Portfolio | April 2015

Portfolio Exclusive to Emirates First Class and Business Class

India’s Boom Return of the Tiger Short Circuit Japan’s Solar Issues Art Basel Inspiring Brands

Muhtar Kent Putting the Fizz Back Into Coke

Issue 112 n April 2015

This issue APRIL 2015

Portfolio

Exclusive to Emirates First Class and Business Class

Cover Story 24 Putting the Fizz Back Into Coke Coca-Cola, one of the world’s most iconic companies, is starting to lose its sparkle. CEO and chairman Muhtar Kent has his work cut out for him as he battles changing tastes, health conscious consumers and a steady decline in US soda sales.

Features 30 India’s Economic Surge

46 Tech Boom Under Threat?

Other developing economies have run into headwinds, but

Vietnam’s technology businesses are a bright spot in the

India’s outlook has brightened since the election of business-

country’s economy, but increased regulation may hamper

friendly Prime Minister Narendra Modi.

innovation.

34 The Invention Mob

50 Soaring Mortgages

Quirky is a startup that sources inventions from the online

Many European homebuyers who took out mortgages in

community and then refines, manufactures and markets the

Swiss francs are seeing their repayments rise as the currency

resulting products.

gains strength.

38 Making the Apple Watch Tick

54 Short-Circuiting a Solar Boom in Japan

In order for the Apple Watch to truly take off, much will

Japan lags behind many countries in renewable energy and

depend on third-party apps that will make it more functional.

now there are fears that the government is retreating from its

42 Greece’s Bureaucratic Labyrinth There is no question that Greece is suffering from austerity

clean-energy commitments.

38

cuts, but its complicated bureaucracy is also stifling the economy and innovation.

30

42

5

Portfolio

6

Exclusive to Emirates First Class and Business Class

Essentials 59 The Many Faces of Angkor From the bustle of trendy Siam Reap to isolated temples in the jungle, a visit to Angkor Wat is a multifaceted experience.

64 Life of Italian Nobility for Sale Regulations and rising taxes have forced many landowners to put their castles and historical mansions on the market.

68 Reclaiming Puerto Rico’s Food Paradise

59

Puerto Rico has produced its fair share of internationally acclaimed chefs, but now its local food scene is also gaining attention.

72 Crisis Hits Kimono Trade The Japanese island of Amami Oshima is renowned for its kimonos, but a stagnant economy and an out-dated distribution system is endangering this tradition.

68

76 The Tall Blacks The New Zealand Breakers, a basketball team from a country that worships rugby and cricket, has won three of Australia’s National Basketball League’s past four championships.

80 Taps Run Dry in Brazil’s Largest City A combination of drought, deforestation, climate change and creaky infrastructure have caused an unprecedented water crisis in São Paulo.

80

84 The Brands in Art Basel’s Orbit

Departments

Art Basel is the most well-attended art event in the world,

9 Notebook

which is why there is stiff competition among companies for

World business in a nutshell.

15 Observer

sponsorship deals.

88 Other Business

Spotting and analysing business trends.

Portfolio takes a light-hearted look at the latest business news.

22 Column: Jane Levere Smart Luggage for the Connected Age

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Portfolio

F O R

S H O P P I N G

L O V E R S

CA S T E L L A N A

S TO R E

S TO R E

M A D R I D / D I AG O N A L

DEPARTMENT STORES SPAIN & PORTUGAL

BA R C E LO N A

9

Notebook B U S I N E S S

N EW S

Egypt’s New Capital

B R I E F

to the east of its predecessor.

The scale of the plans certainly defy historical norms. If completed, the currently nameless city would span 700

several years of deep social division, political upheaval and economic crisis.

There are also those who doubt this particular dream will ever reach reality.

square kilometres (a space almost as big as

“Based on historic and global track

Egypt’s capital has moved two-dozen

Singapore), house a park double the size of

records, trying to build a new city from

times in the country’s 5,000-year history,

New York’s Central Park, and a theme park

scratch is a massive gamble,” says Brent

but its current seat of power has remained

four times as big as Disneyland – all to be

Toderian, Vancouver’s former chief planner,

unchanged since AD 969. That was the year

completed within five to seven years.

and a consultant for several cities outside

when Fatimid invaders began to build a

According to the brochure, there will be

of the Middle East. Toderian cites less

grand enclosure to house their new mosques

exactly 21 residential districts, 25 “dedicated

ambitious projects in China – places like

and palaces – a private city known to its

districts”, 663 hospitals and clinics, 1,250

Caofeidian, which hoped to attract a million

residents as al-Qahera, and eventually to the

mosques and churches, and 1.1 million

residents but ended up with only a few

world as Cairo.

homes housing at least five million residents.

thousand. Dubai is an obvious counter-

But a millennium on, and nearly 20

In terms of population, that would

example of success.

Writing in The Egyptian Observer, the

million inhabitants later, Cairo’s time

make it the biggest purpose-built capital

might finally be up according Egyptian

in human history – nearly as large as

academic and Cairo native Khaled Fahmy

officials. The government has announced

Islamabad (population: an estimated 1.8

argued that the money spent on the new

a $45 billion plan to pass Cairo’s baton to

million), Brasilia (2.8 million), and Canberra

capital “could solve the problems of Cairo’s

another foreign-helmed development. Just

(380,000) put together.

inner cities where 63 per cent of the city’s

as al-Qahera once was, this new capital Photos: Getty Images

I N

In certain quarters in Egypt, these

inhabitants live. We could provide them

is to be built from scratch – in this case

astonishing numbers have been hailed by

with all the basic needs that they have been

by Capital City Partners whose founder,

those who desperately hope a new capital

deprived of over the past 50 years: potable

Mohammed Alabbar, built Dubai’s iconic

can symbolise a process of national renewal

water, health care, clean air, recreational

Burj Khalifa skyscraper – on virgin sands

under President Abdel Fattah el-Sisi, after

facilities, and much more.”

April 2015

Notebook

10

N u m b e r s

G a m e

The world in figures train makers: Bombardier,

compared with the 109 million

Siemens and Alstom.

who spent $164 billion in 2014, according to an analysis by Bank

60%

jump in demand

of America Merrill Lynch. To put

for Australian

that in perspective, there were

real estate by Chinese investors

just 10 million Chinese outbound

has spurred the government to

tourists in 2000.

impose new taxes on foreign properties buyers, including a proposed application fee of A$10,000 for every A$1m spent

$2.1

trillion in profits are stashed

away overseas to avoid taxes by

on Australian property. Chinese

US companies, according to a

buyers have become the biggest

Bloomberg News review of the

single group of foreign residential

securities filing of 304 corporations.

property investors in the US,

Microsoft Corp, Apple Inc, Google

UK and Australia according to a

Inc, and five other tech firms

Knight Frank report.

account for more than a fifth of the $2.1 trillion stockpile as each

35,000

km

boosted their accumulated foreign

journey

profits by more than 20 per cent

around the world will see the

18

-karat solid gold Apple Watch Edition with sapphire crystal glass will firmly clock Apple’s entry into the world of high-end fashion. The luxury watch, set to start at $10,000, is the firm’s most expensive item since 1983.

Technology and luxury good analysts are confident the product has the potential to succeed in the market.

$2.2

over the past year.

Solar Impulse 2 aeroplane make a record-breaking attempt over the next five months. The solarpowered plane will stop off at

11%

more expensive than New

York when it comes to buying

various locations around the

basic groceries has cemented

globe to carry out maintenance

Singapore’s position for a

billion deal

Finmeccanica of its loss making

and spread the campaign

second year as the world’s

has been

arm and reduces debt by 15

message of “clean technologies”.

most expensive city, according

signed by Italian aerospace and

per cent, while the acquisition

defence group Finmeccanica

will build Hitachi’s position in

to sell its rail business to

Europe, where it competes with

Hitachi Ltd. The sale relieves

the world’s top three international

a survey done by the Economist

174

million Chinese

Intelligence Unit. Following behind

tourists are tipped

Singapore are Paris, Oslo, Zurich

to spend $264 billion by 2019,

and Sydney.

126 Million Passengers by 2020 Dubai international Airport and Dubai World Central will together see around 200 million passengers by 2030 according to Paul Griffiths, the airport’s CEO. He also revised the projection for passenger numbers to 126 million by 2020.

“By 2020 we expect Dubai International to have ultimate capacity of 100 million.

By 2020, the traffic projections for the amount of air travel through Dubai will reach 126 million,” he said. “And this (the growth projections) is without the availability of further infrastructure development or space to build at Dubai International.”

Dubai International recently overtook London’s Heathrow as the world’s busiest airport, recording nearly 70.4 million passengers in 2014. Meanwhile, Al Maktoum International Airport in DWC, which currently has a capacity of five to seven million passengers, is slowly building up pace in passenger numbers.

Portfolio

Notebook companies that generate at least 15 per cent of international revenue in two or more currencies.

Earnings per share of North American corporates were hurt by $0.06 on an average, nearly double the 2013-2014 average and the highest since FiREapps began measuring the impact of currency swings.

A slew of US multinational companies, from DuPont to Procter & Gamble, have showed that a strong US dollar hurt their earnings, and several blue-chip exporters said the situation will get worse if the greenback holds its strength.

The number of companies reporting a negative impact was 6.4 per cent higher

Currency Swings Hurt US

in the fourth quarter than in the third quarter, according to FiREapps.

A strong US dollar is hurting multiple sectors, including industrial companies

The strong dollar is good news for some,

Total negative currency impact rose

but US corporations are feeling the pain.

more than four-fold in the fourth quarter

such as 3M Co, technology companies like

This is highlighted by a report from

from the previous quarter, and was the

Microsoft Corp and Apple Inc, healthcare

currency risk management consulting

biggest since the height of the euro crisis,

companies including Bristol-Myers

firm FiREapps that found foreign

according to the report.

Squibb and Pfizer, and consumer firms

FiREapps analyses currency effects on

like Procter & Gamble – which all garner

corporates $18.66 billion in revenue in the

quarterly earnings of 846 North American

a large portion of their sales from outside

fourth quarter.

companies, a subset of the Fortune 2000

the United States.

exchange swings cost North American

Pressure On US Oil Output According to OPEC, US oil output could start to take a hit by late 2015 due to low

be curbed towards the end of the year.

Oil’s collapse from $115 a barrel in 2014

prices. This implies that the exporter group

gained impetus after OPEC refused to cut

will have to wait beyond its next meeting in

output at a November meeting, seeking to

June to see if its strategy to defend market

slow higher-cost production in the United

share will dent the shale oil boom.

States and elsewhere that had been eroding

The halving of oil prices since June 2014 has prompted spending cuts by oil

its market share.

For now, OPEC forecast no further rise

companies and a drop in US drilling,

in demand for its crude in 2015, trimming

raising expectations of slowing output in

the forecast slightly to 29.19 million bpd,

countries outside the Organisation of the

and left unchanged its estimate of global

Petroleum Exporting Countries (OPEC).

growth in oil demand this year.

But in its March report, OPEC left its

In the previous report, OPEC had

forecast for non-OPEC supply this year

sharply increased the 2015 forecast of

unchanged and said output of US “tight”

demand for its oil due to a lower outlook

oil, also known as shale, might only start to

for non-OPEC supply.

April 2015

11

12

+++ ++ + ++++++ +++ + +++Ras + alAjman ++++++ Khaimah Sharjah +++ ++++ +++++++ +++++++++++++++++ Dubai ++++++ ++++ ++++++++++++++++++++ ++++++++ Jebel Ali ++++ ++ +++++++++++++++++++++++ ++ +++++ +++ ++ + ++++++++++++++++++++ ++++++++Fujairah + +++ ++ + + + + + + + + + + + + + + + + + + + ++++++++ +++++ +++ ++ +++++ + ++++ ++++++++ ++++++++++++ + +++++++++++++++++++++ ++ +++++++++++++++++++++++++ + + + + + + + + + + + + + + + ++++++++ ++++++++ +++++++++++++++++ +++++++ +++++++ Dhabi ++++++++ +++++Abu ++++++++++++++++++++++++++ +++++++++ + + + + + + + +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Al Ain ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++ +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++++ +++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++ ++ +++++ + + +++++++++++++++++++++++++++++++++ +++++++ +++++++ ++++++++ + + + + ++++++++++++++ ++ +++++ ++++++++ + + + +++++++ + + + +++++ ++ ++++++++ ++++++++++++ + 13-15 +++++++ ++++++++ ++ ++ +++++ ++++++++ + + +++++++ + OUTDOOR DESIGN & ++++++++ ++++++++++ D U B A I D I A R Y + ++ +++++ + + +++++++ + BUILD SHOW ++++ +++++++++++++ Dubai World Trade Centre ++ ++++ theoutdoorshow.ae

Notebook

UNITED ARAB EMIRATES

April 2015

forum agenda include cloud regulation and barriers, building business in the cloud, and ensuring high level of security and data protection. Attendees benefit from keynote speakers, as well as discussions with leading regional telecom operators.

The show brings the latest in products, services and techniques to design and build private and public spaces such as public parks, schools and major residential projects. New features on the agenda this year include the developer zone, where top developers will be meeting with potential suppliers for many leading projects in the UAE. Running alongside the event is Landscape 2020 that will focus on elements such as town planning, waste management and innovative urban projects.

13-14

26-28

Dubai World Trade Centre tankstorageforum.com/tankworldexpo/ This event for oil, gas and chemical storage offers attendees the opportunity to gain key insights into the latest market trends and commercial opportunities for their businesses in the Middle East. Industry professionals can gain key information on how to ensure cost effective growth, best strategies for minimising costs and increasing automation at their storage facilities.

Some of the key vendors at the exhibition hail from engineering and construction companies, automation solution providers and pipeline manufacturers.

Dubai World Trade Centre gisec.ae Offering cutting-edge IT solutions, the Gulf Information Security Expo & Conference will showcase over 100 top IT brands, free sessions and workshops. New to this edition is the Safe Cities Briefing Day designed for senior officials from government, security and agencies involved with setting best practise for safe cities.

It will also review the latest policy, plans and procurements designed to make cities safe. The official programme will also run sessions on a wide range of topics including cyber security, developing a security culture and the privacy dilemma.

9-10

14TH MENA FOREX The Westin Mina Seyahi Beach Resort meforexexpo.com This expo provides a platform for foreign exchange businesses to engage with institutional investors, discuss trends and establish investment opportunities.

Some of the topics on the agenda include alternative styles and strategies for investing, managing risks in online trading and the future of gold trading.

A gala dinner awards will honour the winners under more than 40 categories.

Some of the categories include best forex bank, best forex customer services provider, and broker of the year award.

112-14

CLOUD MENA Habtoor Grand Hotel mena.cloudworldseries.com The 5th edition of the Cloud World Forum MENA is set to be bigger and better by hosting more than 60 visionary speakers, leading solution providers and more interactive sessions. The highlights of the

TANK WORLD EXPO

GISEC

Portfolio

Observer BUSINESS NEWS IN BRIEF

Korea’s F1 Dream

we ended up with a spectacular flop.”

Such failures are far from unheard-of in

The Korean Grand Prix only lasted for four years, and critics say it was ill-conceived from the start. But at least it has left a legacy of motor racing, reports Choe Sang-hun.

Formula One racing. The Turkish Grand Prix lasted only from 2005 to 2011, and India’s third and last was in 2013. Low attendance in Turkey and a tax dispute in India were blamed for the early demises.

But many in South Korea say the

EIGHT YEARS AGO, the South Korean

on their way to the Hyundai shipyard.

Yeongam circuit, which was funded mostly

province of South Jeolla, which includes the

But only three more Grand Prix races

with public money, was ill-conceived from

sleepy coastal county of Yeongam, cleared

followed, and today the quiet has

the start. As early as 2007, parliament’s

more than 400 hectares of rice paddies and

returned. The biggest events now seen

budget office and a government research

embarked on a $375 million experiment:

at the 5.6-kilometre Korea International

institute warned that South Jeolla’s

building a Formula One racetrack.

Circuit, with its capacity for 120,000

revenue forecasts for the project were

spectators, are amateur races that draw

exaggerated. In January, a civic group filed

modest crowds.

suit against former provincial officials

© 2014 New York Times News Service

In 2010, Yeongam hosted the first Korean Grand Prix. New hotels went up to accommodate what local officials

“We started with a big dream of making

over the track, asking prosecutors to bring criminal charges for breach of trust.

hoped would be an unprecedented

lots of money,” said Park Bong-soon, a

wave of foreign tourists. The screams of

South Jeolla province official whose title

racing machines came to this flat, quiet

until recently was director of the Formula

nest of problems, a project that should

land, which was more accustomed to

One support centre, even though there is

never have been born,” said the group,

the trundle of gigantic ship components

no longer an F1 race to support. “Instead,

whose English name is Good Society

April 2015

“The Formula One race here was a

15

16

Observer for Humans, accusing the officials of squandering tax revenue to pursue a “political showpiece.” The officials have denied such accusations.

The Korean Grand Prix’s main problem, provincial officials like Park now say, was that most South Koreans were simply unfamiliar with Formula One – and, indeed, with auto racing in general. Some took “F1” to be a variant of K-1, a mixed-martial-arts competition.

In Seoul, the capital, road racing is usually mentioned in association with so-called pokjujok, literally “tribes of violent speed” – fast-food delivery drivers on souped-up motorcycles who terrorise late-night drivers.

South Jeolla officials had envisioned the Grand Prix as a multimilliondollar advertising platform for Korean corporations like Samsung and Hyundai, but given the sport’s obscurity in the country, no major sponsors were interested.

And ticket sales were disappointing – which perhaps should have been no surprise, given the track’s location in the remote southwest. (Both the location and the dearth of South Korean racing fans were cited by parliament in its early warnings about the project.)

Organisers wound up cutting ticket prices substantially, and they were accused of exaggerating turnout and of letting people into the races at no charge.

BY 2013, SOUTH Jeolla was deep in debt and unable to come up with the annual fees required by Formula One. The fees were reduced by about 40 per

Top: Cars at the Nexen Tire Speed Racing event at Korea International Circuit in Yeongam.

Above: Spectators cheer at the Nexen Tire Speed Racing event.

will return soon. Still, some say that the Formula One venture should not be seen as a complete failure. It left behind a legacy, they say: the seeds of a South Korean racing scene.

cent that year, to $27 million (after which

“You see the car-racing mindset

a banner went up in Yeongam thanking Bernie Ecclestone, the F1 chief ). But no

prompting speculation that it would move

suddenly picked up in Korea in the past

more discounts were forthcoming, and

to the Seoul area. But it was dropped

two years,” said Michel Puchercos, 57, a

that year’s Grand Prix was the last. In the

from the calendar in January, with no

French businessman in Seoul who has

autumn, South Korea was mysteriously

explanation given.

been competing in local amateur races for

included on Formula One’s calendar for 2015, with no site specified for the race,

South Korean officials say there is no realistic prospect that the Grand Prix

three years. “You see the number of racing cars increasing.”

Portfolio

Observer O N E

2

w a t c h

Text: Hilda D’Souza

Prior to his recent tenure as the chairman of Bayer AG’s health-care division, Brandicourt served at American pharmaceutical giant Pfizer. There Brandicourt oversaw the introduction of the cholesterol treatment Lipitor, the best-selling statin, and also the first drug to generate $10 billion in annual sales. This successful US experience should benefit Sanofi as the company plans to launch the new injectable cholesterol treatment called Praluent together with its US partner Regeneron this year.

In addition to Praluent and Toujeo, which replaces Lantus, the company is projected to launch up to 18 new drugs by 2020. Others

Olivier Brandicourt, CEO, Sanofi

include the world’s first vaccine for dengue fever, which bank analysts say could become the world’s best-selling vaccine with revenues of over $1.05 billion.

Brandicourt studied medicine and after attaining his degree he spent eight years with

Sanofi SA, the French pharmaceutical

the Paris Institute of Infectious and Tropical

company and one of the world’s largest

Diseases researching malaria in West and

drug and vaccine makers, has named

Central Africa and working as a doctor in

Olivier Brandicourt as its new chief

the Democratic Republic of Congo. Industry

executive, effective April 2. Brandicourt

analysts say this experience will be valuable in

replaces Christopher A. Viehbacher who

promoting the new dengue vaccine.

was abruptly dismissed on grounds of lack

Brandicourt will also have the task of

of communication with the board and his

driving through Sanofi’s on-going restructuring

questionable management style.

demands and reviving its oncology research

Brandicourt takes helm at a critical time

and development that suffered a setback after

for Sanofi as it gears up for a busy period

a few late-stage product failures. Investors

of product launches, which investors are

also want to see Brandicourt succeed where

counting on to revive growth after long

his predecessor Viehbacher failed by pushing

dearth of innovation. Sanofi’s top-selling

for greater productivity without alienating the

diabetes drug Lantus, which accounts for

company’s powerful French stakeholders.

over 30 per cent of its profits, loses patent

“Olivier Brandicourt’s strong experience

protection this year. The company also faces

combined with his international profile, deep

stiff competition from rivals that have already

knowledge of US and emerging health care

lined up cheaper versions of the product in

markets, and his capability to unite teams will

Europe. In addition, Lantus has come under

provide new dynamism to Sanofi’s strategy

pressure by insurers in the US who are

of diversification and innovation,” chairman

demanding lower prices.

Serge Weinberg said in a statement.

++++++++++++++++++ ++++++++++++++++++ Ghana Secures ++++++++++++++++++ ++++++++++++++++++ $1 Billion IMF ++++++++++++++++++ ++++++++++++++++++ Loan ++++++++++++++++++ ++++++++++++++++++ Ghana has struck a deal with the ++++++++++++++++++ International Monetary Fund aimed at ++++++++++++++++++ ++++++++++++++++++ stabilising its troubled economy. The ++++++++++++++++++ IMF will provide Ghana with loans ++++++++++++++++++ ++++++++++++++++++ worth about $940 million in instalments, ++++++++++++++++++ beginning in April. The three-year deal ++++++++++++++++++ ++++++++++++++++++ follows months of talks prompted by the ++++++++++++++++++ government’s failure to meet targets on ++++++++++++++++++ ++++++++++++++++++ inflation, the budget deficit and growth. ++++++++++++++++++ The Ghanaian economy had been ++++++++++++++++++ expanding at about eight per cent ++++++++++++++++++ ++++++++++++++++++ annually on the back of gold, cocoa and ++++++++++++++++++ oil exports. However, growth fell to 4.2 ++++++++++++++++++ ++++++++++++++++++ per cent in 2014 as commodity prices ++++++++++++++++++ fell and the currency depreciated. The ++++++++++++++++++ ++++++++++++++++++ resulting economic crisis has led to severe ++++++++++++++++++ power shortages. ++++++++++++++++++ ++++++++++++++++++ This bailout is considered necessary for ++++++++++++++++++ the restoration of investor confidence in ++++++++++++++++++ a struggling economy beset by crippling ++++++++++++++++++ electricity black-outs. ++++++++++++++++++ But President John Mahama’s ++++++++++++++++++ ++++++++++++++++++ administration has a tough job ahead ++++++++++++++++++ implementing austerity measures being ++++++++++++++++++ ++++++++++++++++++ prescribed by the IMF – a likely increase ++++++++++++++++++ in fuel prices as a 17 per cent petroleum ++++++++++++++++++ ++++++++++++++++++ tax is imposed, a freeze on hiring public ++++++++++++++++++ sector workers and an end to costly ++++++++++++++++++ energy subsidies. ++++++++++++++++++ ++++++++++++++++++ The IMF now expects inflation in ++++++++++++++++++ Ghana to fall to between 11 and 12 per ++++++++++++++++++ ++++++++++++++++++ cent by the end of the year. Growth ++++++++++++++++++ should come in at 3.5 per cent in 2015, ++++++++++++++++++ ++++++++++++++++++ it said, rising to between five and six per ++++++++++++++++++ cent by 2017. ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Reuters

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Portfolio

Observer

19

End of the “Blue Banana” Once depicted as a “Blue Banana” stretching from Manchester to Milan, Europe’s industrial heartland has moved eastwards just as its political centre of gravity has shifted to Germany.

The term was coined in 1989 to describe French geographer Roger Brunet’s work identifying a manufacturing megacity, visible from space at night as a band of light curving from England to Italy via the Netherlands, Belgium, West Germany Reuters

and Switzerland.

A quarter of a century later, the continent’s industrial geography has morphed. A more fitting image might be

cars and some industrial machinery.

Manufacturing employment has declined

percentage points between 2004 and 2013, the latest year for which final data

a golden soccer ball centred on southern

everywhere in Europe as a share of the

is published. The biggest gains accrued to

Germany and reaching into Poland,

workforce but most sharply in Britain,

Germany with 2.2 percentage points.

Hungary, the Czech Republic, Slovakia,

France and Belgium, with the post-2008

Austria and Romania.

economic crisis accelerating a trend driven

region encompassing Britain, France,

by the globalisation of supply chains.

Ireland, Spain and Portugal lost a

Former-communist countries that joined the European Union in 2004 and 2007 have

The golden football region – Germany,

Over the same period, the Atlantic Arc

cumulative 4.4 percentage points in

become the extended production line of

the Netherlands, the Czech Republic,

intra-EU market share, led downwards

German industry, no longer just supplying raw

Slovakia and Romania – increased its

by Spain and the UK. Italy also lost 1.7

materials and components but assembling

share of intra-EU trade by a total of 5.3

percentage points.

Indian Jewellers Jump Online growth potential convinced Ratan Tata, former chairman of the Tata Group, to invest in Bangalore-based online jewellery store BlueStone last year.

Jewellers are tying up with Amazon.com, Flipkart Online Services and Ebay after the government last year eased import curbs on gold bars and coins. The total online retail market in India will be about $6 billion this year, driven by free delivery and heavy discounting, Gartner Inc. estimates. That may grow to $22 billion by 2018, CLSA Asia Pacific Markets predicts.

Getty Images

The online jewellery market may be worth as much as $2.5 billion in the next five to 10 years, BlueStone estimates. Currently it accounts for less than 0.1 per cent of the $55 billion jewellery In India, where buying gold traditionally means a trip to the family jeweller, a growing e-commerce market forecast at $22 billion in three years is starting to challenge all conventional wisdom.

Gitanjali Gems Ltd., India’s biggest diamond and gold jewellery

market, it says.

Indians bought 662 metric tons of gold jewellery valued at $26.9 billion in 2014, the most since 1995, according to the World Gold Council. Total demand including for gold bars and coins was 842.7

retailer, expects online sales to account for as much as 20 per cent

tons, helping India surpass China as the world’s largest consumer

of its sales in two to three years from about one per cent now. The

last year, the council said.

April 2015

Observer T H E

W O R L D

ToP Text: Hilda D’Souza

1o

Safe CitieS index 2015 Rank

CITY

1.

Tokyo

2.

Singapore

3.

Osaka

4.

Barcelona

5.

Amsterdam

6.

Sydney

7.

Zurich

8.

Toronto

9.

Melbourne

10

New York

Getty Images

20

China’s Tourist Wave Already the most prolific spenders globally, the number of Chinese outbound tourists is tipped to soar further as the millennial generation spreads its wings.

Source: The Economic Intelligence Unit 2015

According to a new analysis by Bank of America Merrill Lynch,

CitieS for digital SeCurity Rank

CITY (oveRall Rank)

1.

Tokyo

SCoRe/100 87.18

2.

Singapore

83.85

3.

New York

79.42

4.

Hong Kong

78.78

5.

Osaka

77.00

6.

Los Angeles

74.99

74 million Chinese tourists are tipped to spend $264 billion by 2019, compared with the 109 million who spent $164 billion in 2014. $264 billion is about the size of Finland’s economy and bigger than Greece’s.

“China-mania spread globally in the past few years, akin to when the Japanese started travelling some 30 years ago, when the

7.

Stockholm

74.82

8.

San Francisco

73.85

9.

Abu Dhabi

73.71

needs,” the analysts wrote. “In our view, this is going to be bigger

10

Chicago

72.90

and will last longer given China’s population of 1.3 billion versus

world went into frenzy then, pandering to Japanese customers’

Japan’s population of 127 million.’’

Source: The Economic Intelligence Unit 2015

Millennials, or 25- to 34-year olds, are expected to make up the

CitieS leading in infraStruCture Safety SCoRe/100

bulk of Chinese tourists at 35 per cent of the total, followed by

Rank

CITY

1.

Zurich

92.63

15- to 24-year olds accounting for around 27 per cent. Only about

2.

Melbourne

92.28

five per cent of China’s 1.3 billion populace are thought to hold

3.

Sydney

91.40

passports, meaning the potential for outbound tourism is vast.

4.

Amsterdam

91.27

5.

Tokyo

89.79

6.

Montreal

89.47

7.

Singapore

88.86

The projected boom could be good news for the global economy.

The Chinese are the world’s biggest consumers of luxury goods, with half of that spending done overseas. Chinese visitors to the

8.

Toronto

87.57

US have risen more than 10 per cent since 2009, the fastest pace

9.

Madrid

87.28

for a destination outside of Asia. Australia, France and Italy are

10

Abu Dhabi

86.16

also popular.

Source: The Economic Intelligence Unit 2015

Asian markets stand to benefit, with the biggest uptick tipped for Japan, South Korea and Southeast Asia, according to the research.

Portfolio

CASHMERE, SILK & CROCODILE CONCEPT

Commentary

22

Jane Levere

Smart Luggage for the Connected Age

in late summer. Trunkster’s bags will have a tracking system, a scale and a battery with two USB chargers, Potash said, as well as a roll-top entry providing quick access.

The push for the connected bag solves

It wasn’t long ago that the main selling

one of the most vexing problems for

point of a piece of luggage was its durability.

travellers – lost luggage. “The last thing that

Not for Kevin Harwood. Like many travellers today, he is looking for technology

you want to have happen is an unwelcome

to go along with durability. He stumbled

surprise of a suitcase disappearing,” said

across a carry-on bag controlled by

Henry Harteveldt, travel analyst for

smartphone – with a Bluetooth-enabled lock,

Atmosphere Research Group. “This is

GPS tracking and a USB port for recharging

peace-of-mind technology.”

Travellers who want to track their bags but

a device. It has a built-in scale, too.

not replace luggage they already own, or who

“I’m a little bit of a geek, always looking for products that extend from my phone,

are concerned about a suitcase’s embedded

that connect my world and me,” said

tracking system possibly malfunctioning,

Harwood, a 30-year-old software developer

have another option: free-standing devices.

from Austin, Texas.

Beside LugLoc – which uses Bluetooth and GSM technology and costs $70, plus

Why should luggage be any different?

At the crowdfunding site Indiegogo he was

to airport. Rimowa, a German luggage

additional search fees – there is Trakdot,

among the first to buy into a startup called

manufacturer, is jointly developing a smart

whose GSM device texts and emails users the

Bluesmart that is developing a connected bag.

suitcase line called Bag2Go with Airbus and

location of their checked suitcase when their

Harwood has plenty of company. Bluesmart

Deutsche Telekom. The new bags, expected

plane lands and costs $50, plus an annual

raised more than $2 million from more than

to be available next year, will interact with

service fee of $20.

10,000 backers, far surpassing its goal.

sensors in the cargo holds of Airbus aircraft

Bluesmart, which expects to deliver its first bags in October, is part of what has become

to identify their location.

“Adding electronic capability and

Franck Dubarry, founder of Lev Technology, said his company would introduce a Smart Unit device this summer

a stampede of businesses – both startup and

communications to baggage makes a lot

that will tell users where their bags are after

established – into the nascent connected

of sense,” said Frank Gillett, an analyst at

flights. It will cost $99, plus activation and

luggage industry.

Forrester Research. “What you’re seeing is

other fees.

Samsonite is to introduce a new line of

the first round of innovation that will take

To comply with regulations governing

GeoTrakR suitcases, containing a cellular-

time to evolve. The goal is to improve the

personal electronic devices, the tracking

enabled baggage-tracking system from

travel experience.”

systems are generally designed to

LugLoc, at the Travel Goods Association

© 2015 New York Times News Service

said it would release a carry-on and a suitcase

Hanif Perry, 32, a New York-based

automatically shut down once they are stored

trade show in Las Vegas, Nevada. Andiamo

marketing consultant who also participated

and to automatically turn back on once a

will introduce a new carry-on with a

in Bluesmart’s Indiegogo campaign, said he

plane lands.

wi-fi hotspot, battery charger and other

liked its bag’s laptop pocket. The carry-on, he

features. Delsey has been soliciting feedback

said, “is more purposefully designed for the

and better for customers quickly spread

since late last year for its Pluggage line of

younger traveller who carries all devices.”

throughout the market,” said Michele Marini

smart suitcases.

Bluesmart is not the only luggage venture

“Products that make travel easier

Pittenger, president of the Travel Goods

Even telecom companies are interested.

raising money through crowdfunding.

Association. “To use recent examples, we’ve

AT&T is researching development of a smart

Trunkster collected $1.4 million from

seen lightweight bags, expandable cases and

bag, described in a YouTube video posted

3,500 investors through Kickstarter, easily

four-wheeled luggage rapidly become the

last summer, that tracks a bag from airport

surpassing its goal. Jesse Potash, a co-founder,

new normal,” she said.

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Profile

24

Portfolio

25

Putting the Fizz Back Into Coke Coca-Cola, one of the world’s most iconic companies, is starting to lose its sparkle.

CEO and chairman Muhtar Kent has his work cut out for him as he battles changing tastes, health conscious consumers and a steady decline in US soda sales, reports Guido Duken.

Muhtar Kent, Coca-Cola’s Chairman and Chief Executive Officer, is under pressure. In North America, the company is dealing with a steady decline in soda consumption and competition from smaller players. In 2014, Coca-Cola’s global unit case volume rose 1.5 per cent, which was short of its target range of three to four per cent. Its operating income and earnings per share growth also fell short of targets.

As a result, shareholders are not happy. Wintergreen Advisers, a minority shareholder in Coca-Cola, went so far as to call for Kent’s head. The investment firm, in a statement accompanying an analysis of Coca-Cola’s performance, said Kent was “incapable of leading Coke’s turnaround and should be replaced.”

That’s not to say that Coca-Cola is on the ropes. The company has 130,600 employees, makes 500 different beverages around the world and sells two billion servings daily. North Korea and Cuba are the only two countries in the world where Coke does not operate.

There are a number of reasons why Coke’s performance is faltering. One major factor is the growth in competition. Today, there are 4,200 beverages in the market, thousands more than existed just a few years ago. But beyond competition, there is a bigger problem, namely relevance. And relevance, in turn, is tied to changing trends. Simply put, Coke isn’t cool anymore.

In fact, it is even regarded as a health hazard. a fifth of all US adults were obese; today that number is 35 per cent.

Obesity rates among children have tripled since the 1970s. The scientific community quickly identified fast food and sodas as a major cause.

The result has been a steady sales decline in the $75 billion soda industry. Yet for decades, soda companies saw consumption rise. During April 2015

Photos: Getty Images, Corbis

By 1999, according to the Centres for Disease Control and Prevention,

Profile

26

targets in 2014, but also likely in 2015.

Coke recently reported that its 2014 revenue slid two per cent to $46 billion and profit fell 17 per cent to $7.1 billion from the prior year. The solution? Kent believes it is to sell more soda, diversify, and cut costs.

MUHTAR KENT, THE son of a Turkish diplomat, is a Coca-Cola man through and through. He started with the company in 1978 working on delivery trucks. “I would get up at 4am, go into supermarkets, bring in products, stock the shelves and build displays. At the time, I would sometimes ask myself what I was doing, but I now know it gave me a very fundamental understanding of our business from the ground up.”

He continued to rise up through the ranks with a variety of leadership positions in Coke’s US, Europe and Asia operations. Kent put the understanding he gained from his delivery days to good use in what he cites as the most enjoyable aspect of his career. “I’m thankful that I’ve had opportunities to be involved with the 1970s, the average person doubled the amount of soda they drank; by the 1980s it had overtaken tap water. In 1998,

Above: Kent puts the understanding he gained from his delivery days to good use in expanding the brand.

markets and societies that are on the move. This was true in the 1990s, when I worked in a number of the former Soviet bloc nations as they embraced the free

Americans were downing 1.3 oil barrels’ worth of soda for every person. But in

years for Kent, and it may get worse. In

market and greater political freedom. It

2005 sales started dropping and they

February 2013, Coke confirmed it had

was amazing to experience first-hand the

haven’t stopped since. Americans now

fallen short of its three to four per cent

positive changes happening there.”

roughly drink the same amount of soda as

annual volume growth for the first time

they did in 1986, and there have also been

in nearly a decade. Kent called it a “speed

Europe that Kent had a once in a lifetime

unexpected slowdowns in key markets

bump” and promised that 2014 would be

moment after the Berlin Wall fell in 1989

such as China and Latin America. That is

the “year of execution”. By October last

and he was put in charge of the region.

a big problem for Coke, as soda makes up

year, he had to acknowledge Coke would

After sizing up the potential, Kent flew

74 per cent of its business worldwide.

not only miss its revenue and profit

to Atlanta and told his bosses, “I need

In fact, it was in Eastern and Central

And that falling trend is set to continue, as health-conscious consumers shift away from calorie-rich drinks. And as concerns have grown over “artificial” products, such as sweeteners, customers have also moved away from low calorie “diet” colas. In the US, Diet Coke consumption has plunged by two per cent in the past two years.

Kent bases his leadership strategy around being “constructively discontent”. By this, Kent means, “not fast enough, not innovative enough, not entrepreneurial enough. It’s all about an entrepreneurial mentality. I’ve worked religiously to get that into the company. People need to feel like they are chasing pennies down the hallway.”

The result has been a rough two Portfolio

27

capital, and we’ve got to go now.” He and

20 billion-dollar brands. Fourteen of them

his team built 22 factories in 28 months.

are still beverages, including Dasani water

In 1999 he joined the Turkish Efes

and Minute Maid orange juice. “Sparkling

Beverages Group but he returned to

beverages have always been a treat, and

Coca-Cola in 2005 as head of North Asia,

we have to rediscover that,” Kent said in a

Eurasia and the Middle East where he

recent interview.

worked with the bottling network to boost

In February 2014, Kent announced

sales volumes. He was then promoted to

plans for a reintroduction of Coca-Cola,

president and focused on his next target,

accompanied by a two-year, $1 billion

Coca-Cola Enterprises (CCE), which was

marketing push, with the goal of driving

Coke’s biggest bottler in the US. CCE

“sparkling” (the company’s euphemism for

had taken on too much debt and could

soda) back to where it once was. “It’s going

not adequately invest in Coke’s brands.

to take a while, this is not … an immediate

“Coke had no chance to grow in the US,”

fix, but we know it’s going to be a steady

Kent believed. The obvious answer was

improvement,” he said. Judging by last

to buy the bottler, but negotiations had

year’s results, this strategy is producing

already failed twice. But Kent managed to

some effects with sales of Coca-Cola

broker a $12.3 billion megadeal in 2010

inching up one per cent in North America.

that brought 65,000 new employees, $21 billion in revenue and various synergies that helped Coke save $350 million in annual costs.

Above: Coca-Cola has successfully turned Gold Peak, Fuze Tea and I Lohas into $1 billion brands respectively by scaling it through Coke’s global distribution system.

On the back of this success Kent

Coca-Cola has also been busy diversifying its brands. Since 2007, the company has invested in at least five smaller companies and bought three.

Coca-Cola has successfully turned

became CEO in 2008 and chairman

Gold Peak, Fuze Tea and I Lohas into

in 2009. Kent bases his leadership

KENT WILL NOW have to enforce

$1 billion brands respectively by scaling

strategy around being “constructively

his leadership strategy as Coca-Cola

it through Coke’s global distribution

discontent”. By this, Kent means, “not

needs rapid change, innovation and

system supported by intense marketing.

fast enough, not innovative enough, not

entrepreneurial success. But can he do it?

Last year, Coke spent $3.5 billion

entrepreneurial enough. It’s all about

in buying minority stakes in Keurig

Kent insists that soda is still the

an entrepreneurial mentality. I’ve worked

company’s “oxygen”, as it generates roughly

Green Mountain (a machine that

religiously to get that into the company.

74 per cent of revenues. Coca-Cola, he

allows people to make single servings

People need to feel like they are chasing

believes, has “exactly the right ingredients”

of sodas and other drinks at home)

pennies down the hallway.”

to grow rapidly – including a portfolio of

and a 16.7 per cent stake in Monster

Falling flat

Coca-Cola Co.’s global beverage volume, annual change SOURCE: The company/The Wall Street Journal.

6%

4%

2%

0% 2005 April 2015

2006

2007

2008

2009

2010

2011

2012

2013

2014

Profile

28

relevant in a world of changing tastes.

Market researchers have found that high school teenagers can tell them Red Bull’s ad slogan, but have no idea of Coke or Pepsi’s. Whereas drinking a Coke formerly used to be part of the “cool” factor, that role is now played by iPhones and other luxury accessories. That is why Coke needs to find new growth businesses as the market moves away from carbonated soft drinks.

NOT THAT COCA-COLA is the only company in this situation. Preferences are changing so rapidly and profoundly that they’ve caused recent financial losses at companies such as Kellogg, Kraft Foods Group and McDonald’s as consumers move to items that are healthier, tastier and more unique. Kent Beverage – a successful energy drink.

Kent is also intent on freeing up cash by refocusing on Coca-Cola’s core business. In other words, Coke plans to refranchise, or sell off, nearly all of its North American bottling operations.

Top L-R: Coke plans to refranchise, or sell off, nearly all of its North American bottling operations; Coke spent $3.5 billion in buying minority stakes in Keurig Green Mountain and Monster Beverage.

Above: Kent insists that soda is still the company’s “oxygen”, as it generates roughly 74 per cent of revenues.

to it that our brands connect with the values that are so important to the key demographic of the millennial youth generation: authenticity, sustainability and transparency. We need to stay nimble, responsive and progressive.”

This will allow the company to focus on

In 2009, Kent believed he could double

its core competencies – marketing innovation and franchise leadership.

is aware of that shift. “We must see

as Honest Tea, Zico coconut water, and

sales by 2020. The company has since

Innocent, a British-based juice, have

distanced itself from that target, but still

costs by $3 billion a year, some of it by

infused the company with entrepreneurs

believes in its long-term growth strategy.

cutting 1,800 jobs. By reducing hierarchy

who continue to run their brands and in

“There is no tomorrow without today,”

at the corporate level, Coca-Cola is hoping

many cases operate far from corporate

says Kent. “The future of the world

to gain faster, decentralised decision

headquarters in Atlantis.

belongs to two groups: those that can

The company is also planning to slash

making. Furthermore, Coke’s aggressive

It is the acquisition of such brands that

acquisition of independent brands such

Coca-Cola hopes will allow it to maintain

grow and those that cannot grow. Those that don’t grow will go into oblivion.”

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Economy

30

India’s Economic Surge Other developing economies have run into headwinds, but India’s outlook has brightened since the election of businessfriendly Prime Minister Narendra Modi, reports Keith Bradsher.

C

hina’s economy is slowing. Brazil

boilers. Foreign investment rules have

is struggling as commodity prices

been relaxed for insurers, military

plunge. Russia, facing Western

contractors and real estate companies.

sanctions and weak oil revenue, is headed into a recession.

As other big developing markets

Renewed optimism from outside investors is spurring business expansion

to make changes.

His party lost badly in recent local

stumble, India is emerging as one of

in cities around the country like

the few hopes for global growth. The

Tiruppur, a hub of India’s yarn and

elections in Delhi. The next test was in

stock market and rupee are surging.

textile industry. “Most of the factories in

February when the government presented

Multinational companies are looking to

Tiruppur are doubling or tripling their

its full-year budget to parliament and

expand their Indian operations or start

capacity, and these are huge factories,”

layed out an agenda for taming chronic

new ones. The growth in India’s economy,

said Pritam Sanghai, the director of

deficits while increasing investment,

long a laggard, just matched China’s pace

Arjay Apparel Industries.

bolstering manufacturing and building

in recent months. © 2015 New York Times News Service

A broad tax overhaul is underway.

India is riding high on the early success

Whether India’s momentum is shortlived or sustainable hinges on whether

modern highways and ports.

India, in part, is benefiting from

of Prime Minister Narendra Modi and

Modi can push through deeper reforms,

favourable economic winds, the same

a raft of new business-friendly policies

including addressing the persistent

ones wreaking havoc in Russia, Venezuela

instituted in his first eight months.

poverty and corruption that plague the

and elsewhere. The country’s reliance

Small factories no longer need to

economy. Lacking the necessary political

on imported oil, for example, has been

shut down every year for government

support to overhaul legislation quickly, he

its bane for decades. By last summer, oil

inspectors to spend a day checking

has largely relied on temporary measures

was a $100 billion drag on the economy, Portfolio

31

“All the circumstances have come

roughly five per cent of the entire country’s economic output. With crude prices now halved, fuel costs for trucks and cars have plunged, pulling down transport expenses and inflation. The cost of government fuel subsidies has nosedived, helping curb the country’s chronic budget deficits.

“We’ve essentially received a $50 billion gift for the economy,” said Raghuram G. Rajan, the governor of the

India, in part, is benefiting from favourable economic winds, the same ones wreaking havoc in Russia, Venezuela and elsewhere. The country’s reliance on imported oil, for example, has been its bane for decades.

together to make manufacturing and growth happen,” said Shailesh V. Haribhakti, the chairman of MentorCap Management, a boutique investment bank in Mumbai.

As India’s fortunes begin to shift, Modi is trying to tackle thornier economic issues. He wants to expand the private sector’s role in coal mining, a government-dominated industry. He is looking to accelerate the construction of

Reserve Bank of India.

roads and other infrastructure. On the

India is also profiting from the troubles of other emerging markets.

India and its main rival as an alternative

tax front, Modi hopes gradually to replace

China’s investigations of multinationals,

to China, Indonesia.

state taxes on goods that cross state

persistent tensions with neighbouring

Mary T. Barra, the chief executive

borders with a national tax.

of GM, came to Pune in western India

In a January visit to New Delhi,

have prompted many companies to start

last September to oversee the start of

President Barack Obama highlighted

looking elsewhere for large labour forces.

Chevrolet exports from there to Chile.

Big companies like General Motors have

She is also scouting for opportunities to

recently moved their international or

expand in India’s auto market, which

Asia headquarters from Shanghai to

the company predicts will be one of the

Singapore as they expand further into

world’s three largest by 2020.

Illustration: Charlie Banalo. Photos: Getty Images

countries and surging blue-collar wages

April 2015

Below: Workers assemble a General Motors car in India. Multinationals, like GM, are expanding further into India at the expense of China.

Economy

32

“There are still too many barriers – hoops to jump through, bureaucratic restrictions – that make it hard to start a business, or to export, to import, to close a deal, deliver on a deal.”

chronic regulatory obstacles in India.

“There are still too many barriers – hoops to jump through, bureaucratic restrictions – that make it hard to start a business, or to export, to import, to close a deal, deliver on a deal.” But Obama acknowledged the country’s progress, saying, “Prime Minister Modi has initiated reforms that will help overcome some of these barriers.”

The challenges are significant.

The World Bank recently ranked India as the 142nd-hardest place to do business out of 189 countries. Legal disputes, often involving land, can bog down even the most sought-after projects. A Boeing aircraft maintenance centre is only now close to opening after a two-year delay in

parliament, the deeply divided upper

on executive orders that automatically

construction of a crucial taxiway, caused

house has delayed action on bills for his

expire in late April. They can be renewed,

by villagers who lay down in front of

longer-term reforms. So Modi has relied

though not indefinitely.

bulldozers until the state government paid them more for a 183-metre strip of land.

250 million

Would-be builders of large factories also worry about India’s stringent labour laws, including essentially lifetime

India

YOUTH POPULATION

employment guarantees for unskilled or semiskilled workers with at least two years’ experience.

Both sexes 15 to 24

150

Those labour law protections are starting to erode. Many companies

100

rely increasingly on contract workers, whom they require to leave after a single year, circumventing the

50

employment guarantees.

For Modi, the most immediate challenge is on the political front. While his party dominates the lower house of

Clockwise: Raghuram G. Rajan, the governor of the Reserve Bank of India; An industrial project under construction in Pune; Farmers, who have yet to give their land to the Maharashtra Industrial Development Corporation, work their land.

200

China

Divergent Paths

The supply of 15- to 24-year-olds, the prime age for factory workers in emerging markets, is rising in India. By contrast, it is plunging in China because of the “one child” policy, and a sharp increase in college attendance has made the problem more acute.

PROJECTIONS

0 ’95

’00

’05

Sources: International Labor Organization; United Nations

’10

’15

’19

THE NEW YORK TIMES

Portfolio

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High achievement always takes place in the framework of high expectation.

Innovation

34

A

The Invention Mob

was a clever fix rather than an imaginative breakthrough:

Irritation was the mother of his invention.

He found the standard power strip maddening because electric plugs would often block the adjacent sockets. So after his senior year in high school, while attending a summer programme at the Rhode Island School of Design, he © 2015 New York Times News Service

Quirky is a startup that sources inventions from the online community and then refines, manufactures and markets the resulting products, reports Steve Lohr.

s inventions go, Jake Zien’s

devised an adjustable power strip that solved that problem. But his product concept – a brief description, drawings and a crude mock-up – went nowhere until he was a senior in college. At that point, he sent digital versions of his sketches to a startup called Quirky.

Portfolio

35

Quirky’s designers and engineers refined the concept. “They made it a much more elegant solution,” he said.

Quirky also handled the manufacturing and marketing, secured a patent and listed Zien as the lead inventor. A year later, in 2011, the snakelike adjustable strip, Pivot Power, was on its way to store shelves. Zien, 25, now gets a few cents on the dollar for every Pivot Power sold. A software designer in New York, Zien has collected more than $700,000, and counting.

This flexible power strip is the biggest hit so far for Quirky, founded in 2009.

The company, based in New York, is a curious creation of the internet era, a hybrid of the digital and physical worlds.

It is a social network, an online retailer and an industrial designer, manufacturer and marketer.

Ben Kaufman, the company’s 28-year-

testing how far the crowd-based model

old founder and chief executive, calls

of innovation and product development

it “a modern invention machine,”

can go. Quirky’s ultimate goal, Kaufman

whose mission is to commercialise

insists, is to create an engine that

product ideas.

accelerates the process of identifying

Quirky is Exhibit A for the case

and developing new ideas for all kinds of

that a digital-age renaissance of the

products. “I’d like Quirky to be a utility

small inventor is not only possible but

like electricity,” he said.

underway. The company taps an online

Investors are betting that Quirky can

Opposite page: (Top) Nathan Firth, inventor of a smartphone-app garage door opener, at home in San Marcos, California. (Below) Jake Zien, inventor of the Pivot Power surge protector strip, at his office.

Top: An evaluation session at Quirky, whose founder calls it a “modern invention machine,” at the firm’s offices in New York.

Below: The flexible Pivot Power adjustable strip has been Quirky’s biggest success to date.

community of one million registered

build a sizable business. The company

users. More than 400 Quirky-generated

has raised $185 million to date. General

faster-paced models of manufacturing.

products have made it to the marketplace

Electric, the United State’s largest

The rest of the money has come mainly

so far.

manufacturer, has put in $30 million, as

from venture capital firms.

The company is also a laboratory for

Investors are betting that Quirky can build a sizable business. The company has raised $185 million to date. General Electric, the United State’s largest manufacturer, has put in $30 million, as part of a partnership to experiment with faster-paced models of manufacturing.

April 2015

part of a partnership to experiment with

To realise its ambitious goals, however,

Innovation

36

college. He attended Champlain College

Quirky has to go beyond making smallbore products, like the Pivot Power.

Other popular Quirky products include a gadget for separating egg yolks, a plastic stem that inserts into a lemon or a lime and becomes a push-button spritzer, and a corkscrew that cuts the foil off a wine bottle and doubles as a pour spout.

Smart, perhaps, but not essential for a networked future.

That is starting to change. Quirky is pursuing the much-promoted vision of

Big companies want to pick up innovation tips from Quirky, but they will be encountering a corporate culture whose essence Kaufman defines as “a complete disregard for the way things are supposed to be done.”

out in his freshman year. He worked on his startup, called Mophie. It made products like a plastic sled to hold the iPod Nano that could split the audio stream so two people could listen at once. It won a Best of Show award at the Macworld convention in 2006.

Rather than simply trying to repeat that accomplishment the following year, Kaufman decided to do something totally different. He and his team showed up

the smart home, or the consumer Internet of Things. The strategy and the timing are

in Burlington, Vermont, but he dropped

The corporate-partner strategy is

at Macworld in San Francisco, set up a

guided in part by its inventor community.

intended to allow Quirky to focus on its

booth and asked the attendees to invent

Big companies – not just lone inventors

design talents while it benefits from the

the company’s 2007 product line. At their

– will increasingly be part of Quirky’s

marketing and manufacturing muscle

booth, they passed out small notebooks

future. It says a handful of companies

of the large enterprises. But it creates

and pens and encouraged the Macworld

have lined up for its new corporate

the potential for a culture clash. Big

crowd – die-hard Apple fanatics – to draw

partnership programme, which builds

companies want to pick up innovation

up their ideas and submit the sketches.

on Quirky’s experience with GE.

tips from Quirky, but they will be

Winning entries were selected, and by the

Although it is not identifying them

encountering a corporate culture whose

end of the four-day show, they used a 3-D

yet, the new partners will include

essence Kaufman defines as “a complete

printer to make prototypes.

large companies that make toys, audio

disregard for the way things are supposed

equipment and kitchenware. The

to be done.”

products created will carry the tagline

While still in high school, Kaufman

That experience, Kaufman recalled, was “absolutely life changing.” He was struck, he said, by the power of seeing

“Powered by Quirky,” but will be sold

coaxed his parents into taking out a

“a community of passionate people work

under the big companies’ brands.

second mortgage of $185,000 on their

together to create and invent the future.”

house to fund an early entrepreneurial

Two years later, he founded Quirky.

Below: Ben Kaufman, the founder of Quirky, tests a product at the firm’s offices in New York.

venture, which made accessories for the Apple iPod. The loan from his parents

“Ladies and gentLeman, 7 pm

had one condition: that Kaufman go to

Thursday night and you’re watching Quirky product evaluation,” Kaufman said, standing behind a lectern, stage-lit and wearing a mike. “Give it up.”

Hearty applause issued from the 100 or so people assembled at the company’s headquarters. Many more Quirky followers in the United States and abroad were watching the event streamed over the web.

This happened to be in December, but these evaluation sessions happen every Thursday.

The first step in that process is automated. Software algorithms search inventors’ online submissions for product ideas that are off limits for Quirky, like guns, bombs, medicine and food. Next, the company’s inventor community gets Portfolio

37

Right: The offices of Quirky, whose founder calls it a “modern invention machine.”

Below: New ideas adorn the noticeboards of Quirky’s office. About one in five ideas makes it into the marketplace.

engaged in a virtual plebiscite, voting up or down on the ideas.

Quirky’s screeners and product managers then study the popular ideas.

They look for, among other criteria, whether the product category is a trending subject, Twitter-style, on its inventor social network.

Each week, fewer than 10 ideas are presented at the Thursday events, and about half typically get the go-ahead.

When a product idea gets the nod, Kaufman intones, “Congratulations, you’re a Quirky inventor.” In truth, there’s still a way to go at that point. About one

What Quirky has done for many inventors is to make placing a product on store shelves an attainable aspiration.

There are a few Quirky inventors, like Zien, who have made very good money. But for most, the main satisfaction is being a part of ideas that make their way into the world as products. And there is recognition: The inventor’s name appears on the packaging for each product.

in five of the ideas approved at weekly evaluation events make it into the marketplace, where Quirky products are sold through major retail chains.

What Quirky has done for many inventors is to make placing a product on store shelves an attainable aspiration.

There are a few Quirky inventors, like Zien, who have made very good money.

But for most, the main satisfaction is being a part of ideas that make their way into the world as products. And there is recognition: The inventor’s name appears on the packaging for each product.

Quirky, with nearly 300 employees, is growing fast. The company is private and does not make public its financial reports, but Kaufman says Quirky’s revenue more than doubled in 2014, to $100 million.

How far Quirky can go from here depends on the pace at which the smarthome market develops. Someday, homes will be more intelligent, safer and more energy-efficient as devices including light bulbs, doors, window shades, water heaters and lawn sprinklers become able to communicate and respond to and learn from users’ digital commands. It’s beginning to happen, but slowly.

April 2015

Design

38

Making the Apple Watch Tick

T

In order for the Apple Watch to truly take off, much will depend on third-party apps that will make it more functional, reports Brian Chen.

how much it costs. Just as important, it

he value of a wrist watch is

without the help of a whole lot of app

typically defined by its materials,

developers.

design, features and brand. For

with third-party apps, and it’ll be the

apply, but so will something else: apps.

same with the watch,” said Jan Dawson,

Apple recently explained how its long-awaited Apple Watch works and © 2015 New York Times News Service

“All of Apple’s devices really come alive

the new Apple Watch, all those factors will

an independent technology analyst for Jackdaw Research.

When Apple released the iPhone in

also demonstrated what the watch was

2007, it was essentially a blank slate.

capable of doing with apps made by other

When the App Store opened a year later,

companies. If the watch is going to be a

the device became much more than a

success, those other companies will have a

fancy phone. Just by downloading an

lot to do with it because few devices – not

app, the iPhone could become a musical

even those made by Apple – will sell well

instrument, a medical device, a TV remote Portfolio

39

Opposite page: Tim Cook, Apple’s chief, announces the Apple Watch in San Francisco.

Left: An attendee of Apple’s media event tries on the Apple Watch.

Below: Journalists, bloggers and Apple fans prepare for the presentation by Tim Cook, about the features in the Apple Watch.

and gaming device. It became the ultimate Swiss army knife of gadgets.

For the Apple Watch to be remotely as successful, Apple will have to find a way to take that world of apps to the wrist. But a watch presents unique challenges with its tiny screen. And the way app developers make money from it will be different than with other Apple products.

Unlike the iPhone or iPad, the Apple Watch is not a stand-alone product. It relies on an iPhone to fully operate, partly because the brains of watch apps will live on the iPhone. So users will have to install watch apps on the iPhones as well.

The economics of that combination are tricky. Developers working on watch apps have to make an iPhone app first and expand it to include support for the watch.

And it remains unclear whether they can double dip. Apple has not said whether developers can charge for the iPhone app, then charge again for the watch extension of the app. Still, companies are trying, even though some are worried the watch’s tiny screen can limit features or – even worse – ads.

Christian Gaiser, chief executive of Retale, said his company found a path to using a watch app to complement its smartphone app. Retale’s iPhone app displays weekly deals for retailers like Wal-Mart and Target. Retale users who April 2015

see something they want to buy in the

if the watch is going to be a success, those other companies will have a lot to do with it because few devices – not even those made by Apple – will sell well without the help of a whole lot of app developers.

iPhone app can push the nearest location of the retailer to the watch app, which will map out turn-by-turn directions on the watch screen. Retale collects fees from retailers whenever customers engage with their ads, so the watch app is meant to increase usage of the smartphone app, Gaiser said.

At its media event, Apple also demonstrated an app from Uber, the ridesharing service, to summon a car. The watch app shows where the driver is on a

Design

40

“the end goal is to build loyalty with our most valuable guests,” said Chris Holdren, who led development of the starwood watch app. “it continues to deepen the relationship we have with them.”

The cheapest model is the Apple Watch Sport, the one tailored to athletes, which starts at $350. The larger Apple Watch Sport costs $400. The next step up is the map, and from there, the user can place a

Apple will offer three models, each with

Apple Watch, with a more fashionable

a casing made of a different material:

stainless steel case. The smaller version

Watch Sport, a version with an aluminium

of this watch costs $550 to $1,040, and

by Starwood Hotels. Starwood’s iPhone

case; Watch, which has a stainless steel

the larger one costs $600 to $1,100. The

app can be used to book a hotel room.

case; and Watch Edition, which has a case

price range for both depends on the band.

The watch app sends a notification to the

made of 18-karat gold.

The golden Apple Watch Edition is a sure

phone call to the driver.

Apple also rolled out an app developed

watch wearer when he or she is near the

Each model comes in two case sizes –

sign that Apple has entered the luxury

hotel. When the guest arrives at the hotel,

3.81 centimetres and 4.19 centimetres.

market. Pricing for this high-end version

the watch app shows the room number,

And for each watch, customers will

starts at $10,000.

and after that the watch can unlock the

be able to choose from a variety of

user’s room door just with a hand wave

interchangeable bands in different colours

go on sale April 24. It will first be

over the lock.

and materials.

available in a select number of countries,

Preorders start April 10, and it will

“The end goal is to build loyalty with our most valuable guests,” said Chris Holdren, who led development of the Starwood watch app. “It continues to deepen the relationship we have with them.”

Unlike past apple products, the Apple Watch has a complex pricing structure. Because a smart watch is both device and fashion accessory, Apple designed the watch to be highly customisable to suit the tastes of various users, from fitness buffs to collectors of luxury watches.

Above: Tim Cook shows Christy Turlington Burns a model of the Apple Watch.

Right: Attendees of Apple’s media event try on models.

Portfolio

41

including the United States, Australia, China and Japan.

At the event, Apple also stressed some of the signature features of the device. The company has highlighted the crown as its latest signature innovation for controlling a device, similar to the mouse for the personal computer, the click wheel on the iPod and the touch screen for the iPhone.

On the Apple Watch, the crown can be twisted to zoom in or out of the screen or to scroll through a web page.

You can take and even make phone calls, as long as your iPhone is nearby.

“I have been wanting to do this since I was five years old,” said Tim Cook, Apple’s chief executive.

The watch includes a heart rate sensor and a sensor for tracking movement to

Above: Journalists, bloggers and Apple fans view models.

Right: The smart watch is both gadget and fashion accessory, Apple designed its device to be highly customisable to suit the tastes of various consumers, from fitness buffs to collectors of luxury watches.

Below: Kevin Lynch, an Apple executive, demonstrates how Instagram functions on the new Apple Watch.

complement fitness applications. It has a chip that helps it make wireless payments.

The watch also includes Digital Touch, an application that enables a new method of communication between watch users.

Watch wearers can scribble sketches on the watch screen and send them to one another, or even send their heartbeats.

Apple also added to the watch a so-called taptic engine, which taps users on the wrist with a tactile sensation when they receive alerts, messages or notifications. Apple said the watch’s battery would last 18 hours.

April 2015

Greece

42

Greece’s Bureaucratic Labyrinth There is no question that Greece is suffering from austerity cuts, but its complicated bureaucracy is also stifling the economy and innovation, reports Liz Alderman.

Portfolio

43

Y

annis Stamatiou is one of

couldn’t give me a piece of paper,”

Greece’s many business owners

said Stamatiou, the chief executive of

who say Greece’s economic

Stamatiou Plastics, as he described the

problems are not only about austerity.

anxiety that he says keeps him awake

Just ask him about the bureaucracy,

night after night. “Greece is never

alone stoke growth and create the new

which the new government has vowed

going to move forward unless this new

jobs that Greece desperately needs.

to streamline but is a snarl of rules,

government tackles the dysfunction,

There is no question that Greece is

decades in the making, that could prove

bureaucracy and uncertainty that we

struggling to recover from the austerity

hard to untangle.

have failed to address since the crisis.”

cuts that its international creditors have

Stamatiou recalls with disgust his trip

© 2014 New York Times News Service

Above: Filippos Stamatiou owns Stamatiou Plastics with his father in Athens.

As Prime Minister Alexis Tsipras

demanded. To improve the national

last summer to a tax office in southwest

recently staged a showdown with

balance sheet, previous governments

Athens. The large plastics factory his

European creditors over a debt deal,

slashed state spending 20 per cent in five

family has run for 40 years, which

he has insisted that a first step must be

years, mostly by cutting wages, pensions,

employs 150 workers and is one of the

removing many of the austerity measures

health care and social services, which

few in the industry to survive Greece’s

that previous governments agreed to

impoverished many Greeks and depressed

wrenching economic crisis, was poised

starting in 2010 as conditions for bailout

consumption. The economy has shrunk

to get a rare bank loan. But because of

loans totalling $274 billion.

by a quarter in the last five years, and

a welter of changes to Greece’s tax rules

But without many of the other

unemployment is above 25 per cent.

But just as harmful as austerity cutbacks

in recent years, the tax official could not

economic changes that Tsipras and his

produce a critical document the bank

finance minister, Yannis Varoufakis,

have been the structural problems

needed to seal the deal.

say they intend but need time to make,

inhibiting economic efficiency, many

removing austerity may not be nearly

of which have barely budged, despite

enough to restore economic stability – let

creditors’ demands. Businesses are still

“We came this close to closing the whole company because the government April 2015

44

stymied by labour rules and tax policies

reforms in the public and private sector

– say are desperately needed. His Syriza-

that under the previous government often

creating conditions for growth.”

led government says it can succeed where

changed week to week – 2,200 new tax regulations in the last two years alone.

Tsipras, even as his campaign and debt-

others failed because the left-leaning party,

negotiating rhetoric has vilified austerity,

having never before been in power, will not

has acknowledged the need to pursue

be constrained by inertia or vested interests.

FIRMS LIKE STAMATIOU’S, as

the overhauls that Greece’s European

well as investors and startups, face high

partners – and many Greeks themselves

He does not have the luxury of time.

A modest economic recovery that began

administrative costs and bureaucratic

last summer has been at least temporarily

inefficiency that Greek business associations

derailed by the political upheaval in

say jeopardise jobs and leach nearly $16

Greece. Investors and bank depositors

billion a year from the economy. Corruption

have pulled tens of billions of dollars

remains widespread, and vested interests

from the country over the uncertainty

have fought against opening swaths of the

of whether the austerity pushback will

economy to competition.

succeed or will instead result in Greece

“The removal of austerity is all fine and well,” said Constantine Mihalos, president

potentially being the first member to leave the euro currency union.

of the Athens Chamber of Commerce.

Many elements of Syriza’s growth

“But it will only be the right solution if

blueprint would take time to bear fruit,

it is followed by the necessary structural

meaning Greece could remain dependent on external European aid for a long time.

Stamatiou, who runs the plastics business with his son, Filippos, 26, is sympathetic to the bid to end austerity.

When the crisis hit, they did not cut employee wages, finding other ways to reduce costs. “When you lower their salary for years, they have no ambition to do new things,” Filippos Stamatiou said of the

Clockwise: Tina Kyriakis, who created a small business in 2012 giving cultural tours of Athens, says she struggles with bureaucracy; Greek Prime Minister Alexis Tsipras; A man feeds pigeons in central Athens; An employee works on a boat at the Stamatiou Plastics factory.

Portfolio

company’s workers. “It’s not productive for them or for the economy.”

Economists say Tsipras’ plans to stoke

computer one afternoon at Impact Hub,

consumption by eventually rolling back

an airy wooden loft for Greek startups

austerity could help. But businesses

in central Athens. A former corporate

break most of those barriers. Greece’s new

say growth would come much faster if

communications director for a French

budget minister, Dimitri Mardas, said

the government focused on enhancing

company that withdrew from Greece

in an interview that the priority was to

Greece’s productive capacity, in part

after the crisis hit, she created a small

“reconstruct the state and the economy

by following through immediately on

business in 2012 giving cultural tours

from zero, and rebuild it again.” But to the

basic changes like cutting red tape and

of Athens to tap the one lively sector of

chagrin of creditors in debt negotiations

enhancing competition.

the economy, tourism.

Tsipras has said his government will

recently, Tsipras is resisting changes like

“We’ve endured almost everything,”

“I knew domestic consumption would

making labour laws more flexible, which

Filippos Stamatiou said. “In order for us not

be dead for at least 10 years, so I decided

he argues would perpetuate hardship.

to disappear, stability needs to return. When

to focus on income that doesn’t have to

that happens, we’ll see about growth.”

do with the local economy,” said Kyriakis,

Below: Tourists visit the Parthenon on the Acropolis.

Bottom: A stall owner arranges fish at the main fish market in Athens.

surrounded by a roomful of onceSUCH PROBLEMS ARE hardly limited

unemployed young people striking out

to the old economy, as Tina Kyriakis

on their own. Yet the energy from the

well knows. Kyriakis, 30, hovered over a

startup scene has been no match for the Greek bureaucracy.

Because government licensing rules limit competition in the tour guide sector – a problem highlighted by Greece’s creditors – Kyriakis’ five freelance employees cannot give tours at the Acropolis.

When someone does work, she must go to the social security office in person to register their hours. If the schedule changes, she must go again to report it.

“The administrative burden is killing us,” she said. “You spend hours and hours in public offices, not being efficient.”

Meanwhile, the tax code changes so frequently that it is almost impossible to keep up, Kyriakis said. And with a 23 per cent value-added tax on all tours, plus a 26 per cent tax on profit, she has little left over to reinvest. “If you are doing something innovative in Greece, you face a chaos of uncertainty, instability and risk,” she said.

While Tsipras has pledged to help startups become the source of thousands of new jobs, Kyriakis is not optimistic.

“They need to realise that change is only going to come through private initiatives,” she said. “We need the economic and political environment to change in a way that will allow this to flourish.”

Her message to Tsipras, she added, is this: “Just don’t stand in the way.”

April 2015

Greece

45

Technology

46

ambiguous – when you run into them.

But as Vietnam’s government overhauls its information technology policies, the

Tech Boom Under Threat?

Vietnam’s technology businesses are a bright spot in the country’s economy, but increased regulation may hamper innovation, reports Mike Ives.

race is getting riskier. A growing list of regulations dictates how these businesses must be run, including what they can do with their content and even what their owners’ academic credentials must be.

Some worry that innovation and investment in the booming sector may be smothered under the weight of new rules.

Vietnam’s tech businesses are a bright spot in the country’s economy compared with its other industries, many of which are dominated by state-run companies.

© 2015 New York Times News Service

W

In one measure of growth, online sales

andering through Glass Egg

and Electronic Arts. “You just run, run,

by businesses to consumers in Vietnam

Digital Media’s open-plan

run until you hit something,” said Tran,

totalled an estimated $2.2 billion in 2013,

office in Ho Chi Minh City,

who founded Glass Egg in 1999 after a

and the number is expected to reach

Phil Tran paused beside a game designer’s

short stint at a computer game startup in

up to $4 billion in 2015, according to a

cubicle and pointed at his computer screen.

San Francisco.

2013 report by the Ministry of Industry

A character sprinted across a digital

Tran and other technology

and Trade.

The technology boom is built on strong

landscape in one of the latest offerings

entrepreneurs in Vietnam are taking

from Tran’s company, which localises

the same approach to building their

internet infrastructure, brisk smartphone

international video games for online

businesses: grow at breakneck speed

sales, an explosion in online shopping and

publication in Vietnam and designs

and comply with regulations – which

legions of skilled coders and designers

3-D art for games by Sony, Microsoft

are often, in their view, maddeningly

who are willing to work for lower wages

Portfolio

47

Opposite page: Vietnam had 36 per cent smartphone penetration in 2014.

Left: Ho Chi Minh City is home to nine million people.

Below: A woman rides past an Apple store in Hanoi.

based voice and text services by requiring some providers to have contracts with Vietnamese telecommunications companies. And an approved rule will require some online game providers to have payment systems in Vietnam and obey other requirements, according to an analysis by Tilleke & Gibbins, a law firm based in Bangkok.

Another draft rule would require overseas technology companies that

Vietnam is now among Southeast Asia’s most promising markets for high-tech growth, said Dung Nguyen, the director for Vietnam and Thailand at CyberAgent Ventures, a Tokyo-based venture capital firm that has invested in 15 Vietnamese startups since 2009. than others in the region.

The expansion began about a decade ago, and Intel, Samsung and Microsoft later built factories in the country. International outsourcing firms were enticed by tax breaks and other government incentives. Vietnam is now among Southeast Asia’s most promising markets for high-tech growth, said Dung Nguyen, the director for Vietnam and Thailand at CyberAgent Ventures, a Tokyo-based venture capital firm that Photos: Getty Images

has invested in 15 Vietnamese startups since 2009. He said e-commerce, musicstreaming services and smartphone games were the hot growth areas right now.

But some of the country’s internet April 2015

entrepreneurs and multinational

supply cross-border services in Vietnam

technology corporations say the new

to have representatives in the country,

and pending regulations signal that

industry professionals said. That would

Vietnam’s regulatory approach to the

apply to companies like Google that do

internet is increasingly out of step with its

business in the Vietnamese market but

blossoming technology scene.

have no formal local offices. The Asia

Last summer, content administrators of

Internet Coalition – which represents

social networks and news websites were

Google, Apple, Facebook, Yahoo, eBay,

told they must have university degrees,

LinkedIn and Salesforce.com on policy

obtain licenses and archive posts for

issues in the Asia-Pacific region – said last

at least two years. Another order, still

spring it was “very concerned” about the

in draft form, would regulate internet-

rule’s potential effects.

Technology

48

Left: A view of Ho Chi Minh City from the offices of Glass Egg Digital Media, a game developer and art production facility with clients such as EA and Microsoft.

Below: Customers play video games at a cyber café.

of new threats to control, rather than a source of new opportunities to realise.”

In 2013, the government issued a rule, Decree 72, that appeared to place unprecedented restrictions on speech online. That angered human-rights groups and the US Embassy, which warned that the restrictions would violate Vietnam’s international human rights commitments and stifle innovation and investment.

Controversy around the rule has quieted, and in January, the stateand some industry professionals say officials

controlled newspaper Thanh Nien

of the country’s young social networks.

are closing down social media websites

quoted Prime Minister Nguyen Tan

In October, the popular Vietnamese

because they have operated, at least to some

Dung as saying that it was “impossible”

social media site Haivl.com was abruptly

degree, outside the state’s control.

for the Vietnamese government to

The chill has already been felt on some

shut down after publishing content

Hans Vriens, managing partner at

block Facebook and other social media

that the Ministry of Information and

Vriens & Partners, a consulting firm based

sites. Facebook has been sporadically

Communications deemed offensive. More

in Singapore whose clients include several

unavailable in Vietnam for years, but

than a dozen social media sites have since

major technology companies, said, “When

the government has never claimed

been fined or taken offline for similar

they look at policy developments in the

responsibility for the blockages.

reasons, according to several Vietnamese

last two years, some companies worry

businessmen in the technology sector.

that the government views social media

the Ministry of Industry and Trade on

and internet-based businesses as a source

e-commerce matters in Ho Chi Minh

Vietnamese law bans private news media,

Nguyen Thi Hanh, who represents

Portfolio

49

Clockwise: A technician in a server room at Glass Egg Digital Media; A man checks a news site on his smartphone; Mike Tran, chief executive of Ticketbox. vn; A tangle of electrical and internet lines at an intersection; Nguyen Thi Hanh, who represents Vietnam’s Ministry of Industry and Trade on e-commerce matters, near her office in Ho Chi Minh City.

City, said that the government’s internet

technology companies’ access to its

Vietnam Internet Association, a business

policies had long aimed to both regulate

domestic information technology sector as

consortium whose members include state-

and support tech businesses. She added

a way to protect Baidu, a popular search

owned telecommunications providers,

that her ministry was highly supportive of

engine, and other local heavyweights,

said that the legal environment for

e-commerce and noted that the Ministry

said Khoa Pham, director of legal and

internet businesses had been good so far,

of Information and Communications had

corporate affairs at Microsoft Vietnam.

and that the Communist Party had given

jurisdiction over social websites.

But it is unclear whether Vietnam can

“priority support” to the information

follow that model, he added, because its

technology sector.

The goVerNMeNT, MaNy tech

domestic technology industry is not as

executives say, is also trying to protect

robust as China’s.

the entrenched economic interests of the

Vu Hoang Lien, chairman of the

sector, whose billions of dollars’ worth of business has been threatened by the rise of disruptive internet technologies.

The state-controlled Vietnam News reported in November that about 26 million Vietnamese, or nearly a third of the country’s population, were using internet-based smartphone applications like Viber, Line and a Vietnamese competitor, Zalo, to make calls and send messages while avoiding the traditional carriers’ higher fees.

Neighbouring China can restrict foreign April 2015

the heels of the closure of Haivl.com last autumn, are considering registering their companies in Singapore, where they see

state- and military-owned companies that dominate Vietnam’s telecommunications

A few Vietnamese entrepreneurs, on

Neighbouring China can restrict foreign technology companies’ access to its domestic information technology sector as a way to protect Baidu, a popular search engine, and other local heavyweights, said Khoa Pham, director of legal and corporate affairs at Microsoft Vietnam.

more regulatory stability, said Hung Dinh, a veteran of Vietnam’s startup scene and the chief executive of JoomlArt.com, an international company that creates content-management systems for websites.

Tran of Glass Egg said there appeared to be a “heightened sense of security” around internet content in recent months.

“I don’t think it’s going to be a gamestopper,” he said, looking out from his 17th-floor office over Ho Chi Minh City’s skyline. But for young Vietnamese entrepreneurs, he said, “it does have a deterring effect.”

Currency

50

currencies. But the monetary magic is unleashing unintended consequences on the global economy, financial markets and ordinary people.

The action by the Swiss central bank, which came in mid-January, was one of the biggest surprises. The Swiss National

Soaring Mortgages Many European homebuyers who took out mortgages in Swiss francs are seeing their repayments rise as the currency gains strength, reports Danny Hakim.

Bank decided it would be hard-pressed to keep the franc tied to the euro when the European Central Bank began a major round of stimulus. The move set off shock waves in financial markets and a oneday 23 per cent spike in the franc’s value against the euro.

The fallout has been far-reaching. Some hedge funds, like one run by the Fortress

© 2015 New York Times News Service

P

Investment Group, took steep losses;

iotr Szczepaniak, an apartment

Eastern Europeans, Szczepaniak, 46,

the IG Group, a publicly traded British

manager in Warsaw, had just

is paying off a mortgage he took out in

brokerage firm and financial trading

finished work, checking faucets

francs, instead of his local currency, the

company, issued a profit warning. Swiss

and making sure rents were paid. After

zloty. In an instant, his monthly payment

exporters howled, and the chief executive

making himself a coffee, he logged on to

rose by more than 20 per cent when

of the watchmaker Swatch Group called it

a Polish social network and noticed that

Switzerland’s central bank unexpectedly

a “tsunami.”

someone had posted the current exchange

removed a cap on its currency.

rate of the Swiss franc. “I was frozen,”

Central bankers are increasingly viewed

Many of the worst hit are average Europeans who took out loans in Swiss

he said, seeing that the franc’s value had

as wizards capable of rescuing countries

francs, often from foreign-owned banks,

soared that day.

from the doldrums by printing money

to take advantage of the far lower interest

to manage interest rates and control

rates being offered.

Like hundreds of thousands of other

Portfolio

51

Poland has nearly $40 billion in loans denominated in francs, according to European Central Bank data. The borrowing, which accounts for nearly eight per cent of the country’s gross domestic product, has left Poland weighing its options. In late January, the Left: Rafal Jackowski, 39, a marketing executive who took out a loan in francs for an apartment in Krakow in 2004.

Polish government urged banks to convert franc loans to zloty at market rates.

Poland is hardly the only country in this predicament. Austria has about $41 billion worth of such loans, close to 10 per cent of its economic output. Other ordinary borrowers, from France to Croatia, have also felt the sting.

“With hindsight, it’s easy to say the foreign banks are guilty of pushing these

available at interest rates a third as high

39, a marketing executive who took out

mortgages and not informing customers

as for loans in Polish zlotys, or even lower.

a loan in francs for an apartment in

of the risks,” said Nicholas Spiro,

In Poland, there were 562,487 home

Krakow in 2004. “They said, ‘Wow, you

managing director of Spiro Sovereign

loans in francs in 2013, representing

can pay that much?’” he said, adding, “We

Strategy in London, who also blamed

almost a third of the total number of

were not used to spending money that we

“insufficient regulation.” Poland’s troubles,

mortgages, according to the Polish

don’t have.”

which come during an election year, are

Financial Supervision Authority.

“political dynamite,” he added.

Poland is a country that is still getting used to the idea of mortgages. Many

But borrowers unknowingly became amateur currency traders in a fast-moving game that has affected many professionals.

Poles who took out loans were the first in

gripped Europe, banks heavily marketed

their family to do so. “It was quite a shock

of a 13-year-old boy, recently joined a

loans in Swiss francs, which were

for my parents,” said Rafal Jackowski,

Facebook support group whose name

Illustration: Charlie Banalo

Before the financial crisis

April 2015

Szczepaniak, married and the father

Currency

52

happened. She immediately began calling her bank and kept calling all day, but could not get through. Over the past five years, her payments have doubled to about $2,000 a month. A few months ago, her boyfriend – the father of her 20-year-old daughter – went abroad to help cover the added costs by getting a job in a factory.

When she first took out her loan, the United States was already in the grip of a financial crisis, but its impact on Europe was still not clear. “Everybody kept saying that the crisis in the States was very local – nobody knew why – but it was the US that had problems,” Szczerbowska said. “People had to be idiots to think the crisis wouldn’t spread. Unfortunately, I was the idiot.”

Because Poland also had a housing bubble that collapsed during the

translates to “Tricked Into Francs,” where he exchanges stories with other Poles.

“They are terrified, they are scared, and they pray that the government does something,” he said.

On a recent morning, his son, Krzysztof, was watching the Disney Channel dubbed into Polish while Szczepaniak showed a chart of the movement of the franc against the zloty since he took out his loan in 2003. “It didn’t seem scary at the time,” he said. “Both the Polish and Swiss economy were very stable, and the foreign exchange rates were predictable.”

“With hindsight, it’s easy to say the foreign banks are guilty of pushing these mortgages and not informing customers of the risks,” said nicholas spiro, managing director of spiro sovereign strategy in London, who also blamed “insufficient regulation.”

crisis, many who borrowed in francs are now underwater.

Leszek Wolany bought a small house in Warsaw in 2006. He took out his loan in francs because of the favourable interest rates, and for years, it seemed as if he got a better deal. But things turned around, and his monthly payments have increased more than $100 in the recent run-up. “I can’t sell the house now,” said Wolany, a 30-year-old father of one who works in advertising. “The loan is bigger than the house is worth.”

Last year, Hungary, facing a similar

Since then, the franc’s relative value has

problem, forced banks to convert home

increased more than 40 per cent. writer, said she was advised by a financial

loans denominated in francs to Hungarian

took out his mortgage relatively early in

consultant when she bought a two-storey

forints at below-market rates. The country

the cycle. He said he got a 4.65 per cent

apartment in 2008. “The adviser said

was criticised for the policy, which chilled

loan in francs, versus the 10 to 12 per

Swiss francs were the best option because

the banking sector.

cent he would have paid in zlotys at the

the interest rates were lower and the

time. He can afford the increase, which

currency rates were stable,” she said.

In many ways, Szczepaniak is lucky. He

amounts to $70 a month.

“Everybody around me advised me

Poland, regarded as the model for Eastern European economic stewardship, had considered a similar path. The

to take a mortgage in Swiss francs,” she

country’s prime minister, Ewa Kopacz,

Others are in far deeper trouble.

added. “Everybody else was doing the

said January 26 that she would side with

Katarzyna Szczerbowska, a 43-year-old

same thing.” She says she is now so far

the people over the banks.

behind on her payments, and feels so Above: Piotr Szczepaniak, 46, saw his monthly payment rise by more than 20 per cent when Switzerland’s central bank unexpectedly removed a cap on its currency.

By January 28, Polish officials rejected

trapped by her accumulating debts, that

the Hungarian approach. Mateusz

she has contemplated suicide.

Szczurek, the finance minister, said, “It

She learned on Facebook of the Swiss central bank’s action the morning it

isn’t the role of the government to be removing all possible risks people face.”

Portfolio

Japan

54

R

ice fields, golf courses and even a disused airport runway. All over the

southern Japanese region of Kyushu, unexpected places gleam with electricity-producing solar panels.

Solar use in Japan has exploded in the past two years as part of

Short-Circuiting a Solar Boom in Japan Japan lags behind many countries in renewable energy and now there are fears that the government is retreating from its clean-energy commitments, reports Jonathan Noble.

an ambitious national effort to promote renewable energy. But the technology’s future role is now in doubt. Utilities say their infrastructure cannot handle the swelling army of solar entrepreneurs intent on selling their power. And their willingness to invest more money depends heavily on whether the government remains committed to clean energy.

“It’s upsetting,” said Junji Akagi, a real estate developer on Ukushima, a tiny island near Nagasaki. Akagi said he hoped to turn a quarter of the island into a “mega-solar” generating station, and has already lined up investors and secured the necessary land. Then last September, Kyushu Electric Power Co., the region’s dominant utility, abruptly announced that it would stop contracting to buy electricity from new solar installations.

Other power companies elsewhere in Japan soon followed suit.

“It was a shock,” Akagi said. “Now we don’t know if Kyushu Electric will buy our power.”

The faltering solar boom is threatening an important goal for Japan as a whole: finding clean sources of power to replace the nuclear output lost after the Fukushima disaster four years ago.

So far, the country has been relying

Portfolio

55

mostly on fossil fuels like coal and natural

“The homework wasn’t done,” said

More challenging for electric-company

gas to fill the gap, leading to sharply

Nobuo Tanaka, former executive

planners is what is in the pipeline. An

higher emissions of greenhouse gases.

director of the International Energy

additional 8.4 gigawatts’ worth of projects,

Agency. Utilities, he said, need to

including Akagi’s on Ukushima, have

government is retreating from its clean-

install more hardware – transmission

received government approval but are in

energy commitments. Prime Minister

cables, substations and the like – and

limbo after Kyushu Electric’s edict. That is

Shinzo Abe is pushing to bring back

develop new kinds of expertise to avoid

more power than the region consumes on

into service some of Japan’s 50 nuclear

disruptions. “To make renewables work

some low-demand days – and far too much

reactors, all of which are now closed as

in reality, they have to be properly

for Kyushu Electric’s grid to handle without

public concern lingers over their safety. If

connected to the power system.”

the risk of failures, the utility argues.

Some solar advocates fear the

they reopen, it could reduce the need for

The problem is especially acute in

“If we accept everybody’s electricity, the

alternatives like solar power, which many

Kyushu, where relatively plentiful

system will become unmanageable,” said

in Abe’s circle, including the powerful

sunshine and low land prices have

Shinichi Futami, an official at the utility. It is

industry ministry, see as expensive and

attracted a disproportionate share

laying new transmission cables as fast as it

unreliable. Abe has initiated a review of

of solar development. Installed solar

can, he added, but has been stymied by the

the renewable-energy policies introduced

capacity roughly doubled in the two years

slow, expensive task of securing land rights.

after Fukushima by a previous, more left-

from mid-2012, when a law took effect

leaning administration. Environmentalists

requiring utilities to buy renewable energy

the landscape and economy in Kyushu.

worry he will gut them.

from outside producers at rates far above

They have taken over reservoirs, bankrupt

market prices. By last summer it stood at

golf courses and idle industrial parks,

amount of clean power that utilities are

3.4 gigawatts, about equal to the output of

as well as the more familiar locations of

required to buy from outside producers,

three modern nuclear reactors – at least

residential rooftops. The largest ones,

and additional measures to curb supply

during those hours when the sun was

like the Nanatsushima Mega-Solar Power

are expected this spring, including cuts to

shining at full strength.

Plant in Kagoshima, which opened in

The government recently reduced the

Solar projects have already changed

price subsidies.

“It would put a brake on the spread of solar power,” Yuji Kuroiwa, the ecologically minded governor of Kanagawa prefecture, next to Tokyo, said at a news conference in December, referring to the new restrictions.

LIKE OTHER COUNTRIES that have promoted the technology with generous state support, Japan is also struggling with the financial and technical © 2014 New York Times News Service

consequences of its rapid solar growth.

Solar power here is costly for consumers because of high state-mandated prices, and handling the fluctuating output of thousands of mostly small solar producers is tricky for utilities. Necessary improvements in the infrastructure have not kept pace, experts say.

Above: An employee works in the town management office at the Fujisawa Sustainable Smart Town.

April 2015

56

Above: The Nanatsushima Mega-Solar Power Plant, which opened in 2013, in Kagoshima.

Right: Workers check solar panels at the Nanatsushima Mega-Solar Power Plant.

Bottom: Houses equipped with solar panels.

2013, cover areas bigger than 100 football fields. Its vast lot was set aside for a shipyard more than 30 years ago, but sat empty until the recent solar boom.

IN MAKURAZAKI, a remote city in Kagoshima, the local airport went unused for a decade, a victim of economic and population decline.

Now its runway is covered end to end with solar panels, a project under the co-ownership of a leasing company and a subsidiary of Kyushu Electric.

For all the frantic building, however, Japan still produces less solar power than many other countries. Nationwide, just 2.2 per cent of its electricity came from any renewable source in the last fiscal year, excluding hydropower from dams.

The small percentage is the legacy of a narrow focus on nuclear power before Fukushima. The figure was less than half the level of the United States or France, Portfolio

and a fraction of the roughly 20 per cent

economy to life, through his stimulus

for inaction, said Tomas Kaberger, a

achieved by Germany and Spain.

programme known as Abenomics.

Swedish energy expert who heads the

Rather than curtail the expansion of

Catching up would be expensive, even

Japan Renewable Energy Foundation.

if all the necessary infrastructure existed.

solar power, advocates for the technology

Japan’s financial incentives for solar power

say a broader shake-up of Japan’s

economic interests,” he said, “not their

and other renewables are the highest in the

electricity market is needed. Utilities

technological interests or the interests

world – about twice the level of Germany,

like Kyushu Electric, they argue, have

of their customers.”

depending on the type of installation.

little incentive to accommodate outside

According to the government, if every

competitors to their own coal, gas

intended to promote competition. It

solar plant now on the drawing board were

and nuclear plants. Instead of seeking

would force Japan’s 10 regional utilities

actually to be built, it would cost users 2.7

innovative solutions to the oversupply

to split their generation and transmission

trillion yen a year in special charges, four

problem, utilities are using it as an excuse

operations into legally separate

times the premium they are paying now.

Solar supporters note that the money economy, instead of disappearing into the pockets of foreign oil and gas producers. But cost concerns remain. Higher energy bills related to the nuclear shutdown are already being blamed for squeezing household budgets. That is hurting consumer spending

According to the government, if every solar plant now on the drawing board were actually to be built, it would cost users 2.7 trillion yen a year in special charges, four times the premium they are paying now.

and undercutting Abe’s efforts to jolt the 1

3/16/15

A reform bill now in parliament is

businesses. The two sides would remain

would at least remain in the Japanese

elite - port.pdf

“I presume that it’s to protect their

closely connected, however, and some say the plan does not go far enough to even the playing field for new entrants, including those in green energy.

“These 10 monopolies will still own the grid,” said Tom O’Sullivan, a Tokyo-based energy consultant. “It will still be very difficult for independent power companies to get their electricity into the grid.”

12:03 PM

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CM

MY

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CMY

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Join us in Barcelona for our next event in May

Japan

57

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59

Essentials

THE BEST OF LEISURE AND LIFESTYLE

The Many Faces of Angkor

Images: Getty Images/Brian Johnston

From the bustle of trendy Siam Reap to isolated temples in the jungle, a visit to Angkor Wat is a multifaceted experience, reports Robin McKelvie.

60

Essentials

Travel

“I

t frustrates me that people think there’s just one Angkor temple, when there are over

600 spread across an ancient metropolis that it took London’s population until the 19th century to overtake,” Roland Fletcher explains, his passion brimming over his university professor calm. I have to confess to Fletcher that I’m one of those arriving in the ancient city of Angkor with a hazy idea of what to expect. Soon, though, I’m lost in the most remarkable temple complex on earth, which I discover is backed up by Siem Reap, an emerging chic jet set destination.

Almost everyone who visits the Angkor temples stays at the adjacent city of Siem Reap. In the Swinging Sixties it was a favourite of international A-List

1970s, putting Angkor virtually off limits

from a massive jungle-shrouded moat, its

celebrities. Jackie Kennedy and Charlie

for the best part of two decades.

trio of elegant giant corncob-like spires

Chaplin breezed through its glamorous

Stumbling through the darkness I feel

vaulting high into the heavens. It’s easy to

bars and restaurants, sipping a cocktail on

like a real life tomb raider, as I approach

see why the inhabitants of Angkor felt so

the terrace of the Foreign Correspondent’s

Angkor Wat for the first time. I haul

close to the gods here.

Club. Then the horrors of the Khmer

myself up yet another step and I’m finally

Rouge clouded over Cambodia in the

here, deep inside the world’s largest

TODAY ANGKOR WAT is firmly back

temple. I am just in time. The first of the

on the tourist map, as its reputation as

sun’s rays are bursting through the ancient

one of the wonders of the world grows.

stone, putting on a spectacular light show.

The temple teems with tourists, but there

You just don’t forget your first sight of

has also been a flowering of interest in

Angkor Wat. How could you? It soars

the rest of the UNESCO World Heritage-

Top: Monks in front of Angkor Wat Temple.

Above: The first of the sun’s rays bursting through the ancient stone put on a spectacular light show.

Portfolio

61

Clockwise: A Buddhist statue at the Bayon temple; Ta Keo Temple was built around 975; Angkor Wat is probably the bestpreserved of the Angkorean temples; Filming Jungle Atlantis.

listed 1,000-square-kilometre Angkor.

the life that goes on around them – forests

Most of what remains of the ancient

and small villages, as well as the ancient

metropolis of Angkor is its crumbling

ruins. As a photographer it is the periphery

temples. All of its wooden houses have

of these places that I find most interesting.”

been forever lost to the jungle.

Many people just visit Angkor Wat. I

John points me in the direction of the Bayon. I hike up scores of steep stone

have a hunger, though, to discover more of

steps into a world where I’m vastly

what was the world’s largest pre-industrial

outnumbered by giant Buddha heads.

city. Handily I’m staying at the Amansara,

There are more than 200 in total, each

a former royal residence where the room

with their own unique expression staring

rate includes your own remork (similar to

out over the lush jungle as they have done

a Thai tuk-tuk) and a local guide.

since the 12th century, when the Bayon

I seek the advice of renowned local photographer and gallery owner John McDermott, who fires my enthusiasm: “Angkor encompasses the temples and all April 2015

was built as the state temple of Mahayana Buddhist King Jayacarman VII. I continue on the Tomb Raider trail, following in the footsteps of Hollywood’s

62

Essentials

Travel

version, Lara Croft (Angelina Jolie).

on the BBC’s acclaimed Jungle Atlantis

Scenes from the movie were shot at Ta

documentary. This project utilised

Prohm and it’s easy to see why at this

pioneering laser technology to create a

most dramatic of temples. My guide wakes

remarkable picture of what the medieval

me at 4am, as I’m determined to catch

world’s greatest metropolis would have

the sunrise. We arrive as the nocturnal

looked liked.

inhabitants of the jungle retreat and the

“The LiDAR Project allowed us to see

Above: Ta Prohm has been left in the same dramatic condition in which it was found, with trees invading and growing out of the ruins.

tackle the rugged jungle trails. Delving deeper now, the crowds are left far behind.

first chink of light breaks through the

the sheer scale of Angkor for the first

In place of chattering phones and selfie

dense canopy. The ruins here look like

time. For me the colossal Western Barai

sticks are the myriad sounds of the jungle,

they are losing a spectacular battle with

irrigation scheme – which anyone can visit

the chirp of exotic birds, the crackle of an

the jungle. A web of thick vegetation,

– is even more impressive than Angkor

animal I cannot even see moving just on

tangled tree trunks and gnarled roots

Wat, which is a medium-sized piece of

the edge of the ruins. The jungle wraps

weaves in and around the wealth of

engineering compared to what was the

its velvety cloak around the ruins, wilder

statues, towers and sculptures.

pre-modern world’s largest single object,

ruins, so I have to ramble over rocks and

eclipsing the Great Wall.”

slip over boulders to explore them. I’m

BACK AT THE Amansara, where

Buoyed by Fletcher’s enthusiasm I set

immersed in the world that Fletcher and

Roland Fletcher gives lectures, I catch

out with my guide to visit some of the

up over lunch. He reveals I’ve still only

more remote temples of Ta Keo, Ta Nai

scratched the surface. He should know

and Preah Khan. We switch from the

tourists forever. I see signs flagging up

as he is an Angkor specialist who worked

remork to a sturdier old-style Jeep to

restoration projects backed by China,

McDermott have become so beguiled by.

These remote sites won’t stay free of

Portfolio

63

India and America as I head back to Siem Reap. There are plans for new roads too

Clockwise from top left: Preah Khan; Foreign Correspondent’s Club; Amansara; A spicy Cambodian amok at Sugar Palm.

feast on a delicious stir-fried beef salad and a spicy Cambodian amok (a rich fish soup). The hottest ticket in town is Cuisine Wat Damnak. Here in the shadow

and Siem Reap airport is expanding.

Siem Reap River. Over a dinner of Khmer

of Angkor Wat long lost Khmer dishes are

IN SIEM REAP MAN already seems to

specialities I chat to Douglas Moe, who

being brought back to life by mercurial

have won his battle against the jungle.

has worked here for over a decade. In

French head chef Johannes Riviere.

Sam Clark, founder and director of

recent years he has witnessed the boom

Experience Travel Group, has witnessed

times return for Siem Reap. “The town

gather for sunset at Angkor Wat and the

the city transforming itself over the post

is buzzing again with people flocking

restaurants in Siem Reap bustle into life I

last few years: “The majestic temples

here from all over the world,” he beams.

dream of the other Angkor that lies deeper

have attracted plenty of tourist attention

“Business is good and once again the

in the black of the jungle where the tourist

in the past few years, and Siem Reap,

glamour is back in Siem Reap”.

buses don’t venture. It is an intoxicating

the gateway town to these temples, has

It certainly is. Outside the cosseted

On my last night as I watch the crowds

otherworldly place where you feel more

upped its game to cater to the increased

world of the Amansara, with its slick

like a tomb raider than just another

demand,” he explains.

service and superb spa, the local cafes,

tourist. Take a little time, make the effort

bars, restaurants and shops are booming.

and follow the advice of Angkor experts

of Jackie Kennedy and Charlie Chaplin

Chic boutiques and international

like Fletcher and McDermott and you too

and sip a cocktail on the terrace at the

brands are joining the existing array of

can gaze through this tantalising window

Foreign Correspondent’s Club. The club

independent art galleries and craft shops

into another time, a time when Angkor

still stands proudly on the banks of the

that sprinkle the city. At Sugar Palm I

was the largest city in the world.

I take a stroll with the jet set ghosts

April 2015

Essentials

64

Real Estate

Life of Italian Nobility for Sale Regulations and rising taxes have forced many landowners to put their castles and historical mansions on the market, reports Gaia Pianigiani.

N

estled on a gentle Tuscan hill

Afterwards, we have seen some owners once

near the town of Pontassieve just

or twice a year.”

west of Florence, and caressed by

generation,” said Dimitri Corti, chief

the morning fog, sits a medieval castle that

for sale, castle, church and all. While that

executive officer at Lionard, an exclusive

was once home to the few prominent noble

might seem an exceptional circumstance,

real estate company based in Florence

families who plotted against the Medicis’

increasingly for Italy, it is not. Although

whose portfolio boasts about 70 castles

rule during the Renaissance, some of whom

castles and historical mansions in Italy have

located in central and northern Italy. “It

are believed to have taken refuge here.

long been family inheritances, today dozens

is not necessarily true that the owner is a

of them are for sale, even in one of the most

millionaire like one can assume in countries

conservative real estate markets in Europe.

like the United States or England,” he

For centuries after, the descendants of the nobles and the peasants who served them

© 2015 New York Times News Service

Today the entire estate is deserted and up

“The Italian market is mostly historical – mansions pass from generation to

lived sheltered by the fortress’s crennelled

In recent years, Italy’s well-rooted

walls or in the nearby country houses, and

inherited wealth has withered from a

went to Mass in a rose stone church.

potent combination of factors. They

are frequently not Italians, a worrisome

include the increasing costs of living and

circumstance to some here who bemoan the

farmers’ families to the Sunday’s Mass

services, the shaky finances of owners

loss of historical and family patrimony to a

here up until the late 1960s,” said Franco

in a time of lingering economic trouble,

newly moneyed global elite.

Viliani, 80,a former manager of the estate.

cuts in government subsidies to maintain

“It might sound strange for a pseudo-feudal

historical properties and, not least,

Corti said, while the majority of buyers are

system, but that was a form of inclusion.

mushrooming property taxes.

foreigners. They predominantly seek villas

“I remember a procession of over 25

added. “Some do need liquidity.”

Moreover, those with the money to buy

The bulk of Lionard’s sellers are Italians,

Portfolio

65

or mansions in Tuscany, and are ready to

a more diverse clientele, ranging from the

or to invest in more real estate. In 2011,

spend an average of six or seven million

Arab countries to China, plus Russia and

as the financial crisis deepened and the

euros (about $6.75 million to $7.85 million).

North America.

government came under pressure to

“It is no longer reasonable to think that

“No historical owners would like to get

the owner of a neighbouring castle would

rid of their properties, but they might be

minister, Mario Monti, raised property

buy yours,” Corti added. “It’s most likely to

in the condition to do it,” Moroello Diaz

taxes and started a review of the land

be a Russian, or a Chinese.”

della Vittoria Pallavicini, president of the

register’s assessment of home values.

Indeed, more than 50 per cent of

Italian Historic Houses Association, said

balance its books, the technocratic prime

On historical buildings, where owners

Lionard’s clients come from Russia and

in his vaulted office located in a

used to pay little as compensation for the

the former Soviet Union, while the rest

17th-century complex on the Quirinal

elevated costs of maintaining centuries-old

mostly live in North America. Other luxury

hill in central Rome. “And we fear that

structures, the taxes increased by 20 or 30

realtors, like Sotheby’s Italian branch, have

foreigners will be less attached and caring

times, depending on the property’s location.

of their property,” he added. “They didn’t

On some buildings, taxes spiked from

grow up there; that mansion doesn’t belong

¤3,000 (about $3,400) in 2011 to ¤75,000

to their family’s history.”

(about $84,000) by 2013. That might be a

Opposite page: The Castle of Torre a Decima, once home to noble families at least as far back as the Renaissance, is now deserted and for sale, in Pontassieve, Italy.

Above: The Chianti hills and the courtyard of the Castle of Torre a Decima.

April 2015

Despite relatively low incomes, Italians

small figure for castle dwellers in the United

have historically inherited properties

Kingdom, but a burden for Italian pockets,

and benefited from low property taxes,

especially in regions where the property’s

helping them to afford their housing,

market value or tourism interest is low.

Essentials

Real Estate

“We no longer live like in 1800,” he added. “But 99 per cent of changes are either impossible or extremely bureaucratic and complicated in an Italian historic building.”

The trends, to many here, are indicative of Italy’s place as a country caught between its past glory and its modern difficulty in

Photo: Reuters

66

producing an innovative climate capable of ensuring its future.

Landowners’ attempts to navigate the the noble Uberti family, mentioned in

in some cases, its use to the public. Many

Dante’s Divine Comedy, and then the

buyers give up on properties of great

Some ItalIan oWnerS who bought

Canigiani family, whose daughter Elena

historical value, but in bad condition, for

properties as an investment transformed

gave birth to the illustrious Renaissance

this reason, brokers said.

them into luxury hotels, hoping to offset

poet Francesco Petrarch.

changes have often fallen short.

the steep costs of maintaining ancient

The 14th-century castle was turned into

“This is a problem for possible investors, who want to have modern comforts like

frescoed walls and immense Italian gardens,

a lavish bed and breakfast and wedding

a spa, air-conditioning, or a lift,” said

often including hectares of olives groves

venue. But today the fruits of the estate’s

Pallavicini, of the Italian Historic Houses

and vineyards. Yet demand for luxurious

5,000 olive trees have not been picked for

Association. “We no longer live like in

holidays has not boomed in recent years,

years, and the newlyweds’ bed from last

1800,” he added. “But 99 per cent of those

and some resorts have registered few guests.

summer remains unmade. Buyers can

changes are either impossible or extremely

make it theirs for ¤18 million (just over

bureaucratic and complicated in an Italian

floors of the Tavolese castle, about 31

$20 million). But buyer beware: living a

historic building.”

kilometres south of Florence, housed

nobleman’s life in Italy comes at a cost,

Once, the 427 square metres on five

Above: Marquess Lamberto Frescobaldi poses in his cellar at the Nipozzano castle northeast of Florence. His family’s wine business makes their estates profitable.

Below: Lionard Luxury Real Estate reports an increase in Italian sellers and foreign buyers of historical properties.

At the same time, many of the

even for many tycoons. New owners face

association’s 5,500 members would prefer

the same onerous bureaucracy as Italians

never to sell their property, he said. “They

to make even minimal changes to many

have an umbilical cord to that building,” he

older properties.

said. “They were maybe raised there. Selling

Under Italian law, the owner of a historical building is its custodian, bound to maintain it and grant its security and,

is not an option, as long as they can resist.”

But while selling may be hard to swallow, too often the only other option is abandonment, especially for castles and monuments not located in tourist regions.

“If a Tuscan owner who sells his mansion can rope in a Russian, British or American buyer to restore his family’s finances, we can’t,” said Francesco Scardaccione, the owner of a historical palazzo and two country estates, who is also president of the Italian Historic Houses Association branch in the southern region of Basilicata.

“What is going to happen,” he asked, “the day we will no longer be able to afford it?”

Portfolio

68

Essentials

Cuisine

Portfolio

69

Reclaiming Puerto Rico’s Food Paradise

fried bread, a dip spun from eggplants that had been smoked over the wood of wild mesquite trees, and a chop brushed with sugar-cane juice. Toward the end would come a sweet, coral-hued sphere of

Puerto Rico has produced its fair share of internationally acclaimed chefs, but now its local food scene is also gaining attention, reports Jeff Gordinier.

guava ice.

T

of loosely affiliated Puerto Rican cooks,

Where did the guavas come from?

Enrique motioned toward the window.

The fruit tree stood right outside.

© 2015 New York Times News Service

Enrique, 37, is a leader in a movement he sun was starting to recline

“We’ll see. I kind of like it that way. I think

farmers and activists who have arrived

on the horizon, but as chef Jose

it makes me more creative.”

at the same realisation over the last

Enrique slid a beaten-up Ford

Enrique and Katie Savage, his chef

Explorer into a parking space in Vieques

de cuisine at the hotel, tend to wing it

at an easy-going beachside hotel called El

based on whatever baskets of fruit, bags

Blok, he admitted that his menu for an

of vegetables and buckets of seafood

upcoming Saturday evening was still up in

come their way. Dinner that night would

the air. What would he be cooking?

overflow with lobster ceviche, a conch

“I have no clue,” he said, and laughed.

April 2015

salad spooned into steaming pockets of

Opposite page: Tara Rodriguez Beosa (L-R) Chef Pax Caraballo and Carlos Reyes of El Departamento de la Comida, a non-profit organisation that helps distribute locally grown produce.

Above: Lobster ceviche, with fried plantains and avocado.

70

Essentials

Cuisine

few years: There is a juicy gastronomic

makings of a gastronome’s fantasy island,

as a way to bring local organic products

paradise at their fingertips, and all they

a place where all sorts of natural delights

from private pinprick gardens and farms

have to do is reach out and grab it.

sprout from the land, sometimes without

to the teeming, street-art-emblazoned

much need for human coaxing.

districts of San Juan.

San Juan restaurants like Parcela Gastropub, La Jaquita Baya, Santaella,

Despite that, decades of economic

“We just kept having the same

Marmalade and Jose Enrique (the

policy, kicking into overdrive with

conversation over the dinner table,”

chef ’s namesake spot in the humming

Operation Bootstrap starting in the

Rodríguez Besosa said. “We were like,

Santurce neighbourhood); a pioneering

late 1940s, led to an emphasis on

‘Wow, there really is no access to good

farm-to-tote-bag enterprise called El

industrialisation and a shift away from

food here – to good ingredients.’”

Departamento de la Comida; and the

Puerto Rico’s agrarian roots. This helped

Hacienda San Pedro coffee company are

create a middle class, but a reliance

up a bare-bones CSA, or community-

all promulgating a new way of thinking

on growing things was replaced by the

supported agriculture project. “It was

that reintroduces Puerto Rican diners and

canned-and-shrink-wrapped gospel of

just a website, a van, the two of us and

shoppers to the buried treasures of their

postwar America.

a driver,” Rodríguez Besosa said. But

home island.

Their solution, early on, was to cook

demand exploded, so the two gradually It was thIs vexing disconnect

commandeered a warehouse space that

it is. From a food standpoint, Puerto Rico

that prompted Tara Rodríguez Besosa

includes a restaurant offering dishes made

represents a twisted paradox. Thanks to

and Olga Casellas Badillo to create El

with their bounty. “I used to market my

its balmy climate and rich soil, it has the

Departamento de la Comida 4∏ years ago

produce by cooking it at home and taking

That should not be revolutionary, but

Clockwise: Roberto Atienza, the owner of the coffee plantation Hacienda San Pedro, who is committed to the coffee industry and providing a one of a kind product; Fresh caught fish in Puerto Rico; The original restaurant of chef Jose Enrique, one of the most prestigious young cooks on the island; Cristina Lugo, left, helps customers as a volunteer at El Departamento de la Comida.

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71

pictures of it,” she said. “And then people started asking, ‘Where can I get that?’”

Over the years, Puerto Rico has produced plenty of celebrated chefs (Wilo

Left: The Coabey Valley of Jayuya, considered one of the most important coffee regions.

Below: (L-R) Chef Jose Enrique runs three restaurants; The Puerto Rican Scotch egg.

Benet, Alfredo Ayala, Roberto Treviño, Mario Pagán, José Santaella), many of whom have sought to raise the profile of what they call cocina criolla around the world and burnish its reputation at home.

But the budding locavore movement is a godsend to next-generation figures like Ariel Rodríguez, Xavier Pacheco, Sebastián Ramírez and the sausage maestro Pedro Álvarez, who yearn to move even further beyond sawdust-dry tostones and leaden mounds of mofongo.

“In the last couple of years, it has

contagious enough to become trendy.

“Puerto Ricans – we’re pretty passionate

Enrique’s spots several times. In his travels around the Caribbean, Jennings

about our island and what we have here,”

has encountered his share of “very

he said.

bland, fried, uninteresting food,” but he still remembers being struck by a

become a lot easier to find higher-quality products,” said Ramírez, 29, who runs

PASSionAtE, too, ABout what

dish of butterflied baby snapper at

the kitchen at a tapas-oriented gastro

they can have, thanks to the island’s oft-

Enrique’s unmarked, always-a-party San

pub called Parcela. There is a new

untapped fecundity.

Juan flagship.

wave of young farmers, he said, and the burgeoning “buy local” fever seems

“You will fly over land that’s green, verdant, beautiful – and nobody’s growing anything,” said Simon Baeyertz, an owner of and the driving force behind El Blok. “And the younger generation has started to say, ‘Wait, that’s crazy!’”

April 2015

“You will fly over land that’s green,

As Jennings swooned over the snapper,

verdant, beautiful – and nobody’s growing

he was told that “literally the guy over at the

anything,” said Simon Baeyertz, an owner

next table, next to me, was the fisherman,”

of and the driving force behind El Blok.

he recalled. “That experience embodies what

“And the younger generation has started

Jose’s restaurants are about.”

to say, ‘Wait, that’s crazy!’”

Enrique, whom Food & Wine magazine

Like more and more chefs in Puerto Rico, Enrique’s impulse is to find a way

picked as one of its best new chefs in

to use it. “The ingredients are what drive

2013, is seen as leading that charge.

me,” he said. “It’s not about what you can

“It’s incredibly fresh, his food, which is

do with an ingredient. It’s what you don’t

what I love about it,” said Matt Jennings,

do to it. So to make that happen, you need

a New England chef who has visited

to find what’s best.”

Essentials

72

Culture

K

azuhiko Kanai uses the traditional method to dye the elegant kimonos for which

the small, semitropical island of Amami Oshima is renowned: he carries a bundle of pure white silk to a nearby rice paddy and hurls it into the mud.

Kanai is one of the last practitioners of a method known as “dorozome,” or “mud-dyeing,” which uses the island’s iron-rich soil to turn silk the colour of the darkest chocolate. This is just one step in an elaborate production process that can take a year to produce a kimono with the glossiest silk and most intricately woven designs in all Japan. In a nation that esteems its traditional form of dress as high art, Amami Oshima’s kimonos became some of the most prized of them all, once capable of fetching more than $10,000 apiece. But those heady days are over, as a shift to Western fashions and Japan’s long economic squeeze have led to

© 2015 New York Times News Service

plummeting demand, especially for high-

Crisis Hits Kimono Trade The Japanese island of Amami Oshima is renowned for its kimonos, but a stagnant economy and an out-dated distribution system is endangering this tradition, reports Martin Fackler.

end kimonos.

On Amami Oshima, production has fallen so far in the past two decades

down from 20,000 people a generation

of kimono silk has similarly plunged, from

that only 500 people on an island with

ago, according to the Authentic Amami

enough to make 284,278 kimonos during

73,000 residents remain employed full-

Oshima Tsumugi Association, the island’s

the height of the postwar boom in 1972, to

time in kimono production, and many

union of kimono producers.

enough for just 5,340 kimonos last year.

of them are in their 70s or 80s. That’s

The union says the island’s production

Amami Oshima has fallen harder Portfolio

73

than most of Japan’s famous kimono production centres, dragged down by a complex web of wholesalers, dealers and specialised retailers who distribute and sell the island’s kimonos. While this antiquated system once benefited the

Opposite page: (Clockwise) A weaver adjusts silk threads at a workshop in Amami Oshima; Yukihito Kanai shows silk after it was washed in a river, part of a traditional method of dyeing for kimonos.

Above: Kimono cloth from Amami Oshima on display at Ginza Motoji, a traditional kimono store in Tokyo.

Left: Mifuko Iwasaki, who has been teaching how to weave silk on hand looms for 35 years, weaves in her class.

April 2015

74

Essentials

Culture

Kanai is one of the last practitioners of a method known as “dorozome,” or “mud-dyeing,” which uses the island’s iron-rich soil to turn silk the colour of the darkest chocolate. This is just one step in an elaborate production process that can take a year to produce a kimono with the glossiest silk and most intricately woven designs in all Japan.

remote southern island near Okinawa by spreading its kimonos to the rest of Japan, islanders say it has now become a burden, keeping the kimonos prohibitively expensive while driving down wages.

Yet, the old ways have proved hard to

silk is dyed in bubbling iron caldrons and

requires repeating the cycle of staining

discard, despite a growing sense of crisis.

then hung from the ceiling to dry. “If we

and drying the silk 30 times, he said. Only

Many fret that there will soon be too few

cannot make kimonos any more, what will

then is the silk ready to be immersed in

islanders left with the skills to sustain

be left here?”

the black mud, whose iron reacts with

each of the 30 separate steps needed to

Kanai says the mud-dyeing process

tannins in the tree dye to create the

produce one of the kimonos. “If we lose

alone takes more than a month, as the

one link in the chain, we lose our ability to

silk is first coloured a burgundy hue with

That is not the most elaborate step.

make kimonos,” said Kanai, 56, who owns

natural dye made from the pulp of a local

Even before the silk arrives at Kanai’s

a dirt-floored wooden workshop where

plum tree. Getting the right shade of red

workshop, it is first woven into a

coveted dark brown colour.

temporary fabric as part of a unique method that the islanders have devised for creating minutely detailed patterns. After this temporary fabric has been mud-dyed, it is unravelled back into its original silk threads. Each coloured thread now has thousands of tiny white stripes where it overlapped with another thread, blocking the mud from touching it at that point.

As the threads are rewoven into new

Above: (L-R) Koumei Motoji, the owner of the Ginza Motoji kimono store; A staff member of Ginza Motoji kimono store models one made in Amami Oshima.

Left: Yukihito Kanai dyes silk in the mud, a traditional method of dyeing for kimonos, near his craft house.

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75

fabric by nimble-fingered island women, they slowly reveal perfectly formed patterns, ranging from starkly minimalist shapes to elaborate scenes of bamboo groves and flying storks.

“The weaver has a tremendous responsibility,” said Mifuko Iwasaki, 70, who has been teaching young islanders how to weave these perfectly aligned patterns on hand looms for 35 years. “If we make a mistake, we undo all the hard work of those who spent so much timing preparing this thread.”

IwasakI says that when she began teaching her yearlong classes, she typically had 40 students, who were drawn by the fact that weaving offered higher wages than fishing, farming and logging, the island’s other industries at the time.

These days, she says she is lucky to get more than two or three students, because weaving no longer pays as well. The myriad middlemen in the cumbersome distribution system each take a cut, making it hard to reduce prices at the same rate as other items in deflationary Japan. Worse, the brunt of what price

in the production process get even less.

cuts have been made inevitably falls on

Nonetheless, islanders say they are

Above: Iwasaki says that when she began teaching her year-long classes, she typically had 40 students; now she gets barely three.

the island’s dyers and weavers. As a result,

reluctant to bypass the antiquated

while a new Oshima kimono can still cost

distribution system, saying they feel bound

$3,000 to $6,000 in Tokyo, weavers say

by generations-old obligations and a fear

they are lucky to get more than $400 for

of change. This makes them a microcosm

a month’s exacting work. Other craftsmen

of Japan as a whole, which has been slow

islanders buried kimonos in the ground

to give up its out-dated postwar economic

to hide them, only to discover on digging

model despite years of stagnation.

them up again that the fabrics had turned

the myriad middlemen in the cumbersome distribution system each take a cut, making it hard to reduce prices at the same rate as other items in deflationary Japan. worse, the brunt of what price cuts have been made inevitably falls on the island’s dyers and weavers.

April 2015

“It is ironic that we can no longer make ends meet producing something so expensive,” said Shigehiko Furuta, 67, who

Mud-dyeing started when disobedient

a beautiful dark colour, said Kanai, who owns the mud-dyeing workshop.

His son, Yukihito, now uses those same

uses coloured pens and graph paper to

centuries-old dyeing techniques to colour

design the minutely detailed patterns.

new types of items, including T-shirts, jeans

Shinichiro Yamada, 83, the head of the

and even guitar bodies. He is experimenting

producers’ union, said the island’s ornately

with selling these over the internet, to avoid

woven patterns have their roots in the

the onerous distribution system.

colourful culture of the Kingdom of the

“We need to become more like artisans

Ryukyus, centred in current-day Okinawa.

in Europe or artists in New York,” said

They ruled Amami Oshima until the

the younger Kanai, 35, who said he is

early 17th century, when the island was

one of the few “young successors” in the

conquered by Japanese samurai, who

island’s kimono industry. “Even traditions

claimed the island’s kimonos as tribute.

have to evolve.”

Essentials

76

Sport

The Tall Blacks

The New Zealand Breakers, a basketball team from a country that worships rugby and cricket, has won three of Australia’s National Basketball League’s past four championships, reports Scott Cacciola.

T

he New Zealand Breakers are the most unconventional team in Australia’s National Basketball

League. For starters, they are the only team in the league that is not from Australia. It is also worth noting that they practice in a converted power tools warehouse, where they have two full-length courts, a film room, offices for staff and several wellappointed vending machines.

The owners are not particularly interested in making money off the team, and its chief executive officer – who was promoted after a successful stint as general manager – says that he knows almost nothing about basketball. But the Breakers, with their homegrown roster and homespun charm, know how to win.

“Try to be disruptive,” Dean Vickerman, the team’s second-year coach, told his players at a recent practice, ahead of a road game against the Townsville Crocodiles.

© 2015 New York Times News Service

“They’re trying to drive the lane, and you’re trying to put doubt in their minds and buy some time for the next guy to get back.”

Vickerman, 43, a convivial Australian whom everyone calls Deano, was harping on one of his favourite subjects – teamwork – and paused just long enough to blow his whistle. “Go!”

The Breakers have won three of the

“Australians are tough people,” said Dillon Boucher, a former forward for the Breakers who heads the team’s sponsorship department. “They don’t like losing.”

league’s past four championships, a stretch of dominance that was unthinkable when they were founded in 2003. Mika Vukona, a 32-year-old forward who has been with the Breakers since their inception, recalled how players were tasked with handing out wads of tickets to random Aucklanders. “And they’d be like, ‘No, we don’t want any! Go away!’” he said.

The Breakers, who are sponsored by a Portfolio

77

casino, lean on the fundamentals: passing

In the old days, the offending

to the open man, running the floor, taking

player would simply pay a fine and

good shots. Cedric Jackson, 28, one of three

everyone would move on.

Americans on the roster and the league’s

Abercrombie mixed things up

most valuable player in 2013, returned from

by introducing a roll of the dice to

Europe this season to cement his celebrity

the equation, and he even provided

status. “I’m on a billboard,” he said, no

teammates with a spreadsheet

small feat given the country’s all-consuming

that details the various punitive

passion for rugby and cricket.

measures. Roll a two for a minor

The team averages 5,342 fans for home

offense? Hit the rowing machine

games at Vector Arena, and while most

for 500 metres. Roll a three for a

appreciate basketball, some are still lured by

moderate offense? Make phone

the prospect of watching a team from New

calls to five season-ticket holders.

Zealand wallop opponents from across the Tasman Sea. For Kiwis, there are few things more enjoyable than beating Australians at sports, even if that sport is basketball.

“The season-ticket holders love it,” said Vukona, the forward.

At 6:15 in the morning, the Breakers left for their game against Townsville.

Abercrombie wanted to emphasise accountability – one penalty involves

BasketBall remains a second-

wearing practice gear on public

tier sport in this part of the world, and

Dillon Boucher, a former forward for the

transportation – even if some of the players

especially in New Zealand, where boys

Breakers who heads the team’s sponsorship

now find themselves openly rooting for

grow up dreaming of playing for the All

department. “They don’t like losing.”

teammates to show up late. In any case, the

Blacks, the country’s legendary rugby

Breakers seem to share an understanding

team. Boucher, 39, the player turned team

that they are in this together.

executive, recalled favouring basketball

“Australians are tough people,” said

Six of the team’s 10 players grew up in New Zealand, which means that the Breakers ply their trade with national pride.

only because the rugby team in his

Opposing mascots have been known to

hometown was terrible.

taunt them by strangling toy sheep. Yes, New Zealand has a lot of sheep.

Still, the Breakers guard against complacency. Tom Abercrombie, a forward from Auckland, recently unveiled a revised system for team-imposed fines that features three levels of infractions: the minor (arriving less than 10 minutes late for practice), the moderate (drawing a technical foul) and the severe (missing a team flight).

April 2015

Opposite page: New Zealand Breakers point guard Cedric Jackson goes for a layup against the Townsville Crocodiles.

Above: A cutout of Alex Pledger, a center on the New Zealand Breakers, on the wall of their practice facility in Auckland.

Below: (L-R) New Zealand Breakers players gather for a pre-game ritual before a road game; New Zealand Breakers center Ekene Ibekwe throws down a dunk during a road game against the Townsville Crocodiles.

Boucher got his start at age 17 with the team in Auckland and supplemented his income by working as a travel agent. The Breakers did not yet exist, but that was all about to change thanks to a surprising result at the 2002 FIBA World Championship in Indianapolis in the United States, where

78

Essentials

Sport

New Zealand – a team known as the Tall

35, a former guard who is now Vickerman’s

Blacks – placed fourth and momentarily

top assistant.

distracted the country from rugby. The Tall

Undercut by a false sense of security, the

Blacks did not have the most talented roster

Breakers promptly lost nine of their next

in the tournament, but they were cohesive.

10 games. They went 30-67 in their first

They fell to Yugoslavia, the eventual

three seasons.

champion, in the semi-finals, an outcome that still bothers Boucher.

The slow build toward respectability took shape in 2005, when Paul and Liz

“We had Yugoslavia on the ropes,” he

Blackwell, the owners of a supermarket

said. “It still cuts me deeply when I think

chain, bought the team. The Blackwells

about it.”

did not get involved to accumulate oodles

developmental programme that draws on

of cash. Instead, the Blackwells viewed

young players from New Zealand. Six of the

enough of a splash that a group of

basketball as a form of community outreach,

team’s 10 current players are products of the

businessmen was able to establish the

as a way to connect with children –

system. The Breakers also run an academy

Breakers in 2003 after persuading the

especially those from single-parent homes,

for promising players between the ages of

doyens of the Australian league to

an important social issue in New Zealand.

14 and 19.

Regardless, the Tall Blacks had made

expand to New Zealand. The Breakers

The Breakers staged post-practice

The eight teams in the NBL are subject

played their first game that October and

clinics for schoolchildren. They organised

to a salary cap of one million Australian

scored 44 points in the first quarter en

summer camps, weekend leagues and

dollars, spread among 10 players. The

route to a victory against the Adelaide

group outings to games. On the court, the

Breakers try to maximise every penny, and

36ers. “It was about the worst thing that

team stabilised under Andrej Lemanis,

they seldom give up on prospects.

could have happened,” said Paul Henare,

who coached the Breakers to their first winning season in 2007-08.

Today, the Breakers have a robust

Game day in Townsville was filled with the hum of expectation. At 9:30 am, the players convened in the lobby of their hotel and headed outside for what was described

Above: Townsville Crocodiles fans cheer on their team during a win over the New Zealand Breakers.

Left: The New Zealand Breakers practice before departing on a road trip, in Auckland.

Below: New Zealand Breakers players visit a popular spot overlooking Townsville, Australia.

in their itinerary as 30 minutes of fresh air.

The Breakers were heavily favoured, and Vickerman had no reason to doubt their preparation – until they took the court.

The game was a disaster for the Breakers, who shot 39 per cent from the field and lost, 79-71.

Vickerman was morose during his news conference. “The harder we tried,” he said, “the more we turned the ball over.”

The Breakers wound up carrying a twogame losing streak into their game recently against Perth, and they were down by one point in double overtime with time about to expire when Jackson launched a shot from midcourt. It banked in. His teammates mobbed him. Days later, the players were still buzzing.

“That game was a cracker,” Abercrombie said.

It was the sort of shot that can save a season, and as players accustomed to doing things their own way, they knew exactly how to create something from nothing.

Portfolio

She Savors Every Moment With Her Grandchild

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Essentials

80

Photo: Getty Images

Environment

E

ndowed with the Amazon and other mighty rivers, an array of huge dams and one-eighth of the

world’s fresh water, Brazil is sometimes called the “Saudi Arabia of water,” so rich in the coveted resource that some liken it to

© 2015 New York Times News Service

living above a sea of oil.

But in Brazil’s largest and wealthiest city, a more dystopian situation is unfolding: The taps are starting to run dry. Worst of all, none of this is a surprise. In fact, the Brazilian government released a warning six years ago predicting this exact scenario in this exact timeframe.

Taps Run Dry in Brazil’s Largest City A combination of drought, deforestation, climate change and creaky infrastructure have caused an unprecedented water crisis in São Paulo, reports Simon Romero.

As southeast Brazil grapples with its worst drought in nearly a century, a problem worsened by polluted rivers, deforestation and population growth, the largest reservoir system serving São Paulo is near depletion.

Many residents are already enduring sporadic water cut offs, some going days without it. Officials say that drastic rationing may be needed, with water service provided only two days a week. According to current estimates, South America’s largest city will likely run out of water in June.

Behind closed doors, the views are grimmer. In a meeting recorded secretly Portfolio

81

For some in this traffic-choked megacity of futuristic skyscrapers, gated communities and sprawling slums, the slow-burning crisis has already meant no running water for days on end.

“ImagIne goIng three days without any water and trying to run a business in a

“Because of environmental degradation and political cowardice, millions of people in São Paulo are now wondering when the water will run out.”

basic sanitary way,” said Maria da Fátima Ribeiro, 51, who owns a bar in Parque Alexandra, a gritty neighbourhood on the

disaster monitoring service that São Paulo’s

edge of São Paulo’s metropolitan area.

main reservoir system could run dry in 2015.

Some residents have begun drilling their

and leaked to the local news media, Paulo Massato, a senior official at São Paulo’s

Experts say the origins of the crisis go

own wells around homes and apartment

beyond the recent drought to include an

buildings, or hoarding water in buckets to

array of interconnected factors: the city’s

wash clothes or flush toilets. Public schools

surging population growth in the 20th

are prohibiting students from using water to

century; a chronically leaky system that

brush their teeth, and changing their lunch

spills vast amounts of water before it can

menus to serve sandwiches instead of meals

reach homes; notorious pollution in the

on plates that need to be washed.

Tietê and Pinheiros rivers traversing the

Officials are promising ambitious

city; and the destruction of surrounding

water utility, said that residents might have

solutions, like new reservoirs. But they are

forests and wetlands that have historically

to be warned to flee because “there’s not

a long way off, and many people in this

soaked up rain and released it into

enough water, there won’t be water to bathe,

vast metropolitan region of 20 million are

reservoirs. Eighty per cent of São Paulo’s

to clean” homes.

frightened by forecasts at Brazil’s natural

main watershed is deforested, as is 20 per cent of the Amazon.

“We’re witnessing an unprecedented water crisis in one of the world’s great industrial cities,” said Marússia Whately, a water specialist at Instituto Socioambiental, a Brazilian environmental group. “Because of environmental degradation and political cowardice, millions of people in São Paulo are now wondering when the water will run out.”

April 2015

Opposite page: Aerial view of the Atibainha river dam, in Nazare Paulista, during a drought affecting São Paulo state.

Above: The stump of a tree and its once water-covered roots at Atibainha reservoir, part of the Cantareira system, which is a major water source for the São Paulo metropolitan area.

The low water levels have also impacted electricity outputs, as hydroelectric dams simply cannot produce as much energy with reduced water flows Deforestation in the Amazon River basin, hundreds of kilometres away, may also be adding to São Paulo’s water crisis. Cutting the

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Essentials

Environment

forest reduces its capacity to release humidity into the air, diminishing rainfall in southeast Brazil, according to a recent study by one of the country’s leading climate scientists.

Officials also point to global warming.

“Climate change has arrived to stay,” Geraldo Alckmin, the governor of São Paulo state, said in February. “When it rains, it rains too much, and when there’s drought, it’s way too dry.”

Shrinking water supplies are afflicting Rio de Janeiro and Minas Gerais, two other powerful states, while some smaller cities in the region cancelled Carnival festivities over worries about the lack of water to clean trash-strewn streets after celebrations.

But São Paulo’S crisis is particularly

The water utility says it is pursuing a

utility said it was seeking to reduce leaks.

acute. Officials at Sabesp, the water

grandiose project to draw water from a

It has been offering discounts to reduce

utility controlled by São Paulo state, have

nearby river basin and the construction of

consumption while starting to impose steep

acknowledged lowering the water pressure

new reservoirs though some efforts are not

fines recently on high water use.

in the distribution network. While that

expected to be completed until well into

effectively reduced the amount of water

next year.

flowing through the system, the authorities

“It’s a water system which clearly

Outright rationing – in which service would be cut entirely for certain periods, not just reduced – is “still under discussion

have frequently insisted it is not the same

hasn’t been managed well,” said Newsha

and study,” said Sabesp, the water utility,

as rationing, sowing confusion and anger

Ajami, director of urban water policy

after rains in recent weeks slightly raised

among those unable to get water.

at the Stanford Woods Institute for the

reservoir levels. But for people already

Environment, who recently met with water

experiencing what they describe as de facto

authorities here. “They’re going for these

rationing, the position of the authorities has

megaprojects, which should be the last

been perplexing, at best.

Above: Artist and activist Mundano works on a graffiti mural along a busy highway titled Cantareira Desert, after the name of a nearly depleted water reservoir system that supplies São Paulo.

Below: (L-R) Piping, used to transfer water from one reservoir to another, stretches across dry ground left by a receded water line; People collect water from a public source in Itu, an area about 60 miles northwest of São Paulo.

solution,” when aggressive measures should

“I feel hatred, hatred of the governor and

have been taken months ago “to reduce

of Sabesp,” said Márcia Oliani, 54, the finance

consumption and leakage.”

manager of an art gallery who endured six

More than 30 per cent of the city’s

days without water in her apartment. “They

treated water is estimated to be lost to leaks

completely failed to warn us and have just

and pilfering. In a statement, the water

continued to lie about this throughout.”

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MOH No. OD51557

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Essentials

Art

Portfolio

Essentials Art

The Brands in Art Basel’s Orbit

Art Basel is the most wellattended art event in the world, which is why there is stiff competition among companies for sponsorship deals, reports Hannah Seligson.

W

hen visitors arrived at Art Basel Hong Kong last month, they were able to

explore artwork by Richard Serra, Keith Haring and Ai Weiwei – along with a plethora of luxury brands decked out to show their artistic side.

Davidoff, the cigar company, was on hand selling humidor boxes designed by the French artist Lison de Caunes, at 19,500 euros apiece. There was also a hand-painted BMW art car and a lounge space sponsored by Executive Jet Management China, a part of the private © 2014 New York Times News Service

aviation company NetJets.

April 2015

Ruinart, the LVMH-owned Champagne company, operated a bar, along with carts that weaved through the 233 galleries represented, selling glasses of bubbly for about $22. Other brands were showcased in the Collectors Lounge, a space set aside for companies to market their products.

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If you include all three fairs – held annually in Miami Beach, Florida, and Basel, Switzerland, in addition to Hong Kong – Art Basel is the most wellattended art event in the world. The Miami fair attracted 73,000 visitors in December; 65,000 people were expected

Above: Artist Jeff Koons at the North American premiere of his BMW Art Car. Right: Mixed media installation titled Invisible Presence: Bling Memories by Ebony G. Patterson in Monique Meloche Gallery at Untitled Art Fair during Art Basel Miami Beach.

Below: Cartier Dome during the Art Basel Miami Beach art fair.

brand,” said Johan Jervoe, global group

to show up in Hong Kong for the fair, held

chief marketing officer at UBS. He added,

from March 15 to 17.

however, that there was a concrete return on investment for sponsoring the fairs.

When you consider that someone

The real estate firm Douglas Elliman has

in Miami paid $1.2 million for a work

by Richard Prince, you can see why

also seen tangible benefits. In 2013, “around

companies want to be part of the Basel

a third of people who came to Douglas

action. The wealthy people who buy art at

Elliman’s first showcase of high-end

the fair often have plenty more to spend.

properties at Art Basel Miami made followup appointments to view them in person,”

Competition is stiff for brands seeking sponsorship deals at the fair. “We get

said Adriana PintoTorres, director of luxury

approached by companies every week

sales for Douglas Elliman in Miami. “It was

who want to partner with us, and every

extremely successful,” she said.

year that number increases,” said Marc Artists, of course, also benefit.

Spiegler, director of Art Basel.

Without certain brand sponsors and

There is a sponsorship fee for brands,

competitions, some artists say it would be

although he would not disclose specific

more difficult to break into the extremely

numbers. “Brands pay more to take part in the fair than galleries,” he said.

The bar is high for those seeking sponsorship deals, Spiegler said, because

Photo: Getty Images

Art Basel is only looking for companies with

spends in the low-two-digit millions a year

competitive art world. Traditionally,

on collaborations involving the arts, a small

galleries – and the coterie of high-end art

fraction of its overall marketing budget.

consultants who buy from them – have

UBS, the lead sponsor of all three fairs,

been the arbiters of artistic talent and one

“day-to-day engagements with the arts.” So

had a curated selection of its artwork

of the few gateways to critical acclaim and

the companies do their best to display their

displayed in its dedicated lounge space

commercial success in the art world. To

artistry. BMW, the lead automotive sponsor

in Hong Kong. In addition, the bank has

some extent, corporations have become an

for the fairs, is underwriting Art Journey, an

two full-time curators who buy art from

added gateway – a reality that has led to

award for emerging artists.

the Basel fairs (among other places) for

certain amount of concern in art circles.

“Our customers are into the arts,” said

its worldwide collection, which includes

The fear is that corporate interests could

Ludwig Willisch, chief executive of BMW

thousands of pieces of contemporary art.

compromise artistic integrity.

North America. The company says it

“Art creates a certain glow around our

When Ruinart, the official Champagne Portfolio

Essentials Art of corporations and artists. “This is not a new chapter in the debasement of art.

It’s a potential reservoir of funding that when done respectfully and thoughtfully is simultaneously good for the brand and good for the artist,” Szanto said.

STILL, WITH THE growing crosspollination of brands and art, there are increasingly more judgment calls to be made about the balance between artists and brands.

At the Scope fair in Miami, intermingled among the 131 gallery spaces were five sponsored galleries by brands such as paper company Moo, Red Bull and Bombay Sapphire. They all displayed work by emerging artists, some selected from online competitions.

Outside on the beach was Heineken House, a pyramid with 12 walls being painted live over the course of six days by a rotating group of a dozen artists, all of whom were paid for their time. Fiat, the official automotive sponsor of Scope, had a brand-new car in the middle of the fair.

Visitors willing to fill out a short survey were entered for the chance to win it.

Four years ago, companies couldn’t Top: A beachfront pyramid from Heineken, which was a sponsor of the Scope Art Show.

Above: The BMW and Ruinart booth, which commissioned the artist Georgia Russell to make packaging for a limited edition of Champagne bottles, at Art Basel Miami Beach.

be tempted to sponsor the fair, said Daria Brit Greene, vice president of the Scope Art Show, who also oversees brand partnerships; now she says she

sponsor of Art Basel, approached the

Art Basel Miami; she hopes the exposure

has to turn away many. The companies

artist Georgia Russell about designing

will be good for her career. Russell’s work

pay the same rate as the galleries

Champagne packaging for a limited

was represented at Art Basel Miami by

do for their space, she added.

edition of 2,325 bottles, she was initially

Galerie Karsten Greve at Art B, which

ambivalent. “I’m a fine artist and this

has three locations across Europe. Even

gallery showing their art, so we try to keep

was a little bit out of what I normally do.

so, she said it would have been hard to

to a minimum, how much space we give to

I don’t want to become like Jeff Koons,”

turn down Ruinart because, among other

brands,” Greene said.

said Russell, referring to that artist’s

reasons, it has such a wide marketing

collaborations with companies such as

reach and budget.

H&M, Dom Pérignon and BMW, on

Since artists have historically had

“It does take away from a traditional

At the Art Basel fairs, the only branded items allowed on the floor are the Ruinart Champagne carts and Audemars Piguet

everything from leather handbags to the

patrons, from wealthy citizens to

clocks. “I would not allow a BMW in the

body of a car.

monarchs to religious institutions, some

middle of the fair,” Spiegler said.

But Russell agreed to the project, which

contend that it’s fairly benign for brands

The Ruinart carts, he says, pass the test

Ruinart, a division of the luxury goods

to take on a similar role. That’s how

because, unlike a car, they are small and

conglomerate LVMH, commissions every

Andras Szanto, an adviser to Art Basel

don’t block any sight lines. He said, “You

year from a different artist. Her sculpture

sponsors including Davidoff Cigars and

can’t buy your way onto the floor; it’s for

was displayed in the Collectors Lounge at

Audemars Piguet, views the convergence

galleries who have earned it.”

April 2015

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88

Other Business

German Employers Get Creative German employers are coming up with

low-wage jobs over the past decade. Some

creative ways to avoid paying a new

3.7 million people were expected to benefit.

minimum wage, angering unions.

Chancellor Angela Merkel’s government

But in the months since it went into effect it has become clear that not everyone

introduced Germany’s first nationwide

is taking home more pay. Butchers have

wage floor of ¤8.50 per hour early this

complained that they must pay a fee of up

year. The law was the brainchild of the

to ¤100 per month to use knives they need

Social Democrats (SPD), who made it

to cut meat. Bakers say they are being paid

a condition of joining Merkel’s coalition

in buns and bread instead of cash. Other

in 2013.

workers have had their holiday entitlement

The centre-left party argued that it was a necessary response to the sharp rise in

Vandals Take Selfie

reduced or premiums for working nights, holidays and Sundays slashed.

Thief Returns Oscar Gown

thief, who tipped off celebrity news site TMZ. com after learning the pearls on the dress were fake.

The Kenyan actress had worn the dress adorned with 6,000 pearls to the Academy Awards in one of the most commented looks of the night.

The media source said the thief removed two pearls from the dress and took them to the Garment District in downtown Los Angeles where he was told they were not

The $150,000 Oscar gown worn by actress

real. The thief then took the dress back to

Lupita Nyong’o reappeared days after being

the London West Hollywood hotel and left it

stolen. Apparently it was returned by the

inside a trash bag in a bathroom.

Two female tourists from California have been cited by police in Rome for carving their initials into a wall at the city’s ancient Colosseum and then taking a selfie to record the vandalism.

Italian state news agency ANSA reported that the two women, ages 21 and 25, used a coin to damage a secondfloor brick wall on the western side of the amphitheater, which dates to the first century AD. A tour guide spotted the vandalism Photos: Reuters

and called police, who questioned the pair before citing them for “aggravated damage to a building of historic or artistic interest.”

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