 tons of carbon emissions have been avoided.

Turkish Airlines has also included sustainable aviation fuel (SAF) into its operations and conducted its first flight using aviation fuel sourced sustainably in February 2022, acknowledging the critical role SAF plays in lowering emissions. The use of SAF has since been extended to new frequencies and itineraries.

Turkish Airlines is actively seeking partnerships to expand the production and use of Sustainable Aviation Fuel (SAF), as it is currently produced in limited quantities worldwide. The airline has reaffirmed its commitment to fighting climate change by signing the Global SAF Declaration, which showcases a unified pledge from stakeholders in the aviation, space, and fuel sectors to decarbonise the aviation industry. In 2023, Turkish Airlines became a founding member of this initiative and

established Turkey's first sustainable aviation platform in collaboration with Boeing and Istanbul Technical University.

Additionally, through its CO2 emission programme, Turkish Airlines gives travellers the chance to take part in the battle against climate change. Through this initiative, travellers can quickly and easily offset the emissions associated with their flights. The projects are presented in three distinct portfolios based on passenger preferences.

They include social development initiatives that support nine different Sustainable Development Goals, are globally accredited, and generate carbon credits to combat climate change. In keeping with the CO2 commitment, the Turkey-based carrier also balances the emissions from all employee duty flights.

To reduce paper use, Turkish Airlines has implemented sustainable practices in passenger services beyond aircraft operations, such as using digital boarding cards and offering digital reading materials. These programmes highlight our dedication to sustainability, as does the usage of biodegradable packaging and environmentally friendly amenities on board. Furthermore, the airline's comprehensive approach to sustainability is demonstrated by its partnerships with stakeholders and investments in renewable energy sources. The carrier hope to significantly lessen its carbon impact and advance sustainable energy practices using solar power.

International Finance | Nov - Dec 2024 | 99

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TURKISH AIRLINES AVIATION

In 2023, Turkish Airlines took part in the most reputable reporting platform for climate change and environmental degradation in the world, the Carbon Disclosure Project (CDP) Climate Change Programme.

In CDP reviews, it received an "A-" score, which is in the leadership band and higher than the industry average for air travel. Since enrolling in the CDP, the carrier has been steadily raising its score.

The venture reaffirmed its support for the Sustainable Development Goals at the start of 2023 when it joined the Task Force on Climaterelated Financial Disclosures (TCFD) as a supportive member.

Meeting stakeholder expectations by offering a transparent communication network with pertinent parties, Turkish Airlines once again took part in the performance 100 | Nov - Dec 2024 | International Finance

evaluations of national and international indices and sustainability rating organisations to analyse the present state of the sector. By guaranteeing ongoing involvement with these indices and rating agencies—which include the DJSI, FTSE4Good, MSCI, EcoVadis, Sustainalytics, TPI, and Borsa Istanbul Sustainability Index—it hopes to improve performance.

The scores from the 2023 ESG performance evaluations, both on a company-by-company and industry-average basis, improved over the 2022 results, as did the assessments conducted by the top rating agencies in the globe. Turkish Airlines received a 2023 award in the "Silver" category as a consequence of Ecovadis' assessments.

Turkish Airlines is committed to sustainable growth, innovation,

and generating value for shareholders while navigating the complex dynamics of the market, technological advancements, and regulatory environments. The airline believes that its actions today will shape the future of the aviation industry. With this in mind, the venture has been dedicated to pursuing a more sustainable future, ensuring that Turkish Airlines remains a shining example of excellence, resilience, and vision for years to come.

In an effort to strengthen its position as a top international airline, Turkish Airlines has skillfully adapted to recent changes in the market. The carrier remained committed to core principles despite obstacles like rising gasoline prices and geopolitical unrest. Through efficient financial management,

Number of passengers travelling with Turkish Airlines from 2014 to 2023 (In Millions)

the airline was able to weather difficult times and come out on top of its competitors in the European network carrier market.

Turkish Airlines stands out from its competition primarily due to its extensive network of destinations and operational flexibility. Significant investments and expansions have led its air cargo division, Turkish Cargo, to become one of the leading international air cargo carriers. The ability to swiftly adapt to changing situations has enabled the airline to maintain its leadership in daily flight operations. To keep its competitive edge, it continually invests in fuel-efficient aircraft and auxiliary businesses.

Despite pandemic-related difficulties, Turkish Airlines wants to strengthen its position in the coming years by achieving operational and financial success, setting the stage for future expansion. With welldefined goals for passenger income, fleet growth, and global market penetration, the airline is wellpositioned for rapid expansion, bolstered by strategic investments in fuel-efficient aircraft and affiliated businesses.

Turkish Airlines places a high priority on comprehending client needs, controlling costs, and quickly responding to market developments in an increasingly competitive environment. The carrier established strategic goals centred on passenger experience, digitalisation, and sustainability after outlining a clear vision for the ensuing ten years.

Beyond 2033, the airline wants to triple the number of planes and passengers, reach a revenue target of over $50 billion, and show its

2014

2017

2020

2022

2015

2018

2021

2023

2016

2019

54.7 61.2 62.8

68.6 75.2

28.0 44.8

71.8 83.4

74.3

Source: Statista

dedication to social responsibility through several initiatives.

The goal of Turkish Airlines is to become a global airline group that delivers value to its stakeholders while promoting sustainable development goals. The airline aims to achieve this by leveraging its modern fleet and extensive flight network.

Turkish Airlines' commitment to sustainable excellence reflects its dedication to innovation, environmental stewardship, and leadership in the aviation industry.

To create a sustainable future for air travel, the airline is setting new standards for ecologically responsible aviation operations through strategic initiatives and partnerships.

In the last two years, Turkish Airlines has also made significant strides in the US, more than doubling its pre-pandemic capacity this summer.

Turkish Airlines had over 75 weekly flights to nine US locations before the pandemic, with the most frequent being a triple-daily to New York-JFK. After five years, the airline has increased its weekly flight schedule to more than 150 and expanded its network to include five more US destinations.

The carrier has already increased its weekly frequencies to Denver

from three to four flights since launching its new service to Denver (DEN) last month, and it plans to make this a daily route. Turkish Airlines Chairman, Professor Ahmet Bolat claims that "the numbers are excellent" on this route and that once it has the appropriate aircraft, Denver will be given priority for additional frequencies.

Following this, the airline will consider other lucrative routes, such as Detroit (DTW), which was added to its US network in November 2023 and is its second-most recent addition.

The airline reportedly plans to fly to up to 20 US locations, with Charlotte, Minneapolis, Orlando, and Philadelphia among the upcoming additions. Given the significance of the market, Professor Ahmet Bolat implied that the airline will strive for "at least daily" flights across its whole US network.

The Turkish Minister of Tourism's plan to bring up to five million tourists to Turkey each year is one of the main reasons for its explosive growth in the US. The airline will eventually need to triple its capacity and then some to reach this goal, which it currently brings in about 1.5 million tourists annually.

International Finance | Nov - Dec 2024 | 101

Business Dossier - Asialink

Empowering MSMEs: Asialink Finance’s rich legacy of customised financial solutions

F

or 27 years, Asialink Finance Corporation has stood out as one of the premier financing companies in the Philippines, committed to delivering customised financial solutions to micro, small, and medium enterprises (MSMEs). The company’s core mission has always been to drive economic growth in the Philippines by empowering MSMEs. With nearly 200 strategically positioned branches across the nation, Asialink Finance ensures that financial services are accessible to a broad range of clients. This extensive network allows individuals and businesses to easily obtain a wide array of innovative loan products designed to meet their unique financial needs.

“From personal loans addressing immediate needs to specialised business financing solutions, Asialink Finance is dedicated to providing customers with adaptable and dependable financial options, supported by our expansive branch network,” the company shared with International Finance.

“At Asialink Finance, we are committed to removing obstacles and creating opportunities

Prioritising customer satisfaction, Asialink Finance has streamlined its loan application process, minimised paperwork, and expedited approvals, ensuring rapid access to funds

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for everyone. Whether you're aiming to achieve personal goals, fuel business ambitions, or manage urgent financial situations, Asialink Finance serves as a reliable partner, offering flexible solutions to navigate the challenges of financial management,” it added.

What Sets Asialink Finance Apart?

Asialink Finance understands that financial needs vary widely and can be urgent.

Whether you’re looking to grow your business, renovate your home, or handle unexpected emergencies, their customised loan solutions are designed to support you at every stage.

Here are the comprehensive financing options they offer: Car and Truck Refinancing (Sangla OR/ CR): This secured loan provides financial flexibility to address diverse needs. If you need additional capital for business expansion, funds for home improvements, or emergency cash, this loan offers competitive interest rates, fast processing, and flexible repayment terms.

Auto and Truck Financing: Purchasing a vehicle, new or preowned, is made straightforward with Asialink Finance's Auto and Truck Financing. Tailored to meet personal and business needs, this loan option features low interest rates, quick processing, and a maximum repayment term of up to 60 months.

Real Estate Mortgage: For property owners looking to leverage their assets, the Real Estate Mortgage is an ideal choice.

This secured loan allows you to use your house, lot, or condominium title as collateral. It is also suitable for property take-outs, offering a versatile financing solution to meet various needs.

Doctor’s Loan: Recognising the essential role of medical professionals, Asialink Finance provides personal loans specifically for doctors. This specialised loan is crafted to assist general practitioners, ophthalmologists, and dentists manage their practice without financial stress. Support your practice and patients with a loan tailored to your professional needs.

At Asialink Finance, your financial well-being is a priority. With accessible and affordable loan options customised to meet your specific requirements, they are dedicated to helping you achieve financial stability and growth. Their competitive interest rates, efficient processing times,

and flexible payment terms reflect their commitment to supporting your financial journey.

Strategic growth plans for 2024

Loans extended by Asialink Finance jumped by 38.1% to P12.6 billion in 2023 from P9.12 billion in 2022, further boosting its lending portfolio.

The strong growth occurred due to more small and medium enterprises (SMEs) borrowing funds to finance their growing businesses.

Asialink Finance’s roster of new borrowers reached 29,500 in 2023 and is expected to increase further in 2024. As per the CEO Robert Jordan Jr., the venture aims to grow their customer base and its resources further this year.

Last year, Asialink Finance partnered with various banks and investment companies, opening up a new window to small and medium companies with little to no access to traditional funding sources.

It raised P2 billion from a corporate notes facility with Rizal Commercial Banking Corporation (RCBC), Security Bank, East West Banking Corporation, Philippine Bank of Communications (PBCom) and Union Bank of the Philippines as note holders arranged

by RCBC Capital Corporation and SB CapitalInvestment Corporation.

Asialink Finance also raised P1 billion from Yuanta Saving Bank and the state-run Small Business Corp.

The company is also expanding its

portfolio and making its security process more robust, linking up with online car sales firm Carbay Philippines Inc. and CIBI Information.

Earlier this year, Asialink Finance forged several strategic partnerships, proudly signing agreements with Automart.ph, Cathay United Bank, Creador, DashcarrPro, and Hana Bank. They are honoured to collaborate with these esteemed companies, who share their commitment to achieving mutual goals. In the first half of 2024, Asialink Finance has achieved several milestones: they welcomed 2,439 new sales partners, bringing our total to 4,879. The company also inaugurated their 192nd branch in Binangonan, Rizal. Additionally, they disbursed a total of Php 8,542,752,127.00 in loans, with a significant highlight being the release of Php 1.5 billion in January and February alone.

“One of our strengths is in our partner network,” Robert Jordan Jr. said, while stating that the venture intends to gain more market share by partnering with dealers selling brand-new cars and trucks across the Philippines, as well as onboarding more dealers of second-hand vehicles.

“We are strategically expanding our network by actively seeking partnerships with both institutional entities and individual lead generators.

This initiative is geared towards broadening our reach and diversifying the sources that contribute to our lead generation efforts,” the CEO concluded.

International Finance | Nov - Dec 2024 | 103

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Is Rangely ready for end of oil boom?

104 | Nov - Dec 2024 | International Finance

FEATURE RANGELY

Rangely shows how oil and gas-reliant regions need tailored strategies based on local advantages and disadvantages

IF CORRESPONDENT

R

angely, a small town in northwest Colorado, is notable for its economic stability, with a low cost of living and a median household income exceeding $70,000.

The town has a strong connection to outdoor activities, such as off-roading in the nearby mountains, a popular pastime for residents. However, Rangely's economy is heavily reliant on the oil and gas sector, which accounts for over half of the county's economic output. This dependency stems from the oil boom during World War II, which played a significant role in the town's development.

But Rangely faces an existential threat. An oil boom during World War II led to the town's location. More than half of the county's current economic production comes from the oil and gas sector. In the United States, the world's largest producer of natural gas and oil, Rangely is not alone. Many communities nationwide rely on the conventional energy sector for well-paying jobs and public funds for essential services like schools.

It's dangerous to rely too much on any one industry, and there are often booms and busts in the oil sector. However, the use of natural gas and oil fuels climate change, which poses a particular threat to the economics of towns depending on these resources.

Any effective plan to stop global warming must include measures that will gradually drastically lower the demand for all fossil fuels.

The global agreement in 2023 to "transition away from fossil fuels" and the increasing popularity of electric vehicles, which are beginning to replace gasoline, and diesel-powered automobiles, trucks, and buses, are two early indicators of this shift.

During the Barack Obama and early Joe Biden administrations, the White House tried to develop comprehensive plans to lower greenhouse gas emissions and assist lowincome neighbourhoods. However, they lacked a strategy to get oil and gas communities like Rangely ready for upcoming economic difficulties.

Why do oil and gas towns get ignored?

In recent legislation, Congress has given top priority to helping small communities.

Nonetheless, there were three main reasons why towns that relied heavily on gas and oil were mostly left out of these plans.

First, there seems to be less urgency. Communities that depend on coal have received disproportionately more attention when it comes to a "fair transition" as the country International Finance | Nov - Dec 2024 | 105

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moves away from fossil fuels. After 15 years of reduction in American coal production, a sustained move away from coal seems both inevitable and imminent.

On the other hand, the United States is still producing more natural gas and oil. Certain oil and gas communities are undoubtedly having difficulties already.

However, moving away from oil and gas may seem like an issue for decades to come due to the vast economic concerns involved.

The majority of Republicans, including many local officials in towns that depend heavily on oil and gas, have no plans whatsoever for a future drop in the output of these resources. The majority of Democratic legislators would rather emphasise how addressing climate change might spur future economic expansion.

"When I think about climate change, I think jobs," is a quote that Biden 106 | Nov - Dec 2024 | International Finance

frequently uses.

His emphasis on the financial benefits of climate solutions is valid.

However, there is rarely a direct substitute for the well-paying positions in the oil and gas sector and the tax income those businesses generate for local communities. This is especially true of renewable energy jobs.

Third, the policy instruments available to economists are ill-adapted to the problems that the oil and gas industries face. Strategies for promoting local economic development typically centre on helping persistently struggling local economies by implementing policies like wage subsidies, which can quickly increase employment rates.

Communities dependent on oil and gas, which are not often facing hardships at the moment, require a distinct treatment plan. The 15 years leading up to the COVID pandemic saw average annual GDP growth in US counties

producing oil and gas of 2.4%, while the national average was 1.9%.

Most oil and gas communities can get by without urgent economic stimulus plans. They require comprehensive approaches to economic growth that can foster new sectors while leveraging their current advantages to ensure their continued prosperity.

Ways to assist towns in becoming ready Harvard economist Ricardo Hausmann likens the difficulty of creating new economic capacities to the game of Scrabble, in which the appearance of a new letter allows for the formation of a larger word. He uses the economy of Finland as an example. From gathering lumber to creating wood-cutting instruments to creating automated cutting machines, it changed with time. From there, it developed into highly automated devices, some of which are employed

INDUSTRY

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FOSSIL FUELS

Oil production in the United States from 2014 to 2023 (In Million Metric Tons)

2014

524.6

2017

574.2

2015

2018

2016

2019

567.0 542.7

669.6

2020

713.3

2022

762.1

2023

827.1

2021

715.9

751.0

Source: Statista

by multinational companies like the enormous telecom company Nokia.

These economic developments need to be customised to the unique qualities of each location. However, identifying the issue and making an investment in remedies is the first step.

Southwest Colorado is home to the Southern Ute Indian Tribe. It allocates oil and gas income to two funds: a “Growth Fund” that invests in a variety of businesses to diversify the tribe's revenue streams and a “Permanent Fund” that ensures the tribe's assets are in line with its long-term financial goals, thereby promoting fiscal sustainability.

To assist areas facing serious economic risks, such as a potential decrease in oil and gas prices, a recent nationwide Academies panel recommended the establishment of a federally chartered organisation on a nationwide scale. This company might finance programmes that provide access to employment opportunities, vital public infrastructure, and displaced people.

The state Office of Just Transition in Colorado has begun to carry out this function. At the moment, its exclusive focus is on moving away from coal, to assist workers in finding new employment possibilities and communities in creating new economic opportunities. However, its purpose can grow in the future. In fact, because of the 108 | Nov - Dec 2024 | International Finance

neighbouring coal shutdown, Rangely is already getting some support.

No concrete answer Rangely provides an example of how regions dependent on oil and gas will require specific strategies based on the advantages and disadvantages of their particular locations. There's no premade playbook available.

To guarantee that policymakers know the necessary to assist communities that rely heavily on fossil fuels in successfully navigating the energy transition, universities, research institutes, and charitable organisations launched the Resilient Energy Economies initiative.

Preparing an economy for resilience is best done ahead of a catastrophe.

The narrative of Joseph, whose visions predicted seven years of plenty for Egypt followed by seven years of famine, is well-known to everyone who has read the Bible or seen Broadway. Following Joseph's vision, the pharaoh used the boom to get ready for the bust.

Today, the United States is producing a lot of gas and oil. Lawmakers are aware that risks will arise. However, the nation is currently failing to get communities ready for more difficult times ahead.

While currently stable due to robust oil and gas production, these communities face looming economic risks as global efforts to reduce fossil

fuel dependency intensify. The urgency to prepare for this shift is often overlooked because the immediate economic pressures are not yet fully felt.

However, the economic foundations of these towns will face growing challenges as a result of the unavoidable decline in fossil fuel use, which is a result of climate change mitigation policies and the growth of renewable energy.

Transitioning these economies requires tailored strategies that leverage their existing strengths while fostering new industries, much like the evolution of the Finnish economy from lumber to advanced technologies.

The creation of federal and state-level initiatives, such as Colorado's “Office of Just Transition” and the proposed federally chartered corporation, can provide support for displaced workers and critical infrastructure, helping these towns diversify their economic base.

However, there is no one-size-fitsall solution. The approach needs to be as varied as the regions themselves, and proactive investment in education, innovation, and local industries will be key to ensuring their long-term resilience.

As the energy transition accelerates, the time to prepare for a post-oil economy is now, ensuring that communities like Rangely can thrive in the future, regardless of the fate of the oil and gas industry. This foresight is critical for avoiding economic hardship and securing a sustainable and diversified future for such towns.

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