Portfolio | December 2013

Portfolio Exclusive to Emirates First Class and Business Class

LONDON STARTUPS Europe’s Big Tech Play BITCOIN The Digital Currency CRUISE SHIPS Too Big to Sail?

P.R.S. Oberoi Exporting Indian Hospitality

Issue 96 ■ December 2013

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This issue DECEMBER 2013

Portfolio

Exclusive to Emirates First Class and Business Class

Cover Story 38 Service is Everything P.R.S. Oberoi, the Executive Chairman of EIH Limited and Chairman of Oberoi Hotels Private Limited, has been in the hospitality business for 50 years. During that time The Oberoi brand has achieved international recognition among luxury travellers.

Features 44 Too Big To Sail?

68 Addicted to Coal

As cruise ships get larger, experts worry that the supersize

Poland has spurned the European Union’s clean energy

craze poses hazards for passengers and crew.

targets, preferring to rely on its coal deposits for cheap but

50 Bitcoin Pursues the Mainstream Entrepreneurs, investors and some merchants believe that

polluting power.

74 London’s Surging Tech Startups

bitcoin is the solution to lower payment processing costs.

London has become the most mature of Europe’s tech hubs in the past decade thanks to being a financial centre.

54 Robots Cut Solar Costs A new generation of robots is expected to cut the cost of building and maintaining large solar farms.

60 New Land of Opportunity The number of immigrants arriving in Mexico has risen 10 per cent in the past year thanks to its growing economy.

44 60

68

15

Portfolio

16

Exclusive to Emirates First Class and Business Class

Essentials 81 Vienna by Design Even if highbrow culture isn’t your thing, there’s many an entertaining way to soak up centuries of art and design in Vienna.

86 Gliding to the Ozone Hole Scientists have long wanted to study the stratosphere, but it is too high for conventional aeroplanes. But where powered

81

flight fails, a glider might be the answer.

92 China’s Booming Art Market China has surpassed the United States as the world’s biggest art and auction market, but forgeries are proving problematic.

96 German Taste Innovation The 2013 Michelin Guide awarded three stars to 10 restaurants, yet Germany’s gastronomic prowess remains

86

underrated.

100 Preserving Culture, Protecting Wildlife The creation of communal conservancies in Namibia has been a rare success story for African wildlife.

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

96

Departments 19 Notebook World business in a nutshell.

27 Observer Spotting and analysing business trends.

36 Column: Charles Arthur Why BlackBerry Failed

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Printed by Emirates Printing Press, Dubai, UAE

Portfolio

Notebook

19

BUSINESS NEWS IN BRIEF

reuters

ECB president Mario Draghi

Threat of Deflation Haunts Eurozone In november, SpaIn became the latest

may have done too little, too late and the

a year in Greece. Some economists interpret

European country to report sliding prices.

ECB has few weapons left to fight deflation.

this as a sign that these recession-hit

This underlined fears that with inflation

With little enthusiasm among Eurozone

economies are becoming more “competitive”

already at 0.7 per cent across the 17-country

politicians for either the quantitative easing

– squeezing labour costs is one of the few

single currency area in October, sky-high

or the large-scale fiscal stimulus that would

ways countries locked into a fixed exchange

unemployment and a prolonged economic

be the textbook response, it is unclear how

rate can make their goods cheaper on

malaise may be dragging the Eurozone

policymakers could tackle a prolonged slide

international markets.

towards a Japanese-style deflationary slump.

in prices.

Madrid said prices in the crisis-hit country

Once prices start falling consumers spend

But with the Eurozone countries that could best afford to buy those goods,

declined by 0.1 per cent in the year to

less, believing the car or the fridge they are

notably Germany, preferring instead to

October, adding Spain to a list of countries –

thinking about buying will be cheaper in

practise strict spending restraint and rely

including Ireland, Greece and Cyprus – that

six months’ time. Profits tend to fall; wages

on their own exports to drive growth, others

are already mired in deflation.

are dragged down; and debtors struggle to

fear the more likely outcome is a renewed

meet repayments.

collapse in spending.

When the European Central Bank unexpectedly cut interest rates to a record

There is early evidence that elements of

Heavily indebted governments will be

low of 0.25 per cent in November it was

this scenario are starting to take hold in

particularly vulnerable to a fall in inflation.

widely interpreted as a strike against

some parts of the Eurozone.

Other things being equal, lower inflation

deflation. The bank’s president, Mario

Wages are already falling fast in some of

tends to push up debt-to-GDP ratios,

Draghi, conceded: “We may experience a

the worst-hit peripheral economies – by 0.1

because nominal GDP, which includes

prolonged period of low inflation.”

per cent a year in Portugal, 4.6 per cent in

inflation, is the key measure for assessing the

Cyprus, and an extraordinary 10.1 per cent

size of a country’s debt burden. n

But some commentators fear the ECB December 2013

Notebook PePsiCo’s india investment

Numbers Game

7.412

million vehicles sold by toyota

motor Corp as per its Januaryseptember global sales figures has secured its top spot ranking over rival general motors and getty images

Volkswagen. general motors sold 7.25 million vehicles and Volkswagen’s sales figures were 7.03 million cars.

$1.8

billion record fine has

$28

million for picasso’s Claude et paloma painting was spent by China’s richest man, Wang Jianlin, at Christie’s auction house in New york. Wang, the chairman and founder of Dalian Wanda, has a net worth of $13.2 billion.

hedge fund saC capital by the Us attorney’s office for being found guilty of insider trading practices. the

PepsiCo, the world’s largest snack-food maker, said it will invest 330 billion rupees ($5.2 billion) with its partners in

been imposed on giant

The World In Figures

year programme the Kuwaiti

India by 2020 as it increases

government aims to review

its manufacturing capacity

subsidies, impose taxes and cut

and adds new products.

public expenditure.

“India is a country with huge potential and

illegal transactions involved

£1.4

trading stocks of technology, pharmaceutical and other

billion will be paid

it remains an attractive,

by Johnson &

high-priority market for

Johnson to settle alleged illegal

PepsiCo,” Chairman and

information, netting saC

marketing techniques according

CEO Indra Nooyi said in the

hundreds of millions of dollars in

to the Us Justice Department.

statement. “We believe we’ve

illegal profits.

the firm paid incentives to

only scratched the surface

doctors and pharmacies to

of the long-term growth

promote three of its medicines,

opportunities that exist for

including anti-psychotic drugs

PepsiCo and our partners.”

companies based on insider

$5.7

billion will

reUters

20

acquire etisalat,

PepsiCo and rival Coca-Cola

the abu Dhabi-based phone

handsome return of 3,281,500

risperdal and invega and heart

company, rights over Vivendi

per cent is largely due to bitcoins

drug Natrecor.

sa’s controlling stake in marco

meteoric rise in price as the

developing countries’ business

telecom sa. this gains etisalat

supply of the virtual currency is

as growth rates in Asia, the

complete sway over the largest

limited.

Middle East and Africa are four to five times those in the

wireless carrier in morocco.

$27

worth of 5,000

are vying for a bigger chunk of

1.2

million Kuwaiti citizens

US and Europe, according

may soon loose

to PepsiCo. The company

generous cradle-to-grave welfare

generated about half its $65.5

by Norwegian Kristoffer Koch

benefits as the government

billion in revenue last year

in 2009 rose in four years

regards the welfare system to be

from outside the US.

to become $886,000. the

unsustainable. presenting a four-

bitcoins bought

Portfolio

chaumet.com

Liens, the new Chaumet watch

Notebook

22

China’s Gold ambitions

outflows from exchange-traded products.

Investors sold more than 755 tons from gold-backed ETPs this year as holdings

A gold vault that can store 2,000

The facility is the biggest for the Hong

contracted every month, according to data

metric tons, double China’s projected

Kong-based company, and it can also store

compiled by Bloomberg. There is a risk

consumption this year, opened in Shanghai

diamonds, jewellery and art.

that bullion may drop below $1,000 an

in November as owner Malca-Amit Global

Consumption in China may increase 29

ounce as the Fed withdraws stimulus and

Ltd seeks to benefit from rising demand in

per cent to a record this year, overtaking

economic data improve according to a

Asia’s largest economy.

India as biggest user as lower prices and

Goldman Sachs forecast.

higher incomes spur demand, according to the

in 2012, compared with 864.2 tons in India,

World Gold Council (WGC).

according to the WGC. Usage in China

China’s total demand may

rose 54 per cent to 706.36 tons in the first

reach 1,000 tons in 2013,

six months, according to the China Gold

according to WGC forecasts.

Association, which is funded by miners,

Bullion is headed for the

refiners, retailers and jewellery makers.

first annual drop in 13 years

gETTy imagES

China’s consumption totalled 776.1 tons

Australia & New Zealand Banking Group,

as expectations that the US

Deutsche Bank and UBS also opened vaults

Federal Reserve will curb

in Asia this year, and UK bullion exports

stimulus hurt investment

surged, a sign to Macquarie Group Ltd of the

demand, spurring record

flow of metal from west to east.

Adblock Plus Threatens Internet Business Model Eyeo, developers of the Adblock Plus

even Google, which relies on showing

plugin, has a straightforward model.

advertising for 90 per cent of its

the whitelist out of 777 which applied,

Unless a site is on its ‘whitelist’, then it

revenues, has been forced to make a deal

according to a blogpost from Adblock

blocks all the ads shown there. And, as

with the company to bypass its blockers.

Plus. For those which have to pay – which

it makes clear, even big websites whose

But in March it kicked AdBlock Plus

includes Google, Amazon and Yandex,

advertising methods (text only, no flashy

out of its Google Play store for Android

Russia’s largest search engine – the fee for

gimmicks) it finds acceptable must hand

phones, stating that it “interferes with or

not having their ads blocked is reportedly

over a share of their advertising revenue

accesses another service or product in an

the cash equivalent of 30 per cent of the

for the reward of being on the ‘whitelist’

unauthorized manner”.

revenue generated by showing ads.

Currently there are just 148 sites on

and showing their ads to visitors. ‘Small’ sites don’t have to pay if their ads are deemed acceptable.

For the many sites that rely on advertising – such as Facebook, Yahoo and Twitter – the idea of millions of desktop users not seeing the ads that pay a significant part of their bills is a problem. Yet the idea of paying the company which creates the problem to make the problem go away might not seem palatable either.

So powerful is AdBlock Plus that Portfolio

24

Notebook DUBAI EVENT: DUBAI INTERNATIONAL FILM FESTIVAL WEBSITE: DUBAIFILMFEST.COM DATE: DECEMBER 6-14 VENUE: MADINAT JUMEIRAH The Dubai International Film Festival (DIFF) has grown into a major international festival and is recognised as a premier stage for Arab cinema. It marks its 10th edition with the release of the 100 greatest Arab films. In addition to promoting the growth of the regional industry the DIFF extends its stage to recognising talent from Asian and African countries by hosting the prestigious Muhr Emirati, Arab and AsiaAfrica Awards with more than $600,000 in prize money. Another highlight is Dubai Filmmart, which is the only event in the Middle East dedicated to the development, production and distribution of Arab films. The market runs alongside the festival and draws over 1,700 delegates from more than 90 countries each year.

EVENT: MENOPE 2013 – MIDDLE EAST NATURAL & ORGANIC PRODUCT EXPO WEBSITE: NATURALPRODUCTME.COM DATE: DECEMBER 3-5 VENUE: DUBAI WORLD TRADE CENTRE The MENA region’s only trade show for natural products over the past 10 years has become a must attend event for buyers of organic food products, botanical extracts and eco household goods. Retailers, distributors and trading houses from across the region can browse the expo and interact with exhibitors at a relaxed pace. Exhibitors, in turn, are able to present a wide range of new products to keen industry buyers and further their business contacts.

DUBAI

United Arab Emirates

EVENT: DUBAI INTERNATIONAL JEWELLERY WEEK WEBSITE: JEWELLERYSHOW.COM DATE: DECEMBER 4-7 VENUE: DUBAI WORLD TRADE CENTRE Dubai’s premier jewellery trade exhibition is an ideal place to discover the latest trends, see exciting new products and partake in seminar programmes and workshops. Unique to the show is the hosted buyer programme that gives top-level buyers an exclusive opportunity to meet with the exhibitors of their choice. The show also hosts the Jewellery Design Awards honouring amateur and professional designers from across the world for their excellence in the field of jewellery design, innovation and creativity.

EVENT: GULF TRAFFIC WEBSITE: GULFTRAFFIC.COM DATE: DECEMBER 9-11 VENUE: DUBAI INTERNATIONAL CONVENTION & EXHIBITION CENTRE Drawing hundreds of visitors, exhibitors and government transport officials the three-day expo showcases the latest in road safety management trends and global implementations of ITS (Intelligent Transport Systems). The event offers an unrivalled opportunity to participate in high-level conferences chaired by the Director of BP offering insights into road safety, and the Director of Transport for London delivering an in-depth know-how on Intelligent Transport Systems. There will also be free to attend seminars led by industry experts revealing the latest in vehicle detection, traffic safety and logistic management.

EVENT: DUBAI DRINK TECHNOLOGY EXPO WEBSITE: DRINKEXPO.AE DATE: DECEMBER 16-18 VENUE: DUBAI INTERNATIONAL CONVENTION & EXHIBITION CENTRE Sip and experience brand new products in the market before anyone else at the MENA region’s exclusive beverage industry event. More than 200 key international beverage and machinery companies will have the chance to meet 10,000 professionals of the regional beverage industry.

On show will be a comprehensive display of the latest production machinery, quality control instruments, storage, transport and handling agencies associated with the industry.

Portfolio

Observer

27

On August 1, Greece’s government dropped VAT in its food service sector by 10 per cent.

AFP/GrAPh eAst

BUSINESS NEWS IN BRIEF

Taxing Problem Arrears in Greece have risen to ¤60 billion, despite efforts to make the tax system more efficient, reports Suzanne Daley.

appears to have aggravated the problem. In particular, attempts to cast a broad net have only fuelled public anger at the wealthy, who are often seen as the main culprits.

In the early days of the economic crisis, Greek officials optimistically predicted that tax collection would soon improve. They bragged of using aerial photographs to nab tax evaders who failed to declare their

The Tax inspecTors swepT inTo

© 2013 New York times News service

the picturesque village of Archanes in

aren’t they going after the big fish?”

If Greece is ever going to get its public

swimming pools on tax returns as required.

They zeroed in on doctors who reported low

Crete during the middle of a saint’s day

finances in order and escape grinding

incomes but who somehow paid high rents

celebration recently, moving from restaurant

budget austerity, it will have to do a better

in affluent neighbourhoods.

to restaurant demanding receipts and

job collecting taxes. For years, economists

financial records. Soon, customers annoyed

have pointed to rampant tax evasion as

and an astonishing number of new tax laws

by the holiday disruption confronted them.

one of the country’s most serious problems,

(22 in the last two years), some question

Pushing, shoving and angry words followed,

depriving the government of money it

whether the authorities are actually making

and eventually the frightened inspectors

badly needs.

progress. At the end of 2011, tax arrears

were forced to flee.

As the confrontation in Archanes shows,

Despite such headline-grabbing efforts

totalled ¤45 billion. At the end of 2012, ¤56

the effort to collect taxes has not gone well;

billion. At the end of July, with the most

said Nikolis Geniatakis, who has run his

having inspectors run out of town is hardly

active tax period to come, the arrears had

restaurant here on the main square for

evidence that the rule of law is taking root

risen to ¤60 billion ($83 billion) equivalent

the last 34 years and who watched the

in the Greek economy. Rather than instilling

to nearly one-fifth of the government’s

confrontation from across the street. “What

a sense of fairness, the more aggressive

public debt.

were the tax inspectors doing here? Why

tax collection programme in some ways

“People are so angry and so poor,”

December 2013

Experts say many of the tax collection

28

Observer quickly handle them. The paper quoted a senior Finance Ministry official as saying too much time had been wasted on investigating past fraud and that the focus should now be on new cases.

The Finance Ministry issued a brief statement denying the story. The next day, it asked parliament to extend the statute of limitation on tax evasion by two years.

But the lack of visible action is one of the reasons many Greeks cite for their disdain with the tax collection efforts. Accountants say efforts to reform the tax code also have failed. “The goal was a simplified system,” said Antonis Mouzakis, a prominent tax accountant in Athens. “But what we have got now is not simplified. It is a mess.”

Nikolis Geniatakis, a restaurant owner who witnessed customers confronting and eventually running off tax inspectors on the island of Crete.

In the past, Greek authorities derided the country’s tax collectors as lazy and corrupt, blaming them for many of the problems

measures are not effective, especially those

times, he and the other restaurant owners

with the system. But in recent months, the

aimed at the rich. Taxing yacht owners,

had pooled ¤1,000 each for music and

union has begun to fight back, speaking out

for instance, only encouraged them to

decorations, only to see their investment

on a number of issues and starting a poster

moor their boats elsewhere, emptying

disappear with the crowds when the scuffle

campaign telling citizens that the collectors

Greek marinas.

began outside the Lykastos restaurant.

are not at fault.

Efforts to overhaul the tax system,

“They are driving us crazy, but what about

Tryfon Alexiadis, the vice president of

many accountants say, have created such

the Lagarde list?” he said, referring to some

the tax collectors union, said he wondered

a confusing jumble of laws that it will take

2,000 tax evasion suspects with Swiss bank

whether his bosses even want the system to

months, if not years, to understand them.

accounts whose names were turned over to

improve. Alexiadis pointed out that Greece

Consolidating and reorganising the tax

Greek officials in 2010.

has only 0.87 auditors for every 1,000 citizens, compared with Germany’s rate of

bureaus, intended to save money in the

When a journalist, Kostas Vaxevanis,

long run, has created an administrative

published the list last year, he was charged

nightmare in the short run, with files

with infringement of privacy but was

Until recently, only nine auditors were

arriving months after a move, if at all,

acquitted and is now being retried. So

assigned to a list of 54,000 cases involving

union officials say.

far, no one on the Lagarde list is facing

money sent abroad, even after 24,000 of

legal action, though officials, answering

those cases were deemed likely to involve

say, is the growing grass-roots anger that

questions in parliament in October,

tax evasion, he said. After they protested

led the customers to turn against the four

said 150 audits were underway. But it

in September, the number of auditors was

tax inspectors recently in Archanes. Tax

remained unclear how aggressive the

raised to 50. The Finance Ministry said

collectors have been threatened or chased

investigation was.

recently in parliament that two audits have

Perhaps as troublesome, some experts

out of many towns, union officials say,

An article in Eleftherotypia recently

though only a few cases, like the Archanes

reported that the Lagarde list investigations

one, get much attention.

1.36 and Belgium’s 2.67.

been completed so far.

In the end, Alexiadis said, the small guy

and other high-profile cases were about to

gets hit hard simply because he is an easier

For Geniatakis, the arrival of the

be moved from an elite auditing unit to local

target. “It’s not a conspiracy to get the small

tax inspectors was the kind of showy

tax offices. Such a move, the newspaper said,

guy,” he said. “It’s just that they don’t have

government move that hurts the little guy

would effectively end further investigations

lawyers or friends to make phone calls to the

but amounted to nothing. In these hard

because the tax offices lacked the skills to

politicians for them.” n Portfolio

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Observer O N E 2 W AT C H TExT: HildA d’sOuzA

Christopher Bailey Burberry Group, the British luxury fashion brand, has appointed Christopher Bailey as its chief executive officer.

Bailey will take over from Angela Ahrendts by mid-2014, after which he will be fulfilling dual roles as chief creative and CEO. Ahrendts is joining technology giant Apple after nearly a decade at Burberry.

Unsurprisingly, analysts and Burberry investors are both concerned and eager to see how the new CEO will handle his dual roles while heading a FTSE 100 company. Burberry’s shares losing six per cent on the day of the announcement reflected this pertinent question.

Quelling reservations on the leadership skills of Bailey, Burberry chairman Sir John Peace said, “I have no doubt that Christopher’s vision and leadership, together with the excellent management team in place, will keep Burberry on the forefront creatively, digitally and financially, creating further value for shareholders in the next exciting stage of our evolution.”

Born in West Yorkshire, England in 1971, Bailey joined Burberry in 2001 and has since been credited with driving Burberry’s global success through his creative direction. He worked in close partnership with Rose Marie Bravo, the company CEO from 1997 to 2006, and later alongside outgoing CEO Ahrendts. He is responsible for the design of all Burberry collections and product lines including Burberry Prorsum, Burberry London and Thomas Burberry. Bailey is known for his micromanagement style and he modelled the company’s overall advertising, corporate art direction and store design. His efforts galvanised the label’s global status and transformed it from an annual turnover of £425 million into the £6.6 billion powerhouse it is today.

Prior to joining Burberry, the graduate from the Royal College of Arts was a senior designer of womenswear at Gucci from 1996 to 2001. Before that Bailey was the womenswear designer at Donna Karan from 1994 to 1996.

Since working at Burberry, Bailey has won numerous awards and accolades including Menswear Designer of the Year at the British Fashion Awards. Under his guidance Burberry returned to the catwalk at the London Fashion Week in 2009, having previously always shown its collections as part of Milan Fashion Week.

“I believe that creativity and innovation have been at the heart of our success in the last 10 years and will be even more so in the decade ahead,” Bailey said in his acceptance address.

Though Bailey may lack CEO experience, there is no doubt that he has been Burberry’s driving force as creative head.

Forest Misuse Costs Indonesia Illegal logging and mismanagement of Indonesia’s forestry industry may have prevented more than $7 billion flowing to state coffers from 2007 to 2011, costing the government more than its health budget, Human Rights Watch said.

In contrast, the Indonesian government’s 2011 revenue from timber royalties and reforestation fees was $300 million, said Emily Harwell, the lead author of a report released by Human Rights Watch.

The report indicates weak governance is chipping away at revenues in the world’s fourth-most populous nation, as budget and current-account deficits this year hurt the rupiah. In 2011, revenue missed from forestry totalled more than $2 billion, exceeding the government’s health spending for that year, New York-based Human Rights Watch said in the report.

Expansion of oil palm and pulp plantations to support economic growth is occurring in existing natural forests and on land claimed by local communities, Human Rights Watch said.

Indonesia has become the world’s largest producer of palm oil, used to make cooking oil, biscuits and other processed foods.

Palm oil output may increase to between 26.7 million tons and 27 million tons this year from 25.7 million tons in 2012, according to Indonesia’s Palm Oil Board.

Indonesia ranked 118 among 176 countries on Transparency International’s 2012 corruption perceptions index, undermining the investment appeal of Southeast Asia’s largest economy.

Facing slowing growth, the government is trying to narrow budget and trade gaps by curbing state spending and easing restrictions on investment in some industries.

AFP/grAPheAst

30

Portfolio

M ESURE ET D ÉMESURE *

TONDA 1950

Rose gold Ultra-thin automatic movement Hermès alligator strap Made in Switzerland

* EXACT AND EXULTANT

www.parmigiani.ch

LES ATELIERS PARMIGIANI BEIJING, LONDON, MOSCOW, SHANGHAI LES STUDIOS PARMIGIANI BEIJING, DUBAI, GSTAAD, KIEV, MACAU, MUNICH, PORTO CERVO, SAO PAULO, SINGAPORE, TIANJIN LUZERN GÜBELIN | INTERLAKEN KIRCHHOFER | MONTREUX ZBINDEN | PARIS ARIJE | CANNES ARIJE | LYON MAIER HORLOGER LONDON HARRODS | ARIJE | MILANO PISA | ROMA HAUSMANN & CO. | MOSCOW RAFF HOUSE DORTMUND RÜSCHENBECK | HAMBURG JUWELIER HANSEN | MÜNSTER OEDING-ERDEL ABU DHABI MOHAMMED RASOOL KHOORY & SONS | DUBAI DAMAS LES EXCLUSIVES | QATAR AL MAJED JEWELLERY

Observer

32

Facebook’s Zero UK Tax

£181 million in 2011 to £223 million in 2012, according to eMarketer.

However, those numbers are not reflected in Facebook’s accounts. In common with fellow American technology leaders Google and Apple, Facebook funnels the vast majority of its income from advertisers targeting its 33 million British users through Ireland.

Accounts filed at Companies House show that in 2012 just £35 million of Facebook’s UK income was booked in the market where it was generated. This was a 70 per cent increase on 2011, when revenues were reported at £20 million.

France is pushing for Europe to adopt

REUTERS

a new corporation tax regime, which would see multinationals such as Google Despite its reported UK income rising

Together with Google, Facebook

and Facebook regulated. Legislation

by 70 per cent, Facebook’s tax bill fell

accounts for almost half of the £6 billion

would be changed to ensure companies

from £238,000 in 2011 to zero. The

expected to be spent on digital advertising

are taxed according to where revenues

social networking site took an estimated

in the UK this year, according to forecaster

are generated, rather than the geographic

£223 million share of the digital

eMarketer. In the last two years, its

location of subsidiaries used to collect

advertising market.

estimated British revenues have risen from

the revenues.

Nature Hurts Philippine Economy

The total economic impact of Typhoon Haiyan may reach $14 billion, about $2 billion of which will be insured, according to Kinetic Analysis Corp. The Economist put the figure at $15 billion.

The Philippine economy is the most at risk

an economic revival that has allowed

globally from natural hazards, according to

the government to increase spending on

Maplecroft, a risk research company based

roads, airports and flood prevention to try

16 billion pesos on flood control and

in Bath, England. The Asian Development

to mitigate the effect of the catastrophes.

drainage projects this year, out of a record

Bank estimates losses from typhoons to

Growth has exceeded seven per cent for

295 billion-peso infrastructure budget.

earthquakes average $1.6 billion annually,

four straight quarters and this year the

Another 644 million pesos are allocated for

the most in Southeast Asia. The country’s

country won investment-grade scores from

equipment to forecast or monitor storms,

capital, Manila, tops the list of 616 cities

Moody’s Investors Service, Fitch Ratings

volcanic eruptions and quakes, and 7.5

ranked by the impact of natural perils to

and Standard & Poor’s.

billion pesos for a calamity fund.

The Philippines plans to spend about

the economy, according to Swiss Re Ltd, the world’s second-largest reinsurer.

According to Munich Re, insured losses caused by damaging weather events in East Asia over the last three decades have become more frequent.

Yet despite this handicap, President Aquino’s administration has overseen

AFP/GRAPHEAST

totalled $76 billion as floods and typhoons

Portfolio

Observer The World

CompIled by Hilda d’souza

Top 10

Monster Battery Project

THE WoRld’s MosT CoMPETiTiVE NaTioNs rank

nation

1.

2.

3.

4.

5.

Switzerland Singapore Finland Germany United States

6.

7.

8.

9.

Sweden Hong Kong SAR The Netherlands Japan

10.

United Kingdom

SoURCe: WoRld eConomIC FoRUm, The Global CompeTITIve Index 2013-1014

ReUTeRS

34

The Scottish island of Gigha is to be the focus of a £2.5 million experiment aimed at solving a major technological problem: how

THE WoRld’s MosT EFFECTiVE PuBliC iNsTiTuTioNs

to store energy generated by wind, tide and wave power plants.

rank

nation

The project, which will involve building giant batteries from

1.

2.

3.

4.

5.

Finland New Zealand Singapore Sweden Norway

75,000 litres of sulphuric acid mixed with vanadium pentoxide,

6.

7.

8.

9.

Switzerland The Netherlands Hong Kong SAR Luxembourg

used to run households on the island and excess is transmitted by

10.

United Kingdom

But the cable link has an upper power limit. As a result, much

is intended to allow power generated by the island’s wind turbines to be stored for later use.

At present, while Gigha’s turbines are running, their power is cable to the mainland electricity grid. When winds are low, and Gigha’s turbines do not turn, the grid feeds power to the island. of the island’s excess power cannot be transmitted to the

THE aRaB WoRld’s MosT CoMPETiTiVE NaTioNs

mainland and is wasted. The battery project, backed by the

rank

nation

Department of Energy and Climate Change, is intended to get

1.

2.

3.

4.

5.

Qatar UAE Saudi Arabia Oman Kuwait

round this problem.

6.

7.

8.

9.

Bahrain Jordan Morocco Tunisia

10.

Algeria

REDT, the company awarded the battery contract, said the reusable batteries would be able to store enough power to provide the island with 100kW of electricity for 12 hours when winds were low.

Scotland’s islands and remote highland regions have immense potential for wind power – and, in future, wave and tide power – but suffer because their electricity-cable links are poor and would be immensely expensive to replace. Battery storage systems could therefore help Scotland reach its goal of meeting all its electricity needs renewably by 2020.

Portfolio

Commentary

36

Charles Arthur

Why BlackBerry Failed “A tech giAnt rises – Another

records. Now the iPad generates

falls,” said the front-page headline on the

more money than Microsoft’s entire

Financial Times. It juxtaposed Twitter’s

Windows business.

So success isn’t foretold in the technology

initial public offering (IPO) with the chaotic events at BlackBerry, which dropped a plan

business. Nor was BlackBerry’s demise.

to sell itself for $4.7 billion, jettisoned its

True, it had a lead, but a detailed analysis

chief executive and said it would raise $1

by Canada’s Globe and Mail of the failure of

billion in cheap debt.

the nation’s darling shows that its managers discussed different ways to get out of their

Is that how it goes? Is the technology business a sort of one-in, one-out game?

predicament time and again. The problem

Twitter’s shares rose 73 per cent in a

wasn’t that they didn’t have ideas; it was

frenzied trading debut that drove the seven-

that they made the wrong choices. They

year-old company’s value to $25 billion. In

didn’t fail to adapt; they failed to make the

marked contrast BlackBerry, which in June

correct adaptations.

You can see this happening elsewhere.

2008 boasted shares topping $144, now

Microsoft, which used to be just a software

languishes at $6.50.

licensing company, began making hardware

Or did BlackBerry just get too old? Is

with the Xbox and now is building its own

that it? technology companies that survive and those that don’t is much simpler. As with biological species, it’s all about adaptability.

Former BlackBerry CEO Thorsten Heins was unable to make the company relevant again.

Surface tablets, and will soon own Nokia’s handset business. It’ll be a software-writing, tablet-making, phone-building company – just like Apple.

Google also now owns a phone

If you can’t adapt, then you will be erased

to iPhones – what startup companies call

by history.

a “pivot”, meaning a shift in business focus

manufacturer (Motorola) and is building

– then it would have been erased. The Mac

new hardware (its Glass device). Even being

1997 was just 90 days from bankruptcy.

and iPod business together generated about

a big and hugely profitable company doesn’t

Steve Jobs, older and wiser than when he

$6 billion in Apple’s most recent quarter,

mean you don’t have to adapt.

had been fired from it, came back, used

less than half that of Google, and one-third

his industry connections (particularly

that of Microsoft.

The obvious example is Apple, which in

Bill Gates) to get the company stable and

The iPhone seems obvious and its success

So while it might seem as though BlackBerry’s time simply came and went, the truth is – if we only had time machines, and

began building the company back up.

assured now – but as recounted in Fred

a desire to save it – that there were always

The iPod, originally conceived as a device

Vogelstein’s forthcoming book Dogfight,

times when it could have been saved from

to make people buy more Macintosh

it was actually a tightrope walk involving

this agonizing swirl around the black hole of

computers, instead turned into a huge

barely ready prototypes, buggy software

irrelevance. And Twitter, too, will meet some

product line in itself.

and last-minute deals. When Jobs showed

point when it abruptly faces a choice that will

off the iPhone in January 2007, there

either kill it, or make it stronger.

But by 2005, Jobs recognised that © 2013 GUardian news & Media

reUTers

Actually, no. The difference between

Every company does; and many choose

making iPods wouldn’t be enough: modern

wasn’t an assembly line for them, and Jobs’

phones would soon be able to store just as

demos had to be carefully planned to avoid

wrongly. That’s why most companies go

much music as a cheap iPod, and also make

embarrassing crashes using a “golden path”

bust in their first five years. Surviving

phone calls. So he set Apple’s designers and

worked out laboriously by testers.

beyond that (as Twitter, Facebook and

engineers to making a phone.

If Apple hadn’t shifted from making iPods

Ditto for the iPad: even internal testers were unsure what it was “for”, Vogelstein

many others have done) doesn’t exempt you from having to adapt. n Portfolio

38

Portfolio

Profile

39

service is everything P.R.S. Oberoi, the Executive Chairman of EIH Limited and Chairman of Oberoi Hotels Private Limited, has been in the hospitality business for 50 years. During that time The Oberoi brand has achieved international recognition among luxury travellers, reports Guido Duken.

It is a gracious gesture from a man who

who rarely gives interviews. Not that he

has been in the hotel business for around

has to, as the Oberoi name is synonymous

50 years and is credited with placing

in the six ‘The Oberoi Hotels’ located in

with a growing portfolio of luxury hotels.

Oberoi hotels on the international luxury

Mumbai, New Delhi, Kolkata, Bangalore,

The latest addition is The Oberoi, Dubai,

travellers’ map.

Udaipur and Ranthambhore in India.

which was inaugurated on November 4.

Today, the 84-year-old is the Executive

EIH has a 100 per cent equity interest

Through its subsidiaries or associate

Chairman of EIH Limited, the flagship

companies it has equity interests in, and

suites, is situated in the middle of Business

company of The Oberoi Group. He is

manages, The Oberoi Hotels in Agra,

Bay and lays claim to spectacular views

also the Chairman of Oberoi Hotels

Jaipur and Shimla.

of Dubai’s skyline. As I enter the meeting

Private Limited, the major shareholder

room on the 26th floor the view through

of EIH Limited.

The hotel, with its 252 luxury rooms and

the floor-to-ceiling windows is indeed INTERVIEWED BY ROBERT ANDERSON

Nast Traveler, Forbes and Galileo.

P.R.S. OBEROI IS A PRIVATE PERSON

Oberoi, founded in 1934, owns and/or

The Oberoi Hotels and Resorts are luxury properties serving business customers and high-end leisure travellers

spectacular with the iconic Burj Khalifa

operates 30 hotels and three cruisers in

in Dubai, Indonesia, Mauritius, Egypt

taking centre stage. And there, sitting in

five countries and had a total revenue of

and Saudi Arabia.

a chair, is P.R.S. Oberoi. And what is the

$189 million in the 2012/2013 financial

second thing this icon of the hotel industry

year. It remains one of the most decorated

nine hotels that operate under the

does after shaking my hand? He offers me

hotel chains in the world with many of

‘Trident’ name. Trident hotels mainly

a mint from a brightly coloured box that

its group hotels bagging awards and

target business and leisure travellers to

magically appears out of his jacket pocket.

accolades from Travel+Leisure, Condé

metropolitan and tier-two cities in India

December 2013

EIH also has equity interests in

Profile

40

seeking high-quality boarding, lodging and business or recreational facilities at more affordable rates than the five-star

The Oberoi, Dubai was inaugurated in November.

deluxe segment.

Dubai is a highly competitive market with a total of 605 hotels in the emirate as of the end of September. So what took so long for the first Oberoi hotel to open its doors here?

“We always wanted to be in Dubai but we didn’t have the right opportunity,” says Oberoi. “I have been to Dubai many, many times. I first came to Dubai in 1972 and there was only the Creek, dhows and the first big tower, which was the World Trade Centre on Sheikh Zayed Road.

Later, when I visited Dubai again, HH Sheikh Mohammed invited me to lunch at the tower. He is a fine gentleman. Then I met Sheikh Adel Al Aujan, Chairman of Aujan Group Holding, and he said he was going to get a piece of land and wanted to participate with us and build a hotel.”

Dubai’s luxury hotel sector is especially competitive, making it more difficult for a brand to differentiate itself – a fact Oberoi is well aware of. “There are some good hotels here and to say that we are the best wouldn’t be right. But I think where we have always stood out is service. And service to me is not only how quickly you get a cup of coffee but how you are actually treated by the staff. The staff should be friendly, cheerful and make you feel so good you come back for the experience.”

most hotels are bigger. The only other

Arabia. Oberoi says that Trident has a

hotel like ours is the Raffles. I don’t

lot of work to do in its home market as

according to Oberoi. “If I said we are

believe in building large hotels, 300 is

there are many cities that lack quality

going to be absolutely unique and we are

the maximum. Thereafter you are not a

hotels. He doesn’t rule out that Trident

going to be the best I would be overstating

person but become a room number.”

may eventually enter the international

Service is a key aspect, but so is size,

the fact, especially with so many hotels

The Oberoi brand has been slowly but

in Dubai and so many brands. However,

surely expanding internationally, but so

I think we are the right size in terms of

far the Trident brand has stayed in India,

room numbers. We have 252 keys, while

with the exception of one hotel in Saudi

market, but currently the focus is on the internationally known Oberoi brand.

Most of the Oberoi chain’s expansion has concentrated on South Asia and the Gulf. “We see lots of potential in both

we don’t want to be the biggest but whatever we do we must do it well. And if we have too many hotels we can’t pay attention to our customers.

regions,” explains Oberoi. “South Asia is very important to us because it’s our neighbour. And as we move away from India we look at expanding close to home.

That’s why we are in the Middle East.”

Oberoi is guarded when it comes to discussing plans, saying: “I don’t want Portfolio

Villas of The Oberoi Udaivilas Hotel in India.

to announce any projects that are not

biggest but whatever we do we must do it

a tub with a shower curtain. People don’t

mature.” But the company is looking at

well. And if we have too many hotels we

tolerate that anymore. People have also

projects in Hong Kong and Jakarta. Oberoi

can’t pay attention to our customers.”

become very demanding when it comes to

says he would also like to have a couple of

food and, of course, they expect excellent

resort hotels on the beach or on the islands

DURING HIS 50-year tenure Oberoi

service. And technology has changed. For

in Dubai and that they are also looking

has seen the hotel industry evolve. “The

instance, we are trying technology out in

at Abu Dhabi and building in Oman. The

industry has changed in a big way. For

one of our hotels and future hotels will

Oberoi Group also recently agreed a deal

instance, people are demanding bigger

have it. We have an iPad that enables you

with Al Zorah Development Company to

rooms and much better bathrooms than we

to switch on your television, watch a film

open a hotel in the UAE emirate of Ajman.

had in the past. In the old days a hotel had

and turn off the lights.”

He also doesn’t rule out projects in Europe. “We don’t want to be all over Europe. We don’t want to be the biggest, but wherever we go we want to be among the best – if not the best. London would be a very good option but it’s a difficult place to start a project. New York, London and Paris are cities we’d like to have projects in as these are source markets for us.”

Oberoi laughs when I ask him about next year. “2014? We are nearly there. We are opening the Trident Hyderabad. We are working on a further two projects in Marrakesh and Casablanca in Morocco.

Abroad nothing has materialised yet, but next year some more hotels will materialise apart from Marrakesh and Casablanca.

But I must stress we don’t want to be the December 2013

REUTERS

CORBIS/ARABIAN EYE

Profile

41

The Oberoi Group reopened the Trident, Nariman Point in December 2008 after the Mumbai attacks.

Profile

42

in our business we have to look at everything from flower arrangement to how the table is set. As I tell our chaps, the devil’s in the detail.

85 in February. I can work for another two or three years I suppose. It’s up to the people who follow me. I don’t know how

India’s Prime Minister Manmohan Singh with P.R.S. Oberoi at The Economic Times Awards for Corporate Excellence 2012.

Oberoi classifies his management style as

big they want to make the company or if they want to do it the way I do it. I’d like

“I was staying at the hotel as I don’t

them to do it the way I did.”

leading by example and being hands on. “In

live in Mumbai, my home is in Delhi.

our business we have to look at everything,

I had left the hotel an hour before the

from flower arrangement to how the table

attack for a meeting in north Mumbai. I

is set. As I tell our chaps, the devil’s in the

couldn’t enter the hotel for three days as

I should be in good health. I eat very

detail. It’s the small things that count. We

they had to sanitise the building. When I

carefully and I don’t drink, although I’ll

think our customers don’t see everything,

came back and saw what had happened to

have the odd glass of wine. But I don’t

but they do. They might not tell you about

the hotel I was mortified. I had built that

exercise enough. I should swim but I

it, but they will always remember.”

hotel. For a month or two we didn’t know

don’t because I guess I’m too lazy.”

2013 is almost over, so I ask him if he has a New Year’s resolution.

“My New Year’s resolution will be that

what to do. Complete wreckage inside.

P.R.S. Oberoi may be a little bit exercise

THE PAST half-century has also had

Then we decided to make drastic changes.

shy like most of us, but judging by what

its fair share of challenges. Among the

The number of suites was increased, we

The Oberoi Group has achieved in the

biggest, Oberoi cites the two Gulf wars,

opened new restaurants and everything

past 50 years he is anything but lazy. n

9/11 and the financial crisis – all affected

was changed except for the structure. So it

travel, and therefore, hotel occupancy.

gave us an opportunity. Sometimes good

But the most personal one is the 2008

things come out of bad.”

terrorist attack of the Trident, Nariman

Does Oberoi have any specific plans for the company? “I’m already 84 and I’ll be

GETTY IMAGES

Point in south Mumbai.

The living room of the Presidential Suite at The Oberoi, Dubai.

P.R.S. Oberoi is turning 85 in February, but he has no plans of slowing down in the next two years.

Portfolio

44

Too Big To Sail?

As cruise ships get larger, experts are worrying that the supersize craze poses hazards for passengers and crew, reports Jad Mouawad.

O

ne of the largest cruise ships in 1985 was the 46,000-ton Carnival Holiday. Ten years ago, the biggest, the Queen Mary 2, was three times as large. Today’s record holders are two 225,000-ton ships whose displacement,

a measure of a ship’s weight, is about the same as that of a Nimitz-class aircraft carrier.

Cruise ships keep getting bigger, and more popular. The Cruise Lines International Association said that last year its North American cruise line members carried about 17 million passengers, up from seven million in 2000. But the expansion in ship size is worrying safety experts, lawmakers and regulators, who are pushing for more accountability, saying the supersize craze is fraught with potential peril for passengers and crew.

“Cruise ships operate in a void from the standpoint of oversight and enforcement,” said James Hall, a safety management consultant and the chairman of the US National Transportation Safety Board between 1994 and 2001. “The industry has been very fortunate until now.”

The perils were most visible last year when the Costa Concordia, owned by the Carnival Corp, which is based in Miami, capsized off Italy.

© 2013 new York TiMes news service

The accident killed 32 people and revealed fatal lapses in safety and emergency procedures.

In February, a fire crippled the Carnival Triumph, stranding thousands without power for four days in the Gulf of Mexico until the ship was towed to shore. Another blaze forced Royal Caribbean’s Grandeur of the Seas to a port in the Bahamas in May. Pictures showed the ship’s stern blackened by flames and smoke.

Although most have not resulted in any casualties, the string of Portfolio

accidents and fires has heightened concerns about the ability of megaships to handle emergencies or large-scale evacuations at sea. US Senator John Rockefeller IV, Democrat of West Virginia, introduced legislation this summer that would strengthen federal oversight of cruise lines’ safety procedures and consumer protections.

Cruise operators point out that bigger ships have more fire safety equipment, and contend they are safer. After a fire aboard the Carnival Splendor three years ago, Carnival adopted new training procedures and added safety features that it says helped with the rapid detection and suppression of the fire on the Triumph.

After the Triumph fire, Carnival also announced it would spend $700 million to improve its safety operations, including

Cruise ships keep getting bigger, and more popular.

The Cruise Lines International Association said that last year its North American cruise line members carried about 17 million passengers, up from seven million in 2000.

$300 million on its fleet of 24 Carnival Cruise Lines ships. Carnival is the largest cruise operator, owning about half of all cruise ships worldwide.

“We have over time improved the safety of our vessels by better training and better technology and learning from incidents that have happened over the years,” said Mark Jackson, Carnival’s vice president for technical operations, who joined the company in January after 24 years with December 2013

Transport

45

AFP/grAPheAst

Transport

46

The Costa Concordia accident has put a renewed focus on cruise ship safety.

the Coast Guard.

Some experts doubt that ships can grow much larger than the current

Technology in Hoboken, New Jersey,

the UN agency in charge of marine

and former chairman of the US National

regulations, warned in 2000 of the

Research Council’s Marine Board.

growing hazards of building larger ships

“Given the size of today’s ships, any

and called for a comprehensive review

that combine cutting-edge technology

problem immediately becomes a very big

of safety rules, known as Safety of Life

and entertainment. Today’s biggest ship,

problem,” he said. “I sometimes worry

at Sea, or SOLAS. William O’Neil, the

Royal Caribbean’s Allure of the Seas, has

about the options that are available.”

group’s secretary general at the time,

behemoths, marvels of naval engineering

2,706 rooms, 16 decks, 22 restaurants, 20

These incidents have brought new

said the industry could not “rely on luck holding indefinitely.”

bars and 10 hot tubs, as well as a shopping

attention to the behaviour of cruise

mall, a casino, a water park, a track, a zip

operators. Rear Admiral Joseph

line, mini golf and Broadway-style live

Servidio, the US Coast Guard’s assistant

regulations in 2010 called the Safe Return

shows. It can accommodate nearly 6,300

commandant for prevention policy, said

to Port rules. Those require new ships

passengers and 2,394 crew members – the

at a US Senate hearing in July that the

to have sufficient redundant systems,

equivalent of a small town towering over

three fires, including the one aboard the

including power and steerage, to allow

the clear blue waters of the Caribbean

Splendor, “highlight serious questions

them to return to port even in the worst

Sea. It measures 362.1 metres long. Its

about the design, maintenance and

emergency. Only about 10 ships built since

sister ship, the Oasis of the Seas, is five

operation of fire safety equipment on

then comply with this new rule.

centimetres shorter.

board these vessels, as well as their companies’ safety management cultures.”

ExpErts point out that larger ships

The risks of building bigger ships

One result was a set of new global

“The idea is that a ship is its own best lifeboat,” said John Hicks, the vice president for global passenger ships

have larger challenges. For instance, they

became apparent over a decade ago,

at Lloyds Register, the largest ship

have fewer options in an emergency, said

as cruise companies pushed the limits

classification society. “The idea is to

Michael Bruno, dean of the engineering

of naval architecture. The head of the

do everything to keep the crew and

school at the Stevens Institute of

International Maritime Organisation,

passengers on a vessel.”

Portfolio

Transport

48

Bud Darr, the senior vice president for technical and regulatory affairs at the Cruise Lines International Association, the industry’s trade group, said today’s ships operated under layers of oversight.

The Coast Guard inspects each ship that calls at US ports at least once a year and enforces national and international norms. Private auditors, hired by cruise operators, perform frequent safety reviews, including comprehensive annual checks that last seven to 10 days, he said, and flag countries like the Bahamas or Panama, where most cruise ships are registered, provide their own oversight.

“We are subject to very close scrutiny,” Darr said. “The standards are universal.”

But incidents like the Costa Concordia grounding have raised questions about whether evacuation regulations are

The Allure of the Seas is 362.1 metres long and has 16 decks.

still applicable in the age of megaships.

bigger lifeboats, for 370 people, because of

Under the SOLAS regulations, for

a provision of the 2010 rules that allows

instance, passengers grouped at their

for exemptions if the cruise line can

muster stations must be able to evacuate

demonstrate an equivalent level of safety.

on lifeboats within 30 minutes of an evacuation alarm.

The investigation into the Costa

Those bigger lifeboats have only enough room for passengers. To evacuate the more than 2,300 crew members, the

Concordia revealed that the crew and

ships are equipped with inflatable rafts

its captain failed to sound the general

that would have to be entered through

evacuation alarm for more than an hour

18-metre evacuation chutes.

after rocks had breached the hull. As a

“The simple problem is they are

result, some lifeboats could not be lowered

building them too big and putting too

once the ship started to list.

many people aboard,” said Captain

After the accident, cruise operators

William Doherty, a former safety

said they would change muster drill

manager for Norwegian Cruise Lines,

procedures. Instead of holding a drill for

the world’s third-largest cruise operator,

passengers within 24 hours of departure,

and now the director of maritime

cruise ships said they would do so before

relations at the Nexus Consulting Group.

ships leave a port.

“My answer is they probably exceeded the

Safety rules also state that lifeboats should not carry more than 150 people.

point of manageability.”

He added, “The magnitude of the

But the two largest ships, the Allure of the

problem is much bigger than the cruise

Seas and the Oasis of the Seas, have much

industry wants to acknowledge.” n Portfolio

50

Bitcoin Pursues the MainstreaM Entrepreneurs, investors and some merchants believe that bitcoin is the solution to lower payment processing costs, reports Nick Wingfield.

Jeremy Allaire is the founder of Circle Internet Financial, which aims to be a bitcoin payment processing system.

Portfolio

Finance

51

The currency known as biTcoin – a much-hyped and much-doubted type of digital cash that can be bought with traditional money – has mostly attracted attention for its popularity in the black market, and for its wildly gyrating valuation.

But some entrepreneurs, investors and even merchants are eyeing a far more mainstream use for it. They are convinced that bitcoin, though not widely understood, offers a path to lower payment processing and more secure transactions. Instead of using bitcoin to buy illegal guns in the recesses of the web, they say, ordinary consumers will use it to reuTers

buy legal goods from legal retailers – and as easily as they now swipe their credit cards or exchange paper bills.

Bitcoin, although used mostly in the digital realm, also comes in a physical form.

“I’m confident you will see major worldwide retailers adopting systems built on bitcoin,” said Jim Breyer, the Silicon Valley venture capitalist and early Facebook investor who also served on the board of Wal-Mart Stores for more than a decade.

Breyer is an investor in Circle Internet Financial, one of the host of startups trying to find a way to make bitcoin a widely adopted currency for retail payments. The company was started by Jeremy Allaire, a serial entrepreneur, and

New bitcoin is created on computers connected through a peer-to-peer network.

An algorithm controls the production of new bitcoin, which is meant to mitigate the risk of inflation.

Since bitcoin emerged in 2009, many of those who flocked to the currency celebrated it for being beyond the clutches of governments and other institutions.

Until recently, the currency lubricated transactions on Silk Road, one of the web’s biggest bazaars for drugs, forged documents and other contraband. The site was shut down in early October by US authorities.

New bitcoin is created on computers connected through a peer-to-peer

it aims to be a payment processing system

network. An algorithm controls the

for online and physical merchants, similar to the service PayPal offers online.

payment, and in many cases they do it

production of new bitcoin, which is meant

Along with his venture firm, Accel

largely as a marketing strategy. The list

to mitigate the risk of inflation.

Partners, and another called General

includes a winery in British Columbia,

Catalyst Partners, Breyer has invested

the popular online dating site OkCupid

and exchanging bitcoin find themselves

$9 million in the company.

and a Seattle lunch truck that specialises

in regulators’ cross hairs. In March, the

in grilled cheese sandwiches. A startup

Financial Crimes Enforcement Network,

acceptance of bitcoin is the sometimes

called Gyft lets people buy electronic gift

part of the US Treasury Department,

wild fluctuations in its value, which

cards for major retailers with bitcoin,

issued guidelines telling businesses

makes it alluring to currency speculators

and in October, an ATM in Vancouver,

involved in the exchange of digital

but could scare off ordinary consumers.

Canada, began issuing bitcoin to people in

currencies that they needed to register as

One bitcoin was worth just over $200

exchange for cash.

money services businesses and comply

One potential obstacle to mainstream

© 2013 New York Times News service

‘This is cool and we should do it.’”

Already, though, businesses transferring

on a Wednesday afternoon in October.

“We pride ourselves on being the

with a variety of rules to prevent money

Someone who bought a bitcoin in early

nerdiest online dating site,” said Sam

laundering. New York’s Department of

April paid as much as $266 for it.

Yagan, co-founder of OkCupid, which is

Financial Services began an inquiry in

owned by IAC/InterActiveCorp, a media

August to determine guidelines for digital

and internet company. “We were like,

currency businesses, issuing nearly two-

Only a small and motley assortment of merchants now accept bitcoin as December 2013

Finance

52

dozen subpoenas to startups, investors and others involved in the emerging field.

Patrick Byrne, chief executive of the online retailer Overstock.com, said that his company was talking about accepting bitcoin, but that it had decided to pause its plans until legal matters around the currency were clarified.

Fred Ehrsam, co-founder of Coinbase, a startup that helps merchants accept bitcoin and helps consumers obtain it by exchanging traditional currencies, said he thought the demise of Silk Road had given entrepreneurs and investors more confidence in bitcoin.

“The bad guys basically lost,” said Ehrsam, whose startup has raised over $6 million from Union Square Ventures and others. “It took the single most illegitimate player in the space and wiped them off the map.”

Cameron, left, and Tyler Winklevoss in New York. The twins have filed a proposal with securities regulators that would let investors trade bitcoins as if they were stocks.

Bitcoin advocates, and especially merchants, say one of the currency’s

on pricing for merchants, but that it

their bitcoin. Allaire of Circle said one of

most enticing promises is that it could

would charge them a fee to use its system

his goals was to make that initial setup

significantly lower payment processing

that would be well below credit card

much faster. Allaire also said his company,

costs. Retailers typically pay two to three

transaction costs.

which is based in Boston, would protect

per cent of the value of a customer sale

Allaire and others predict that

its customers’ bitcoin by creating “offline

when a credit card is used. Retailers have

merchants will encourage customers to

reserves” – batches of the digital currency

long complained about these fees and

spend bitcoin by passing some of the

on physical storage devices, like a hard

have sought other options, but without

savings on to them in the form of lower

drive, not connected to the internet. The

much luck. PayPal, the online payment

prices or other rewards.

offline bitcoin reserves will be protected

system, typically charges merchants a fee

“Bitcoin definitely addresses a need,”

by armed guards, he said.

George Peabody, senior director at

between 2.2 per cent and 2.9 per cent, as

said Simon Johnson, a professor at

well as a per-transaction fee of 30 cents.

the MIT Sloan School of Management.

Glenbrook Partners, a consultancy in

“The payments industry is ready to

the payments industry, said Circle was a

be disrupted.”

sign of the maturation of entrepreneurs

“There have been a number of alternative currencies talked about over time,” said Chris Monteiro, a spokesman for

The fluctuating value of bitcoin has

entering the bitcoin market.

Allaire was an early web entrepreneur,

MasterCard. “The bottom line is consumers

not stopped some investors. Tyler and

want a payment solution that is safe, simple

Cameron Winklevoss, the twin brothers

founding a web application development

to use and universally accepted.”

who tangled with Mark Zuckerberg over

company, Allaire Corp, that went public

the founding of Facebook, have said they

in 1999 and was sold to Macromedia.

payments often range from nothing to

are big holders of bitcoin and have filed

An internet video company he created,

less than two per cent because of the

a proposal with securities regulators that

Brightcove, went public last year.

open nature of the technology. Coinbase,

would let investors trade bitcoin as if it

Allaire said he was convinced that

for example, said it did not charge its

were stocks.

bitcoin represented another major

Fees for a merchant accepting bitcoin,

merchants for the first $1 million in sales,

Other challenges face Circle and other

technological development.

“It’s similar to me in import as the web

imposing a one per cent fee after that

startups building new payment systems.

on the conversion of bitcoin into local

For example, it can take several business

browser,” he said. “It’s as exciting and

currency. Circle said that it had not settled

days to link someone’s bank account to

significant as that.” n Portfolio

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54

Robots Cut solaR Costs A new generation of robots is expected to cut the costs of building and maintaining large solar farms, reports Diane Cardwell.

Portfolio

In a dusty yard under a blistering Californian August sun, Rover was hard at work, lifting 20.4-kilogram solar panels off a stack and installing them, one by one, into a concrete track.

A few metres away, Rover’s companion, Spot, moved along a row of panels, washing away months of grit, then squeegeeing them dry.

But despite the heat and monotony – an alternative-energy version of lather-rinserepeat – neither Rover nor Spot broke a sweat or uttered a complaint. They could have kept at it all day. That is because they are robots, surprisingly low-tech machines that a startup company called

“Working in near secrecy until recently, the company, based in Richmond, California, is ready to use its machines in three projects in the next few months in California, Saudi Arabia and China.”

Alion Energy is betting can automate the installation and maintenance of largescale solar farms.

Working in near secrecy until recently, the company, based in Richmond, California, is ready to use its machines in three projects in the next few months in California, Saudi Arabia and China. If all

An Alion Energy Rover robot helps to mount a solar panel at a farm in California.

December 2013

© 2013 New York Times News service

goes well, executives expect that they can help bring the price of solar electricity into line with that of natural gas by cutting the cost of building and maintaining large solar installations.

In recent years, the solar industry has wrung enormous costs from developing farms, largely through reducing the price

Technology

55

Technology

56

of solar panels more than 70 per cent since 2008. But with prices about as low as manufacturers say they can go, the industry is turning its attention to finding savings in other areas.

“We’ve been in this mode for the past decade in the industry of really just focusing on module costs because they used to be such a big portion of system costs,” said Arno Harris, chief executive of Recurrent Energy, a solar farm developer, and chairman of the board of the Solar Energy Industries Association.

Now, Harris said, “Eliminating the physical plant costs is a major area of focus through eliminating materials and eliminating labour.”

Modules dropped to 35 per cent of system costs in 2013, down from 53 per cent in 2010, while labour, engineering

The QBotix robot controls tracking operations by tilting solar panels to follow the sun.

and permitting rose to 15 per cent from nine per cent in the same time period, according to Greentech Media, which tracks the industry.

For all that the industry promotes its innovations, the business of mounting panels on the ground has remained largely the same for years, a process adapted from smaller rooftop arrays that use metal racks to hold the panels in position. In an expensive, time-consuming process that can demand hundreds of hands and millions of screws, workers clear and level the ground, drive in metal posts, then

The solar market is very competitive, and people literally fight over single cents per watt, so by allowing such a dramatic decrease in overall power plant costs, we are bringing a lot of value to the market.

attach and wire the heavy, glass-encased

production targets.

“The solar market is very competitive, and people literally fight over single cents per watt, so by allowing such a dramatic decrease in overall power plant costs, we are bringing a lot of value to the market,” he said. The systems are now installed in five farms in the United States and Japan, with more scheduled to go in before the end of the year.

Alion’s installation system is designed to work on uneven ground, executives said, cutting down on the need to level hectares of fields. First, a machine used

modules. Projects can frequently run into

to lay sidewalks and gutters spits out a

delays when, say, the wrong bolts show up

Serbot, which makes robots that can wash

long concrete track. After the track sets,

at the site.

the windows of glass skyscrapers as well

Rover, which resembles an industrial

as clean solar arrays.

warehouse cart on caterpillar tracks,

After the panels are installed, it can be expensive to keep them free of dirt

Another startup based in California,

installs the panels and glues them in

or growing vegetation that can block

QBotix, has developed a robot that

place. Human workers then wire the

sunlight and reduce their output. That

controls tracking operations, moving

panels into the system.

task often falls to crews of workers

along an array and tilting the panels to

driving along the rows of panels, which

follow the sun and maximise their output.

smartphone and runs on a solar-powered

can stretch for kilometres, to clean or

Getting as much as 40 per cent more

battery. It rolls along the rails beneath

trim around each one.

electricity out of each panel than

the panels, squirting water and passing

in a fixed-tilt system, said Wasiq

over them with a spinning brush and

Several companieS are developing

Bokhari, the company’s chief executive,

a squeegee. It also has a standard

or selling robots to aid in installation

allows developers to build smaller,

hedge trimmer attachment that can cut

or cleaning, including the Swiss outfit

cheaper systems to meet their energy

vegetation from the ground.

Spot can be controlled with a

Portfolio

Technology

58

The promise of automation is not

The company has attracted some

per cent, Sapru said. But he said that

only to reduce the cost of labour, but

positive attention from analysts. “What’s

whatever the savings, it would benefit

also to cut construction time – to 12

exciting with Alion is that they’ve

the industry and help relieve the price

weeks from six to eight months in some

automated the entire process,” said Vishal

pressure on solar panel manufacturers.

cases – which also reduces the amount of

Sapru, energy and environment research

Back at Alion’s headquarters, efforts

time developers would be accumulating

manager at the business-consulting firm

to squeeze even more expense out of the

interest on a loan, said Mark Kingsley the

Frost & Sullivan, which recently gave

system continue. A leaner, more nimble

chief executive at Alion.

Alion an award for innovation. “You

model of Rover that requires less concrete

reduce the number of days. You reduce

– known as the Jackal for now – lies in

do disruptive change of cost, you change

the number of labourers. You reduce the

wait, while a second-generation Spot is in

materials and you change design concept,”

number of inefficiencies that could arise

the works.

said Kingsley, who was chief commercial

in putting up these panels, and then it

officer of the Chinese panel-maker Trina

results in huge cost savings.”

“Like most industries, when you really

Solar and led the robotics unit at ABB, a

He cautioned that it was unclear

“The goal is not robotics,” but to beat the price of natural gas, Kingsley said, as the machines continued moving

Swiss power and automation technology

precisely how much the technology would

inexorably along the south-facing rows,

giant. “And that’s what we did: We

save – the company says it can reduce

with the panels Spot cleaned suddenly

changed materials from steel to concrete

overall installation costs by 75 per cent,

producing about 12.5 per cent more

and we changed the methodology from

while German companies that do similar

electricity. “You have to be lean and pretty

manual to automation.”

work put their estimates closer to 50

low cost to meet that.” n

Adam French demonstrates Alion Energy’s Spot robot that cleans solar panels.

Portfolio

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60

Michael Wyle, from the US, leads a yoga class at his studio in Mexico City.

NEW LAND OF OPPORTUNITY

The number of immigrants arriving in Mexico has risen 10 per cent in the last year thanks to its growing economy, reports Damien Cave.

© 2013 NEW YORK TIMES NEWS SERVICE

M

are coming from nearly everywhere.

EXICO, WHOSE

is already cheaper than China for many

economic woes have

industries serving the US market. Europe

pushed millions

is sputtering, pushing workers away. And

wilting economically, so with his new

of people north,

while Mexico’s economy is far from trouble

degree in finance, he moved to Mexico

is increasingly

free, its economic growth easily outpaced

City. Lee Hwan-hee made the same move

becoming an immigrant destination.

the giants of the hemisphere – the United

from South Korea for an internship, while

The country’s documented foreign-born

States, Canada and Brazil – in 2011 and

Spanish filmmakers, Japanese automotive

population nearly doubled between 2000

2012, according to International Monetary

executives and entrepreneurs from the

and 2010, and officials say the pace is

Fund data, making the country more

United States and Latin America arrive

accelerating as broad changes in the global

attractive to fortune seekers worldwide.

practically daily – pursuing dreams, living

economy create new dynamics of migration.

Rising wages in China and higher

Mexican officials said recently that residency requests, from foreign executives

Guillaume Pace saw his native France

well and frequently succeeding.

“There is this energy here, this feeling

transportation costs have made Mexican

to labourers, had grown by 10 per cent since

that anything can happen,” said Lesley

manufacturing highly competitive again,

last November, when a new law meant to

Téllez, a Californian whose three-year-old

with some projections suggesting that it

streamline the process took effect. And they

business running culinary tours served Portfolio

Globalisation

61

Mexican manufacturing is on the rise thanks to competitive wages.

hundreds of clients here last year. “It’s

children who have arrived since 2005 with

benefiting from Mexico’s rise also remain

hard to find that in the US.”

their Mexican parents.

isolated from the export economy and its

The shift with Mexico’s northern

“Mexico is changing; all the numbers

benefits, with credit hard to come by and

neighbour is especially stark. Americans

point in that direction,” said Ernesto

little confidence that the country’s window

now make up more than three-quarters of

Rodríguez Chávez, the former director

of opportunity will stay open for long.

Mexico’s roughly one million documented

of migration policy at Mexico’s Interior

“The fact that there is a Mexican

foreigners, up from around two-thirds

Ministry. He added: “There’s been an

moment does not mean by itself it’s going

in 2000, leading to a historic milestone.

opening to the world in every way –

to change our future,” said Ildefonso

More Americans have been added to the

culturally, socially and economically.”

Guajardo Villarreal, Mexico’s economy

population of Mexico over the past few

The effect of that opening varies widely.

minister. “We have to take advantage

years than Mexicans have been added to the

Many economists, demographers and

of the Mexican moment to do what is

population of the United States, according

Mexican officials see the growing foreign

required of us.” The challenge, he said, is

to government data in both nations.

presence as an indicator that global trends

Mexican migration to the United States

have been breaking Mexico’s way – or as

has reached an equilibrium, with about

President Enrique Peña Nieto often puts

as many Mexicans moving north from

it, “the stars are aligning” – but there are

2005 to 2010 as those returning south.

plenty of obstacles threatening to scuttle

The number of Americans legally living

Mexico’s moment.

and working in Mexico grew to more than 70,000 in 2012 from 60,000 in 2009,

INEQUALITY REMAINS a huge

a number that does not include many

problem, and in many Mexican states

students and retirees, those on tourist

education is still a mess and criminals

visas or the roughly 350,000 American

rule. Many local companies that could be

December 2013

Mexican migration to the United States has reached an equilibrium, with about as many Mexicans moving north from 2005 to 2010 as those returning south.

Globalisation

62

making sure that the growing interest in his country benefits all Mexicans, not just newcomers, investors and a privileged few.

Mexico has failed to live up to its economic potential before.

“They really blew a moment in 1994 when their currency was at rock bottom and they’d just signed NAFTA,” said Kevin Gallagher, a professor of international relations at Boston University, adding that those conditions created a big opportunity

Migration to Mexico FOREIGN-BORN IN MEXICO

The expatriate population nearly doubled in 10 years.

Three measures of the country’s growing foreign-born ranks.

2010 961,121

U.S. share: 77%

FOREIGNERS ON WORK VISAS

Permanent and temporary United residents in Mexico by States region of origin. Includes 68,351 new arrivals and longer-term residents.

pe ro Eu ,840 1 6

2000 492,617 U.S. share: 70%

But now, he and others contend, of 112 million people can harness the energy of foreigners and newly educated slew of US firms seeking alternatives to China, and get them to do more than just hire cheap labour, economists and

Migration between Mexico and the U.S. evened out.

1995-2000

2005-2010

TO U.S.

TO U.S.

TO MEXICO

TO MEXICO

2.94 million 670,000 NET CHANGE2.27

million to U.S.

1.39 million

Sources: Mexico national census; Pew Research Center; Mexico Interior Ministry

de la crème in finance and technology, like

promised for decades.

Pace, 26, whose first job in Mexico was with a major French bank just after graduating from the University of Reims.

capitalise on it.”

a

Misc. others: 1,010

20,000 to Mexico

the first-world country its presidents have

said. “And this time, they really have to

Ce 31 ntra ,11 l A me 0

ric

1.37 million

officials say Mexico could finally become

“This is their second chance,” Gallagher

Africa 1,796

h ut ica So mer 6 A ,78 71

Mexicans, become partners with the

NO LONGER LOPSIDED

ean Caribb 17,043

Total: 301,795 foreigners on work visas in 2011

Asia 35,280

for Mexican exports.

Mexico has another shot. If the country

Cana da 13,57 9

THE NEW YORK TIMES

N.Y. Times News Service Date: 09/24/13 – itGraphic becameSlug: clearIMMIGRANTS-CAVE-NSPR that the country’s Size: 6.3 x 5.5 attractiveness extended beyond economics.

With Story: (BC--IMMIGRANTS-CAVE-NSPR--NYT)

architects, artists and entrepreneurs

Artists like Marc Vigil, a well-known

Spanish television director who moved

Economics has been the primary

EUROPE, DYING; Mexico, coming

to Mexico City in October, said that

motivator for members of all classes:

to life. The United States, closed and

compared with Spain, Mexico was

labourers from Central America; middle-

materialistic; Mexico, open and creative.

teeming with life and an eagerness to

class migrants like Manuel Sánchez, who

Perceptions are what drive migration

experiment. Like India in relation to

moved here from Venezuela two years ago

worldwide, and in interviews with dozens

England, Mexico has an audience that is

and found a job selling hair products within

of new arrivals to Mexico City – including

larger and younger than the population

15 days of his arrival; and the global crème

Perceptions are what drive migration worldwide, and in interviews with dozens of new arrivals to Mexico City – including architects, artists and entrepreneurs – it became clear that the country’s attractiveness extended beyond economics.

Martin Leveque, left, and Guillaume Pace, Frenchmen who run a thriving communications business, in Mexico City Portfolio

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Globalisation

64

that four million foreigners have lived in Mexico over the past few years, but the 2010 census counted about one million, making around one per cent of the country foreign-born. Many Mexicans, especially among the poor, see foreigners as novel and unfamiliar invaders.

Race, ethnicity and nationality matter.

Most of the immigrants who have the resources or corporate sponsorship to gain legal residency in Mexico come from the United States and Europe. The thousands of Central American immigrants coming to Mexico without visas – to work on farms or in cities, or to get to the United States – often run into the Mexican police. Koreans also say they often hear the xenophobic refrain, “Go back to your own country.”

Sánchez, the hair products salesman Participants in a Korean pop music contest in Mexico City, where at least 12,000 Koreans are said to live.

from Venezuela, said Mexicans who had not been able to rise above their economic class mostly seemed to resent

of its former colonial overlord. Vigil said

the 1400s, moved to Mexico in 2008 after

the mobility of immigrants. In a country

that this allowed for clever programming,

working as a camera operator in Hollywood.

still scarred by the Spanish conquistadors,

adding that he already had several

He went to film school at the American

he said many of his Mexican neighbours

projects in the final stages of negotiation.

Film Institute and completed a short film

responded with shock when they

that won several awards, but he said he had

discovered that his younger sister was

he said. “Here in Mexico, everything is

moved to Mexico because the United States

studying medicine at Mexico’s national

possible.”

had become creatively restrictive.

university. Not that the quiet scorn is

“In Spain, everything is a problem,”

Diego Quemada-Díez, another Spanish

“Europe feels spiritually dead and so

enough to deter him.

“I earn more here in a year than I would

director who said he was the first person

does the United States,” Quemada-Díez

in his family to leave Spain since at least

said. “You end up wanting something else.”

in 10 years in my own country,” he said.

Mexico’s immigrant population is still

“Mexicans don’t realise how great their

The thousands of Central American immigrants coming to Mexico without visas – to work on farms or in cities, or to get to the United States – often run into the Mexican police. Koreans also say they often hear the xenophobic refrain, “Go back to your own country.”

relatively small. Some officials estimate

country is.” n

A worker checks the locks of a storage container at Ferrovalle rail yard in Mexico City.

Portfolio

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Europe

68

They call iT Poland’s biggesT

mound of brown coal about halfway into

hole in the ground. The coal mine in

the mine.

© 2013 New York Times News service

Belchatow is more than 13.7 kilometres

Poland is Europe’s coal colossus. More

Poland has been its fossil-fuels holdout.

Within the EU, Poland has been increasingly active in trying to block

long, nearly 3.2 kilometres wide and

than 88 per cent of its electricity comes

more aggressive regulations to curb

as deep in parts as three American

from coal. Belchatow is one of its huge

climate change, in contrast to Germany,

football fields. Enough coal comes out

sources and the largest carbon emitter in

for example, which has bet its energy

of it to fuel Europe’s largest coal-fired

Europe. In November, a UN conference

future on clean, renewable technologies

utility plant, whose chimneys loom in

on climate change was held in Poland,

like wind and solar.

the distance.

a location many environmental activists

Poland has also sought to beat back

consider the least appropriate choice they

proposals against hydraulic fracturing,

fit in this hole,” Tomasz Tarnowski, an

could imagine. And while the European

or fracking, a means of unearthing

administrator at the mine, said in a bit

Union has mapped out ambitious clean-

natural gas that much of the EU – with

of proud hyperbole as he led a group

energy goals intended to reduce the

the notable exception of Britain – warily

of reporters on a walk near a towering

greenhouse gases linked to global warming,

regards as an environmental hazard.

“The entire world population could

Addicted to coAl Poland has spurned the European Union’s clean energy targets, preferring to rely on its coal deposits for cheap but polluting power, report Danny Hakim and Mateusz Zurawik.

Portfolio

69

minister, said in an interview, “I am not

the highest concentrations of particulate

little inclination to end their infatuation

sceptical about climate change; I am

matter are in Poland, including Krakow,

with coal, saying their country cannot

sceptical about some European ways of

which is ranked third overall, just

afford to convert to alternative sources of

how to address it.”

behind the Bulgarian cities Pernik

energy quickly. As if to prove a point, the

He said that his country had made

and Plovdiv, according to European government data.

coal industry scheduled its own climate

progress in reducing carbon emissions

summit meeting in Warsaw in November,

but that Europe was moving too far ahead

running concurrently with

on the issue. “This concept of leading

influenced by Poland’s fraught

the UN conference. All this is happening

by example is not delivering,” he said of

relationship with Russia, which wields

even as Polish citizens have taken to the

Europe’s approach. “Leading by example,

its oil and natural gas reserves as a

streets of Krakow, protesting the city’s

you cannot renegotiate.”

political weapon. That is one reason

poor air quality.

Asked for his view on climate change, Marcin Korolec, the environmental

Poland’s coal strategy has implications

The coal strategy has been partly

Poland, since its break with the former

both for the Poles and for Europe more

Soviet bloc three decades ago, has

broadly. Six of the 10 European cities with

sought greater energy independence by

The Belchatow coal mine fuels Europe’s largest coal-fired utility plant.

December 2013

AFP/GrAPheAst

At home, Polish officials have shown

relying on its own coal resources.

Poland was once one of the largest

2020 and continue through 2050. A top British official called the defeat “a dark

exporters of coal, which has shaped

day for Europe’s leading role in tackling

its affinity for it. But at this point, its

climate change.”

industrial economy has grown so that

In March 2012, Poland effectively

Poland can no longer meet its own coal

vetoed a similar long-term emissions

needs. It is now a net importer of coal

reduction plan, exasperating European

and, in an energy irony, Russia accounts

officials. “The EU can’t work like this,”

for about two-thirds of those imports. Last

Europe’s climate commissioner at the

year, Poland bought more than six million

time, Connie Hedegaard, said. “We can’t

metric tons of Russian coal, according to

move forward if the most reluctant one

an estimate from Euracoal, an industry

dictates the pace to the rest.” But Poland

trade association.

held firm.

In the last few years, Poland has

This has left officials in other European

Polish citizens are pushing back.

Recently in Krakow, hundreds of people turned out to protest air pollution.

Krakow sits in a valley, intensifying the pollution in a city where some apartment buildings are heated by coal.

played a more active role in the EU, and

countries, and environmentalists,

particularly in the European Council,

flummoxed. “The government is

which comprises national leaders and

promoting coal and replacing old coal

prefers rule by unanimous decisions

with new coal,” said Julia Michalak, an

“That’s the Polish strategy,” added

among the 28 member states. In June

official at Climate Action Network Europe,

Michalak, who is Polish. “That’s the only

2011, Poland stood alone in opposing

an umbrella group of environmentalist

answer, and that’s not a long-term vision.

climate targets that were to start in

organisations that is based in Brussels.

It’s not rational.”

reuters

Europe

70

Polish citizens are protesting against air pollution caused by coal.

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Enjoy responsibly – www.moet.com

Polish citizens are pushing back.

Recently in Krakow, hundreds of people

turned out to protest air pollution.

Krakow sits in a valley, intensifying

the pollution in a city where some

apartment buildings are heated by coal.

The crowd marched through the city

chanting, “Why do you poison us?” and,

“We want air.”

Organisers of the march say the air

pollution is harming the health of the

local population, leading to high rates

of asthma and premature deaths. City

officials routinely warn parents not to let

their children play outside on the days of

the highest pollution.

“We understand that protest is a drastic

way of showing our discontent, but for

years authorities haven’t done anything to

solve the problem,” said Andrzej Gula, one

of the rally’s organisers and a member of

the informal group Krakow’s Smog Alert,

which monitors air pollution.

Martin Korolec, the Polish environmental minister, is sceptical about some European attempts to address climate change.

“We demand a total ban on heating

homes with coal,” Gula said. “This is the

only way of improving the air quality

in our town. The problem is that the

politicians are afraid of doing that, as it

would harm the Polish mining industry.”

Lena Kolarska-Bobinska, a member of

Poland’s governing party who serves in

the European Parliament, said she wanted

to diversify Poland’s energy mix but at its

own pace. “The only problem for us is to

go farther and farther and quicker and

quicker,” she said, “and this is what the

climate policy in Brussels is.”

“What we are trying to do is to influence

the speed with which the European

Union is pushing,” Kolarska-Bobinska

said. “It’s very easy for some countries to

say we want a 30, 40, 45 per cent goal

A huge coal excavator at Belchatow coal mine.

of renewables. Many political groups in

during a recent tour, the mine’s excavating

transported it to the nearby plant. Plumes

the parliament are asking for that. But

rigs resembled giant Transformer toys,

of smoke twisted for kilometres in the sky

they have to remember how diversified

each with what looked like a Ferris wheel

from the plant’s 13 power units.

the countries are in Europe. Give each

attached to one of its spindly arms.

country the possibility to reach this target

Instead of seats, the Ferris wheels had

swallowed up by this hole, Tarnowski said,

by their own way.”

spiked scoopers that chomped up clumps

gesturing toward them as he stood with

of brown coal. The coal was then fed into

a group of reporters, “just like the Eiffel

120.7 kilometres of conveyor belts that

Tower, almost.” n

For now, the behemoths like Belchatow

will continue to power Poland. Seen

urope-Addicted to Coal.indd 72

Those towering chimneys would be

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74

A mural in the neighbourhood of Shoreditch, where many startups are leasing office space.

London’s surging Tech sTarTups

© 2013 New York Times News service

Britain’s capital has become the most mature of Europe’s tech hubs in the last decade thanks to being a financial centre, reports Mark Scott.

Parts of London have the

has been missing: a London startup firm

a multibillion-dollar valuation. The

outward signs of a budding high-tech

hitting gold on the public market. King.

move feeds expectations that more of

scene. Run-down warehouses have

com, the maker of the popular Candy

the city’s leading startups, many of them

been remodelled into gleaming office

Crush game franchise, is trying to change

clustered in East London, will mature

spaces. Some greasy diners have been

that. And if the company is successful, it

into public companies.

transformed into trendy restaurants. And

could help cement the city’s reputation as

many wood-panelled pubs have become

one of Europe’s top startup communities.

wine bars.

Still, an important sign of legitimacy

The company has filed to go public in the United States, and analysts expect

“In the last 10 years, London has become the most mature of the European tech hubs,” said Harry Nelis, a London partner at the venture capital firm Accel Portfolio

Startups

75

The Tea Building offers commercial rental space for startups.

Partners. “The hope is that some of the new generation of startups may start to look at going public in London.”

The British capital’s growing credibility in the technology industry is partly the result of government efforts to reduce the city’s reliance on financial services, which still dominate the local economy.

Local lawmakers have invested more than $80 million to rejuvenate buildings into co-working and events spaces, attracting companies like Microsoft and IBM to East London – or Tech City, as some local

One of the more successful companies so far is Mind Candy, a British online game and entertainment startup aimed at children, which now has more than 80 million registered users worldwide.

remains in its infancy compared with Silicon Valley. In the first half of the year, London’s startups raised $351 million, less than 10 per cent of the investment directed to companies in California, according to Dow Jones Venture Source.

Though startups have set up across the city, the centre of the action is in the neighbourhood of Shoreditch, in East London. Amid art galleries and pop-up restaurants, local startups like fashion companies Lyst and Farfetch and financial tech firms TransferWise and GoCardless have taken space in converted warehouses

politicians call the area. Policymakers are

and once-crumbling office buildings.

also working with local startups to make

One of the more successful companies

it easier to hire international workers and

of tech companies in East London

to help fledgling firms to get access to

has roughly quadrupled, to around

so far is Mind Candy, a British online

London’s financial markets.

1,400, according to British government

game and entertainment startup aimed

statistics. The city also attracts more

at children, which now has more than 80

budding tech scenes, but London has the

venture capital than European rivals like

million registered users worldwide. In the

benefit of its roots as a global financial

Paris and Stockholm.

company’s office just south of Shoreditch

Other cities in Europe, like Berlin, have

centre. In the last four years, the number December 2013

Still, London’s technology sector

and next door to a Google office, teams

Startups

76

Arnaud Bertrand is the co-founder of the vacation rental website HouseTrip.

of designers, engineers and illustrators fill a space that looks as if it came from

management company.

Four years after starting Mimecast,

like Insight Venture Partners, based in New York.

California. Parts of the colourful office are

which allows companies to archive and

designed to resemble an enchanted forest,

get access to their emails anywhere in

business has made,” said Bauer, 39, who

and a slide allows workers to descend

the world, in 2003, Peter Bauer and Neil

sold his first startup at 24 and moved

between floors.

Murray had to decide whether to expand

to Boston in 2011. “If we had failed in

their operations into the United States

the US, there would be nothing for us to

when it released Moshi Monsters, an

or further across Europe. Despite large

come back to in Britain.”

online game that allows children to look

economies like France and Germany on

after a pet monster and interact with

their doorsteps, the two South Africans

But despite the growing number

others over the web. Since then, Mind

sent a small team of engineers and sales

of startup success stories in London,

Candy has signed franchising agreements

representatives to Boston, preferring to

the city still faces challenges as it looks

with companies including McDonald’s and

bet on the United States market than to

to compete with other European and

Nintendo. Last year, Mind Candy reported

compete in multiple European countries,

international hubs.

a 60 per cent increase in revenue, to $75

where they would have had to face varied

million. Now, the company is looking to

cultures, laws and languages.

The company struggled before 2008,

expand its reach to the United States,

Now, Mimecast has around 170 people

“It was the riskiest move that our

Tech entrepreneurs in London complain that local real estate can be prohibitively expensive. Many property

according to the company’s founder,

across the United States, and it expects

owners demand long leases for office

Michael Smith.

to have more American than British

spaces, which does not match the needs of

customers by early next year. To increase

startups, which can either grow or flop in

already made the push to the United

growth, the firm also raised $62 million

a short period of time.

States, including Mimecast, an email

last year from venture capital companies

Other London startups have

For Arnaud Bertrand, 28, the French Portfolio

Startups

78

To help lure and keep developers, small startups, larger tech companies like Google, and the British government routinely run events across the city. One such event took place on an unseasonably warm night in late September, when a steady stream of mostly 20-somethings filed into a converted warehouse in grimy East London.

Ervin Strnisnik of the TransferWise financial tech firm, centre, works with Daniel Sauva at the company office in Shoreditch.

co-founder of the vacation rental website HouseTrip, the main problem has been hiring qualified staff. The company was founded in 2009. Bertrand now has 200 employees spread across London and Lisbon, Portugal, but he has struggled to find British engineers with the right technical skills. Instead, he has turned to recruitment agencies that scour Eastern Europe for talent, and none of his 35 developers are originally from Britain.

“We almost have given up recruiting in London,” he said. “Finding developers is one of the hardest challenges.”

To help lure and keep developers,

Michael Smith is the founder of Mind Candy, a British online game and entertainment startup aimed at children.

small startups, larger tech companies

the British capital to compete in a

London’s growing startup community an

like Google, and the British government

table tennis tournament that pitted 16

opportunity to swap stories about work,

routinely run events across the city. One

companies, including Facebook’s local

while trying to outplay their counterparts

such event took place on an unseasonably

staff, against one another.

at rival firms.

warm night in late September, when a

Over five hours of competition, fed by

“Startups are always competitive,”

steady stream of mostly 20-somethings

music from a London DJ, the 64 players

said Alexander Will, the 29-year-

filed into a converted warehouse in grimy

– sporting T-shirts emblazoned with their

old co-founder of Listora, an events

East London.

companies’ logos – were cheered on by

publishing company, who helped to

more than 300 colleagues and friends.

organise the tournament. “There’s a lot

founders, the event brought together

Part networking event, part sports

to gain from everyone being in one place

programmers and engineers from across

tournament, the night offered members of

getting to know each other.” n

Organised by a group of startup

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81

GETTY IMAGES

THE BEST OF LEISURE AND LIFESTYLE

VIENNA

BY DESIGN

December 2013

Even if highbrow culture isn’t your thing, there’s many an entertaining way to soak up centuries of art and design in Vienna, reports Brian Johnston.

Essentials

Travel

CAN SEE THE GLAZED LOOK that appears in people’s eyes when I admit I’ve been to Vienna four or five times in the last few years.

They probably think I’m a mad Freudian, an opera fanatic or one of those snore-worthy museum-goers muttering about Secessionist art.

After all, Vienna has a reputation for classical music, art galleries and existential angst. And weren’t all those moustachioed Hapsburgs just a trifle dull?

The truth is that high culture gives of parquet floors in museums drives me mad. Actually, I love Vienna because sightseeing here doesn’t have to be

VIENNA TOURISM

me a headache, and the squeak-squeak

tedious. Just look up: on the ceilings of

Enjoying an evening meal outdoors at the Naschmarkt.

the Hofburg palace, semi-clad nymphs Haas House (Do & Co Hotel) and the roofs of St Stephen’s Cathedral.

leap from the clouds. In Haus der Musik, superb walk-through displays make the lives of seven of Vienna’s great composers come alive, and I can’t resist picking up a baton and conducting an interactive Vienna Philharmonic. And in Augarten Porcelain Manufactory Museum, three centuries of porcelain prowess is seen in action on a behind-the-scenes tour of the still operational factory floor. Afterwards, I dine off Augarten porcelain at the adjacent Décor restaurant, where trendy folk tuck into beef tartare and asparagus salads. It’s suave attire you need for Vienna’s museums, not sensible shoes.

Even Vienna’s hallowed art museums amuse. The Museum of Art History reopened its Kunstkammer this year following a 10-year revamp, and it’s far from dull. The ‘chamber of curiosities’ collection amassed by the Hapsburgs is a treasure-trove of exotica and curious collectables: bejewelled objects include mechanical bears, a special chair used in riotous drinking games, and outrageous goblets straight out of Game of Thrones.

In short, anyone who thinks Vienna is a stuffy imperial leftover hasn’t veered away from their dreary guidebook. Even if you never step inside a museum, you

VIENNA TOURISM

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83

can sashay through centuries of art, architecture and design. For a start, kick back in a coffeehouse, where ornate pastries, topped by whipped cream, are just as madly baroque as any palace décor.

I’m particularly fond of Café Sperl, where composer Franz Lehár once hung out.

Though I’ve yet to find a merry widow, I can at least soak up the genteel nineteenthcentury atmosphere among locals forking AUSTRIAN NATIONAL TOURIST OFFICE

up strudel and reading the newspapers.

I’m also fond of Café Hawelka for the sheer contrast. It retains a shabby-chic 1930s look, down to rickety wooden floors and peeling theatre posters, that makes you feel as if you’ve strayed into a set for The Third Man. No extravagant pastries

A young boy encounters Haydn in the Haus der Musik.

here, just plum dumplings and chopped pancakes sprinkled with icing sugar.

BRIAN JOHNSTON

architect of the Modernist movement

era remains, but not at the expense of

Adolf Loos, is lovely.

new creativity. Lobmeyr oozes period

Just off the old town’s main shopping

charm and once made chandeliers for

drag, the American Bar is another Loos

the Hapsburgs; now it reinterprets

masterpiece. It says everything about how

them in chic cascades of modern glass.

the Viennese rebelled against the old ways

It’s one of several companies that still

at the opening of the twentieth century. I

proudly displays the honorary title k.u.k.

love this petite space, with its green-and-

Hoflieferant, which means it was once an

white chequered floor and minimalist,

official purveyor to the imperial court.

masculine lines made sumptuous by use

Others include textile and fabric supplier

of materials such as onyx, marble and

Backhausen – particularly noted for fine

mahogany. The ceiling is a translucent

Art Nouveau designs – and Knize, former

orange, its sultry light reflecting off gilt

gentleman’s outfitter to archdukes. The

mirrors and martini glasses. There are

AUSTRIAN NATIONAL TOURIST OFFICE VIENNA TOURISM

Enjoying the sun outside Café Sperl.

interior of the shop, designed by leading

You can also get a design lesson in Vienna’s shops. Nostalgia for the imperial

The American Bar by noted designer Adolf Loos.

December 2013

Centuries of architectural design across the rooftops of old Vienna.

Essentials

KUNSTHISTORISCHES MUSEUM

Travel

VIENNA TOURISM

Rhino-horn goblet with warthog tusks from Prague around 1611, from the Chamber of Curiosities collection at the Kunsthistorisches Museum.

pink sandstone with chandeliers that look like pale floating jellyfish, where resident DJs are fond of hip-hop. The contrast is nothing extraordinary in the Museums

Night view of Vienna towards the town hall.

Quartier, where contemporary architecture few better ways to get an art (or at least

THE VIENNESE revere their history,

cuddles up to baroque buildings. The

architecture) education in Vienna than

but aren’t precious about it. You’ll find

plain grey monolith of the dark, angular

over a mint julep in this louche bar, which

another ultra-modern bar in the Leopold

Museum of Modern Art is quite the

seems to anticipate the Jazz Age.

Museum, but there’s no hint that the Café

contrast to voluptuous imperial bling.

The Viennese are still pushing architectural boundaries, and

Leopold is intimidated by great art. It’s a

The Museums Quartier is one of the

sleek contemporary space in marble and

world’s most significant cultural precincts

thoughtfully providing bars from which to admire the results. Also in the old town, Haas House couldn’t be more in-your-face: it sits lopsided in postmodern steel and glass right across from the cathedral. Few miss the exterior, but only locals seem to know that inside lies one of Vienna’s most stylish designer pubs. Dress up for Onyx, where Austrian celebrities can be found quaffing cocktails on whiteleather banquettes before moving on to the restaurant to nibble on superb sushi.

Huge windows allow you to eyeball the gargoyles of St Stephen’s Cathedral across the way in a clash of designer styles that’s quintessentially Viennese.

VIENNA TOURISM

84

The interior of Café Hawelka.

Portfolio

ACCOR HOTELS / VINCENT THIBERT

The spectacular ceiling and view of Le Loft restaurant at Sofitel Vienna Stephansdom.

25 HOURS HOTELS

85

Room 22 at the 25 Hours Hotel.

yet, on long summer evenings, the inner

is the most interesting, demonstrating

big-top memorabilia and boldly-coloured

courtyard is an open-air salon where young

the national knack of simultaneously

paintings of clowns and acrobats. The city’s

Viennese recline on post-modern benches

admiring tradition while reinventing it for

splendid skyline is a treat from the rooftop

in cheerful yellows and reds. Just behind

a modern audience. Her reinterpretations

lounge and terrace, where evening DJs spin

it is a whole district mostly overlooked by

of traditional Austrian dresses, with their

music and sparkling wine flows.

tourists. The 7th District is a lately trendy

pleated skirts and plunging necklines,

neighbourhood getting a reputation for

bring them so up-to-date they’re worn by

changing the face of Vienna. Tucked into

its fashion boutiques, which range from

the likes of Katy Perry.

the old town, the recently-opened Hotel

This is only one of several design hotels

the edgy, fetish-inspired Tiberius to cattle-

The 7th District is also home to one of

horn jeweller Anita Münz and innovative

Vienna’s best design hotels, 25 Hours. The

and an interior whose luxe charm evokes

leather bag designer Ina Kent. To my

amusing décor verges on the surreal at

vague Art Nouveau sensibility. Lamps

mind, dirndl designer Lena Hoschek

times and is inspired by the circus: expect

with duck legs will make you smile, while

Topazz has a cylindrical, port-holed façade

divans slotted into the oval windows give you a grandstand seat over passing pedestrians.

If you want to push your designer boundaries, stay at the Sofitel Vienna Stephansdom, designed by French architect Jean Nouvel. Its all-black or all-white guestrooms are a bit much for me – I’d rather compromise on the grey rooms, with their sliding window panels that allow me to rearrange my city views. But its Le Loft restaurant is LENA HOSCHEK

VIENNA TOURISM

truly sensational. Video installations in

Use a Brand, a shop in the trendy Seventh District.

December 2013

Design inspiration at Lena Hoschek’s fashion boutique in the 7th District.

the ceiling by Swiss artist Pipilotti Rist – which include blinking eyeballs, forest scenes and goldfish swimming by – are as mesmerising as the light-twinkled view over all Vienna. Wonderful. n

86

Essentials

Science

GlidinG to the ozone hole Scientists have long wanted to study the stratosphere, but it is too high for conventional aeroplanes. But where powered flight fails, a glider might be the answer, reports Matthew Wald.

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87

It mIght be the weIrdest part

phenomena, engineers say. So a team of

phenomenon, the polar vortex –

of the atmosphere, 24 kilometres

scientists, aviation buffs and entrepreneurs

circulating winds that act like a giant

above the polar regions, where vast

is building a two-seat sailplane designed

cyclone during the austral winter,

stratospheric clouds of nitric acid and

to withstand the peculiar hazards of

delivering a strong uplift. If it can catch

water vapour shimmer in iridescent pink

stratospheric flight. The journey is

that current, the glider will soar still

while human-made chemicals play havoc

scheduled for August 2015.

higher, into the Perlan Clouds, and

with the ozone layer.

Scientists long to study the stratosphere

The glider will be shipped by freighter

higher, into the ozone hole, where the

to El Calafate, Argentina, where winds

chemical reactions that disrupt the

at close range. But this is almost the edge

from the Pacific Ocean are deflected by the

ozone layer take place. (Perlan is the

of space, far too high for a conventional

Andes Mountains. This creates a standing

Icelandic word for “pearl,” describing

airplane in level flight. So how to get there?

wave, like the waves of water that form

the clouds’ sunlit glow.)

In a glider!

over rocks in a mountain stream, with

Without the weight of engines or fuel, a glider can be lifted by natural atmospheric

updrafts of nine metres per second.

The aim is to go to 27,432 metres, or 127.4 kilometres up, and set a new

“These mountain waves get so steep and

altitude record for a glider. The plane’s

energetic, they turn into white water,” said

predecessor, Perlan I, set the record of

Edward Warnock, an aerospace engineer

15,461.3 metres on August 30, 2006.

who is chief executive of the Perlan Project,

Perlan II will cost an estimated

the non-profit organisation that is building

$7.5 million, of which $3.5 million

the glider, Perlan II.

has already been spent; the project is

A single-engine plane, probably a crop

still trying to raise the balance. The

duster, will tow the glider to meet these

organisers include Dennis Tito, the

waves, at about 3,048 metres. Where the

pension fund manager who paid $20

waves weaken, at about 18,288 metres,

million to visit the International Space

the glider is supposed to intercept another

Station and, until he was killed in the 2007 crash of his single-engine plane, Steve Fossett, the aeronaut and sailor who flew Perlan I.

Einar Enevoldson, right, the founder and chief pilot of the Perlan Project, and Morgan Sandercock, the project manager.

December 2013

88

Essentials

Science

A dummy fuselage for the Perlan II glider.

Einar Enevoldson holds a door for the Perlan II glider.

The glider was designed partly by computer calculation and partly by intuition. Long wings with a short distance from leading edge to trailing edge have low drag, essential in a plane with no engine.

But as the wings get longer, the bending forces become greater, so the wings require a stiffer internal spar, which adds thickness. And thicker wings have a harder time cutting through the air.

Enevoldson and Steve Fossett reached 15,461.3 metres in 2006 to set an altitude record for gliders.

“You’re alwaYs working trade-offs,”

Perlan I also used the Andes mountain uplift; the climb took about 4½ hours. The

co-pilot on the record-breaking flight.

new sailplane will have a wingspan of 25.6

since 1947, when he was 15 years old, and

metres and weigh just 771.1 kilograms,

has extensive experience in high-altitude

counting crew – 45.6 kilograms lighter

fighters and research planes. Now he is

than Perlan I, even though the older plane

81. His reflexes are not the same, he said,

had a 21.9-metre wingspan. The builders

but his judgment in the tricky business of

say Perlan II is 80 per cent complete. Huge

finding the uplifts is still good.

carbon-fibre pieces that look like a woven

said Einar Enevoldson, the founder and chief pilot of the project, who was Fossett’s Enevoldson has been flying gliders

The glider’s design is a trade-off of

fabric, a tight-knit plaid in two shades

performance and safety. Above 15,240

of grey, fill most of a hangar, waiting to

metres, the air pressure is so low that a

be glued together. In the end, all will be

pilot would find it impossible to exhale,

painted a reflective white to stop the sun

even with an oxygen mask. One solution is

from heating the parts enough to weaken

a pressure suit, but it would be too big for a

the epoxy. (Inside the cabin, though, the air

glider built to climb so high.

will be near freezing.)

The glider’s system will be tricked by the Portfolio

90

Essentials

Science

thin atmosphere into showing an airspeed of 74 kph, about what it needs to stay aloft.

other complications.

One is the need to pressurise the cabin

(Mars is a special interest of Tito’s.) In fact, the engineers say, their plane would fly

But for the speed indicator to get to that

so human lungs can overcome low air

well in the atmosphere of Mars – if it could

reading in such low-density air, the actual

pressure – something other airplanes do

get there, and find a tow plane to get it off

speed will have to be about 539 kph.

with an engine. The solution is to seal

the ground.

This, indirectly, sets the altitude

the tiny cabin as the plane ascends, and

The stratosphere is ripe for close

limit. The challenge for the glider, as for

bleed off a little air through a valve so

study, scientists say. It is where the sun

most aircraft, is to move fast enough to

the cabin pressure mimics what it would

continuously breaks apart molecules

get sufficient lift in the thin air to stay

be at 4,419.6 metres. The sealed cabin

of ozone, which is made up of three

airborne, without approaching the speed

needs spaceship-style scrubbers to remove

oxygen atoms. The third tends to bind

of sound, which causes unacceptable

the carbon dioxide and the moisture

with human-made chlorofluorocarbon

stresses on the airframe. But as air density

that would otherwise produce ice on the

refrigerants in the atmosphere. While those

goes down, so does the speed of sound.

windows and walls. There is no way to

chemicals have been mostly banned, the

On the top of the Perlan II glider’s wing,

warm the plane – another consequence of

stray oxygen atoms stay married to chlorine

the passing air will approach the speed of

lacking an engine – so the two pilots, who

or fluorine for 50 years, unavailable to

sound but will not reach it.

will spell each other during the long flight,

become part of new ozone molecules,

will wear socks with heaters in their soles,

thereby depleting the ozone layer and

Enevoldson said.

altering the natural balance.

“They’re definitely going to need to push the performance envelope, which means high lift and incredibly low drag,”

The whole contraption, studded with

Perlan II could take samples and

said Richard Anderson, a professor of

windows cut in circles to minimise

use lasers to observe and measure

aerospace engineering at Embry-Riddle

stresses on the frame, looks well suited

concentrations of chemicals. It is also

Aeronautical University in Daytona Beach,

to an otherworldly environment. “The

expected to provide data on how the

Florida, and a glider pilot, who is not

temperature and atmospheric pressure

air mixes at such high altitudes, a

affiliated with the project.

aren’t too far off from Mars,” said

phenomenon that is crucial to the planet’s

Warnock, the project’s chief executive.

heat balance. n

And the high altitude will introduce A test tail is attached to a dummy fuselage for the Perlan II glider in Bend, Oregon.

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92

Essentials

Art

China’s Booming art market China has surpassed the United States as the world’s biggest art and auction market, but forgeries are proving problematic, report David Barboza, Graham Bowley and Amanda Cox.

Portfolio

93

When the hammer came doWn

has refused to pay for the piece since

at an evening auction during China

doubts were raised about its authenticity.

© 2013 New York Times News service

Guardian’s spring sale in May 2011,

Buyers also failed to pay for the second-

China’s booming market, a six-month review by The New York Times found that many of the sales – transactions reported

Eagle Standing on a Pine Tree, a 1946

most-expensive work reported to have sold

to have produced as much as a third of the

ink painting by Qi Baishi, one of China’s

in that session, and they similarly balked

country’s auction revenue in recent years -

20th-century masters, had drawn a

at paying for the third-, fourth-, sixth- and

did not actually take place.

startling price: $65.4 million. No Chinese

ninth-most-expensive works – a striking

painting had ever fetched so much at

pattern of default that has been repeated at

flooded with forgeries, often mass-

auction and, by the end of the year, the

auction houses across the country.

produced, and has become a breeding

sale appeared to have global implications,

“The market is in a very dubious stage,”

Just as problematic, the market is

ground for corruption, as business

helping China surpass the United States

said Alexander Zacke, an expert in Asian

executives curry favour with officials by

as the world’s biggest art and auction

art who runs Auctionata, an international

bribing them with art.

market. But two years after the auction, Qi

online auction house. “No one will take

Baishi’s masterpiece is still languishing in a

results in mainland China very seriously.”

international art world, but experts

warehouse in Beijing. The winning bidder

Indeed, even as the art world marvels at

warn that the market here is particularly

Just as problematic, the market is flooded with forgeries, often mass-produced, and has become a breeding ground for corruption, as business executives curry favour with officials by bribing them with art.

Fraud is certainly no stranger to the

vulnerable because, like many industries in China, it has expanded too fast for regulators to keep pace.

In fact, few areas of business offer as revealing a view of this socialist society’s lurch toward capitalism as the art market.

Like many luxury businesses in China, the explosion of buyers for art here has been fuelled by the pent-up consumerism of the newly rich. The demand is so great that last year, in a country that barely had an art market two decades ago, reported auction revenues were up 900 per cent over 2003 – to $8.9 billion. (The United States auction market for 2012 was $8.1 billion.)

A prospective bidder examines a figurine on offer at a China Guardian auction in Beijing.

December 2013

Ceramic vases and jugs dry before being fired in the kilns at the Xiong Jianjun factory, one of China’s best-known makers of reproductions.

94

Essentials

Art

landscapes, hardly registers internationally

art market, in which reproductions that

China often mimic those in the West, the

outside collecting circles, though in recent

so many have the skills to create are often

demand for art reflects uniquely Chinese

years he has joined Picasso and Warhol as

offered as the real thing. It would be hard

tastes. While the rest of the world bids

one of the best-selling artists in the world.

to create a more fertile environment for

While the luxury-buying habits in

up Pollocks and Rothkos, Chinese buyers

This very reverence for the cultural past

the proliferation of fakes.

typically pursue traditional Chinese pieces,

is now contributing greatly to the surge

“This is the challenge right now,” said

some by 15th-century masters, and others

in forgeries. Artists here are trained to

Wang Yannan, the president and director

by modern artists, like Zhang Daqian, one

imitate the old Chinese masters, and they

of China Guardian, the nation’s second-

of many who have chosen to work in that

routinely produce high-quality copies

biggest auction house. “In the mind of

old style.

of paintings and other works, such as

every Chinese, the first question is whether

ceramics and jade artefacts. That tradition

it’s fake.”

Even today, the name of Zhang, a 20th-century artist known for his

has intersected with the newly lucrative For years, much of the forgery went unnoticed as works passed from buyer to buyer, their prices spiralling up. But, increasingly, high-profile scandals are exposing the extent of the fakery and sowing doubts about the larger market. In one case, three years ago, an oil painting attributed to the 20th-century artist Xu Beihong, which sold at auction for more than $10 million, turned out to have been produced 30 years after the artist’s death by a student during a class exercise at one of China’s leading arts academies.

Even more embarrassing was the government’s decision last July to close a private museum in Hebei because of suspicions that nearly everything in it – all

At a preview visitors examine classical paintings to be sold by the Poly International Auction company.

40,000 artefacts, including a Tang dynasty porcelain vase – were fake.

“There’s always been forgers on the market, but it’s a matter of proportion,” said Robert Mowry, a former curator of Asian art at Harvard who is now a consultant for Christie’s.

Concern about fraud and a cooling economy seem to have tempered enthusiasm in the Chinese art market.

After peaking in 2011, reported revenues dropped off 24 per cent last year, according to Arts Economics, a research company that studies the international market. This year is expected to be modestly better than 2012.

The Chinese auction industry and the government have taken notice, and say they are looking to clean up the abuses

Liang Zhaojin, who studied with Zhang Daqian and emulates him, at his studio on the outskirts of Beijing.

and stem further damage to consumer confidence, especially since the art market Portfolio

95

Ma Weidu, a major collector, who picked up some pieces in exchange for cigarettes after the Cultural Revolution devalued art.

is actually perceived by many as one of

Association of Auctioneers found that

has also been a rash of museum thefts

the safer places to invest. “A majority of

about half the sales of artworks worth more

involving Chinese antiquities. And a black

Chinese people do not trust the Chinese

than $1.5 million – a major portion of the

market in artefacts has emerged, with

stock market,” said Melanie Ouyang Lum,

market – were not completed because the

so-called tomb raiders digging up buried

a consultant on Chinese art. “The housing

buyer failed to pay what was owed.

treasures that they can sell.

boom has slowed tremendously. A lot of

Even when you factor in faulty revenue

The interest in addressing the

reporting, the rise in art buying over

market’s weaknesses may have played

China has also identified culture as

the past decade has been meteoric, with

a role in China’s recent decision to

a core area for economic growth, and a

Chinese banks, state-owned companies

loosen longstanding rules that restrict

vibrant art market as a useful tool of soft

and business tycoons continuing to invest

Western auction houses from access to the

power, promoting a view of Chinese society

in the boom. Art has become a kind of

Chinese market.

as a centre of aesthetics and beauty and

currency, and collecting is so popular

deflecting the international focus from

in China now that auctions are often

a state-run company, and Christie’s won

political and human rights issues. The

mobbed. On Chinese television, late-night

a license this year to become the first

Chinese are handicapped in cleaning up

infomercials promise quick riches to

international auction house to operate

the art market, though, by a weakness in

viewers who purchase a $2,500 collection

independently in China - developments

their laws, which absolve auction houses

of works by former students of renowned

that may serve to foster competition and

of any responsibility if a work turns out to

masters. Purchase today, the ad declares,

higher standards in the market. Zhang

and you can immediately secure a profit

Yanhua, the associate chairwoman of the

of $100,000.

China Association of Auctioneers, said

people are looking to art for investment.”

be fake.

The forgery problem helps account for the soaring number of payment defaults.

With so much at stake, Chinese art

In the past three years, a study of sales

dealers have rushed to Europe and

at mainland auction houses by the China

America to buy back Chinese relics. There

December 2013

Now Sotheby’s has a joint venture with

bringing in the Western auction houses was like putting a crocodile in a pond.

“It makes the fish swim faster,” she said. n

96

Essentials

Cuisine

German TaSTe InnovaTIon The 2013 Michelin Guide awarded three stars to 10 restaurants, yet Germany’s gastronomic prowess remains underrated, reports Pete Wells.

Portfolio

97

Lohninger, in Frankfurt, serves international and Austrian cuisine.

André Rickert works in the kitchen of Weinsinn, a restaurant in Frankfurt.

© 2013 New York Times News service

W

hen young lovers

Although the 2013 Michelin Guide paid

So off I went in September on a brief but

dream of a romantic

lavish attention to Germany, awarding three

industrious eating tour of Germany. I

European dinner in a back-

stars to 10 restaurants there, neither those

travelled to three of the cities foreigners are

street hideaway packed with locals,

restaurants nor their chefs are household

most likely to visit, Munich, Frankfurt and

those back streets tend to be in Paris or

names in any country but their own. When

Berlin, making reservations in relatively

Florence, not Düsseldorf or Nuremberg.

Germany flexes its economic muscle, other

new restaurants.

When thrill-seeking diners book long-

countries jump to attention. When it shows

distance travel to taste some pathbreaking

off its gastronomic power, they shrug.

chef ’s strange new inventions, their

Anytime the world seems to have

André Rickert, the chef at Weinsinn in Frankfurt, has a modernist’s talent for combining the serious and the playful.

planes land in places like Barcelona or

made a secret pact to ignore a subject,

Look what he does to ratatouille. Even its

Copenhagen, not Leipzig or Dresden.

curious minds grow even more curious.

fans have to admit that the dish, a lump

December 2013

98

Essentials

Cuisine

The other half of the menu can get pretty far out there, at least

by Munich standards. I was deeply impressed by an elaborate composition of tender octopus, gingermarinated squid, potatoes boiled with onions and bacon, and strips of daikon smoked in the Big Green Egg.

Berlin’s Mogg & Melzer is famed for its pastrami sandwiches.

Marinated gilthead bream with ratatouille salad and basil is served at Weinsinn.

Lohninger is a family-run business.

of stewed vegetables mired in a tar pit of

Weinsinn is compact, with only 35 seats

room with a protective eye.

olive oil, is usually no great beauty. Rickert’s

in two small dining rooms. So is Rickert’s

version is a colourful, bright, edible garden,

menu of three appetisers, three main

most pleasurable component of a dish and

a field of couscous across which he plants

courses and three desserts. The wine list, on

then intensifying it. Schmaltz piled onto

black olives, shards of feta, a bright green

the other hand, goes on for page after page.

brown bread is good, and so his schmaltz,

mound of basil ice-cream and warm cherry

Across the city is the current headquarters

Lohninger has an instinct for locating the

sweet with puréed pumpkin and crunchy

tomatoes that dissolved into sweet pulp on

of Mario Lohninger, a chef who has cooked

with flakes of crisp chicken skin must be

my tongue like berries in a pie.

at restaurants formal and informal.

very, very good. It is. It arrives once you

The ingredients were strewed all across

Three years ago he opened Lohninger

have chosen from the menu, which is split

the plate, but the flavours were firmly

in an elbow-shaped, salmon-coloured

into parts that mirror Lohninger’s life. One

rooted. That was the case, too, with a

building on the south bank of the Main

side is called The World. On it, far-flung

dessert of late-summer damson plums

River. The name is not egotism. This is

ingredients turn up like souvenirs from his

that appeared in three guises: stuffed into

a Lohninger family production, where

time abroad. The other side of the menu

a tender dumpling, frozen into sorbet and

Lohninger’s father works by his side in the

is called Childhood. These are dishes from

poached with cinnamon syrup.

kitchen and his mother patrols the dining

his native Austria, like the supple ravioli Portfolio

Essentials Cuisine filled with creamy melted cheese and the beef-cheek goulash, a deeply aromatic stew made with sweet and hot paprika. The Austro-Hungarian Empire fell apart about 55 years before Lohninger was born, but his goulash may be its crowning achievement.

In MunIch, I ran into another splitpersonality menu at a restaurant called Geisels Werneckhof. In this case, the division results from the restaurant’s, and perhaps the city’s, cautious approach to change.

For years, the place served traditional food to residents of its snug neighbourhood close to the English Garden. Two years ago, it was taken over by the Geisel family, but the landlady made them promise not

Duck liver terrine, pickled cucumber and ginger-leek cream served at Restaurant Tim Raue in Berlin.

to touch the leaded-glass windows, the

working at a very good Munich restaurant

a living out of barbecue, bao and other

chandeliers that still burn candles or any

called Tantris, had written to me in

populist staples. For sheer determination

of the other classic German details in the

an email. Compared with fad-chasing

and stubbornness, I doubt many of them

dining room. She gave them free rein to

Americans, he wrote, Bavarians have “a

can match Paul Mogg and Oskar Melzer,

change the kitchen, though.

tremendous appreciation for consistency

who opened a New York-style deli because

and longevity.” To see a city crazy for a taste

they couldn’t find an easier way to get a

of the new, he advised me to hit Berlin.

good pastrami sandwich.

going off to study new techniques at

PerhaPs the most dynamic chef in

for greatness. “These packages were

restaurants in Japan and the Netherlands.

Berlin is Tim Raue, who as a teenager

showing up with the Statue of Liberty on

To get the effects he had learned abroad,

ran with a street gang in the Kreuzberg

the package, and the pastrami was so dry

he had the kitchen outfitted with induction

neighbourhood and then found his

and sweet it was like a candy cane,” said

cooktops, a teppanyaki griddle, liquid

home in restaurant kitchens. By 2010,

Mogg & Melzer’s chef, Joey Passarella.

nitrogen tanks and a Big Green Egg grill.

he had opened a place of his own around

Tohru Nakamura took her up on it. The chef since April, Nakamura was born in

They sampled pastrami imports, hoping

Munich and learned to cook there before

His pastrami is quietly smoky, noticeably

the corner from Checkpoint Charlie,

peppery, not too salty, flagrantly pink.

Nakamura devotes one-half of his menu to

Restaurant Tim Raue, but he wanted it

Sliced and layered on excellent, fresh,

fairly uncomplicated, if refined, dishes in

to be different from the formal, classical,

un-spongy rye modelled on the bread from

which a single, familiar ingredient carries

French-influenced dining rooms that

Schwartz’s deli in Montreal and spread

the tune. His lean and precise artichoke

he believed were draining the joy out of

with a close approximation of brown deli

barigoule, rounded out with a classically

German fine dining.

mustard from Düsseldorf, it adds up to a

For the Werneckhof ’s regulars,

thick artichoke velouté and a fat poached oyster, won’t scare anybody.

“I wanted to have a restaurant in Germany where people could be happy,”

pastrami on rye that only a handful of delis in New York can match.

Mogg & Melzer stretches a short distance

The other half of the menu can get

he said. His menu was built around bright,

pretty far out there, at least by Munich

exciting flavours from China, Vietnam and

outside the deli genre. There is a brûléed

standards. I was deeply impressed by an

Thailand. To let customers know that fun

chicken liver mousse, for instance, and a

elaborate composition of tender octopus,

was not forbidden, he dressed his dining

compact but thoughtful wine list. In the

ginger-marinated squid, potatoes boiled

room staff in Chuck Taylor high-tops.

morning, you can ask for lox dusted with

with onions and bacon, and strips of daikon

The sneakers put a spring in their steps,

fresh horseradish and chives on a chewy,

smoked in the Big Green Egg.

although when my server pulled on a single

unsweetened hand-rolled bagel and watch

white glove to set down clean silverware, I

the cooks working behind glass shelves

couldn’t stop humming “Thriller.”

lined with house-made beet pickles bob

The half-old, half-new menu at Geisels Werneckhof reminded me of something Justin Leone, an American sommelier December 2013

Berlin is now full of cooks trying to make

their heads to rap. n

99

100

Essentials

Environment

Preserving Culture, ProteCting WildliFe The creation of communal conservancies in Namibia has been a rare success story for African wildlife, reports Remy Scalza.

It is estimated only 20,000 Angolan giraffes remain in the wild.

Portfolio

101

UamUnikaije Tjivinda sqUaTTed in the sand and threw a few strips of dried giraffe meat into a pot of boiling water. Like many Himba women in the arid, northwestern part of Namibia called Kaokoland, she wore sandals and a goatskin skirt. Her skin and long, plaited hair were a striking rust-red, rubbed with ochre dug from the earth.

From nearby hills, other women with young children converged, standing quietly around Tjivinda’s domed hut, their eyes downcast. Out of the back of a Toyota Land Cruiser, my wife and I unpacked gifts brought on the advice of our guide – cornmeal, tea, sugar and other supplies hard to find here. Though no longer a novelty for these women, these sorts of

© 2013 New York Times News service

encounters with tourists are still new

The Etambura Tented Lodge on the Orupembe conservancy.

enough to be awkward. Only when the food

into our conservancy bank account.” Goats

came out did they smile and start to talk.

wandered by as the women sat down to

“The conservancy has been good for us,” Tjivinda said in the local Otjihimba

braid hair.

For nearly two decades, Namibia,

land,” he said. “At first, no one trusted us.”

In the years since, the plan has been a resounding – and rare – success story for African wildlife. Seventy-nine

dialect, which our guide translated.

a country twice the size of California

conservancies now cover a full 20 per

“Wildlife are cared for like our own

but with just 2.1 million residents, has

cent of Namibia. Populations of desert

livestock, and money from tourism goes

been part of an ambitious experiment

lions, desert elephants and black rhinos,

in both community tourism and wildlife

all threatened with extinction in the early

conservation, known as communal

‘90s, have increased several times over,

conservancies. “The idea was to fight

while poaching has plummeted. (One

poaching by restoring control over wildlife

rhino was poached in Namibia last year,

to the local people,” said John Kasaona, the

compared with 668 in neighbouring

director of Integrated Rural Development

South Africa.) Meanwhile, conservancies

and Nature Conservation, the primary

throughout the country have teamed up

NGO behind the initiative.

with international tourism operators,

For nearly two decades, Namibia, a country twice the size of California but with just 2.1 million residents, has been part of an ambitious experiment in both community tourism and wildlife conservation, known as communal conservancies. The idea was to fight poaching by restoring control over wildlife to the local people.

December 2013

In 1996, groundwork laid by the

giving ordinary travellers like me

organisation paved the way for new

unprecedented access to both animals and

laws giving tribal communities – who

local culture.

previously had limited rights to resources

But an increase in wildlife – and tourists

on communal lands – the ability to

– has brought a new and unexpected set of

form conservancies and self-manage

challenges. “We’re having some problems

their wildlife.

with our own success,” said Kasaona, who

“We wanted to show them that they

grew up herding goats in Kaokoland and

could benefit financially from keeping

whose family members still live a pastoral

these animals alive, in particular from

life there. “As we say, lions and cattle aren’t

wildlife tourism,” said Kasaona, who would

always best friends.”

spend years canvassing the countryside,

Nearly half of all Namibia’s

explaining the model village by village.

conservancies, and many of the country’s

“Try convincing people who were made

most ambitious community tourism

these same promises years ago by a

projects, are in the northern Kunene

colonial regime and then robbed of their

region (which includes Kaokoland), an

102

Essentials

Environment

expanse of dry mountains and valleys the size of Greece but with fewer than 90,000 inhabitants. As we drove north in a rented four-wheel drive, gravel roads gave way to “Kunene highways,” rutted tracks that thread through desert, cross dry riverbeds and sometimes disappear altogether. Against this harsh backdrop, conservancies have logged one of their greatest successes, the return of the endangered black rhino.

“These animals were almost completely wiped out by poachers 25 years ago,” said Aloysius Waterboer, a guide at Desert Rhino Camp, a tent lodge located in Damaraland, traditional home of the Damara people. We were bumping along in an open safari car, hoping to spot one of the roughly 30 rhinos that now live in this area.

The camp, a cluster of eight tent chalets, sits alone on 4,403 square kilometres of rocky hills and desert scrub leased from area conservancies, who are also 40 per cent shareholders in the project. Nearly 90 per cent of employees, including Waterboer, are drawn from local communities. Many of the expert rhino trackers on staff are former poachers themselves. “If you’re a poacher, all you really want is to feed your family,” Waterboer explained. “So it made sense to put them on the payroll.”

With night falling on the desert, we

Himba women use ochre to colour their long, plaited hair.

rolled into a dry riverbed, then stopped sharply. “He hasn’t noticed us yet,”

locals now,” Waterboer said. “The lions are

the Purros Community Campsite, a small

Waterboer said, pointing to a grey speck

a bit more complicated.”

conservancy-run campground reached after

in the distance. Suddenly, the rhino’s tail

The next day, we set out for lion country.

a half-day’s drive.

Beside a dry tributary of the Hoarusib

flicked up in alarm and he raised his head

Reaching camps north of Damaraland

to sniff the air. Seen through binoculars,

requires either pricey bush flights or, in

River, we turned off-road. Nearby,

the eight-year-old male, identifiable from

our case, a willingness to endure bone-

farmers had spotted a pride of eight lions,

a distinctive chip in one of his horns,

jarring rides along bad roads. Remoteness

suspected of killing two cattle earlier in

looked car-size and prehistoric.

rewarded, however. In the conservancies we

the week. “You have to understand that

drove through, desert elephants grazed on

cattle are wealth here,” Tjipombo said.

and guides made a point of walking guests

acacia trees and Angolan giraffes stared as

“That’s like someone robbing your bank.”

to their tents: a desert lion, another species

we passed. But resurgent wildlife presents

rescued from the brink, had been spotted

its own hurdles. “It’s a constant competition

who has dedicated his career to protecting

outside staff quarters the previous night.

between the livestock and the wildlife for

the country’s desert lions, spends 350 days

“Rhinos are very well accepted by the

resources,” said Dux Tjipombo, a guide at

a year in the bush as part of his one-man

It was dark when we returned to camp,

Philip Stander, a Namibian biologist

Portfolio

Essentials Environment

corbis/arabian eye

The desert elephant is among the animals endemic to the arid Kunene region of Namibia.

Residents crowd around supplies brought by tourists in Kaokoland.

Desert Lion Conservation Project. Since

inhospitable terrain marked the edge

Many of its Himba owners reside in the

1998, he has watched the population

of Kaokoland, one of the wildest, least

surrounding valleys, herding goats and

of these unique animals, which can go

populated parts of Namibia and the

cattle, and living in dung-and-stick huts, as

for months and even years without

home of what may be its most unusual

they have for centuries.

drinking water while obtaining hydration

community tourism experiment.

from the meat they eat, grow from 20 to

The first guest camp owned by the

More than wildlife, it is these people whom travellers come to see.

“Before the camp opened, there were

nearly 150. “The question,” he said, “is what

Himba people, one of the country’s last truly

happens next.”

seminomadic tribes, sits on a mountaintop

almost no tourists in this part of the

inside the Orupembe conservancy. Opened

country,” said Kaku Musaso, a camp

nowhere to be found. We pushed on past

in 2011, Etambura Tented Lodge five

manager brought in from the city of

the last town on the map, just a circle

comfortable tents with thatched roofs,

Opuwo who, like many modern Himba

of huts with sheet metal roofs. Mirages

concrete floors and even indoor bathrooms

women, wears Western clothes and speaks

glimmered in the distance, while a hot

– is hundreds of kilometres from the nearest

impeccable English with a British accent.

wind whipped up the dusty soil. The

paved road or village on the electrical grid.

“It was rare to see any white people here.” n

Back on the river, the lions were

December 2013

103

104

Essentials

Other Business

Hot Topic French Design for Pets

The Los Angeles suburb of

Irwindale that sued to curb the strong, spicy odour emitted from a chilli-processing plant lost its initial bid for a court injunction against the makers of the popular Srirachabrand hot pepper sauce.

Los Angeles Superior Court Judge Robert O’Brien denied a motion for a temporary restraining order against Huy Fong Foods. Irwindale had filed suit saying the company has refused to take sufficient action to abate noxious fumes emanating from the plant strong enough to cause eye and throat irritation in nearby residents.

Huy Fong Foods produces up to 200,000 bottles of hot sauce a day and sold more than $60 million worth last year. The company was

nature of the jalapeno chillies used

founded 33 years ago by David Tran,

in his sauce.

Parisian poodles are used to being pampered

an ethnic Chinese immigrant from

by their doting owners, groomed to perfection

Vietnam, who defended the pungent

“If it doesn’t smell, we can’t sell,” he said.

and adorned with luxury leashes and collars.

Now they finally have the furniture to match.

A company co-founded by a former Societe Generale banker has come up with a range of high-end interior items for the furry and the feathered retailing for as much as €4,000.

Currency Mistake Lebanon went ahead with plans

special issue 50,000 pound note,

to issue banknotes marking 70

which is worth about $33, spells

litter box for discerning cats and a dog might

years since its independence

“independence” as it is written in

appreciate a sofa lined with specialty textiles

despite a spelling mistake on the

English, rather than the French

from Denmark.

commemorative currency.

“independance”.

The company, Chimere, offers a lacquered

Co-founder Frederic Stouls started the

The French-language face of the

The bank said it regretted the

venture after quitting the crisis-ridden banking

mistake, which it blamed on the

sector in 2012, when he spotted a niche in the

printing company, but the notes still

$60 billion US pet market that he believes can

went into circulation on November

be filled by elegant design.

22, the date when Lebanon marks

Big French luxury groups such as Kering and Louis Vuitton already offer some products for animals of privilege, such as $400 dog leashes

the anniversary of the end of French colonial rule in 1943.

Lebanese news site al-Akhbar

and $3,000 cat carriers, but little beyond

criticised the bill, calling it “a

outdoor accessories.

cacophony of sharply contrasting colours” with “inharmoniously placed images.”

Portfolio

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