Month: October 2010

Tanzania poised to become a destination

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The largest state in East Africa has for decades been best known for its touristic attractions – most notably the ever snow capped Mount Kilimanjaro, the Serengeti National Park and the Ngorongoro Crater.

Mining is giving the country a new layer of international prominence. In little more than a decade, Tanzania has emerged from being a small producer of gold into the third largest in Africa – after Ghana and South Africa – and now plays host to big names in mining like Barrick and Canaco of Canada, Resolute of Australia, and Anglold Ashanti and Shanta Mining of South Africa. The latest estimates point to the mining industry as a contributor of around 52 percent of the country’s export revenue.

There was a lull in mining sector activities for the greater part of the year 2009 and early 2010, due to investors anxiously watching the progress of a new mining law that many feared would dampen confidence in the sector. The Mining Act was passed into law in April 2010, and its coming into force is awaiting the promulgation of the relevant regulations. The law has its downsides: the export of unprocessed gemstones has been banned, and royalties have risen from three to four percent for precious and base metals, from five to six percent for diamonds and gemstones, and to seven percent for uranium. However the licensing regime has been streamlined and licensing periods have been lengthened, and overall the climate is now conducive to foreign investors. There is a renewed influx of foreign investors and new discoveries of mineral resources like nickel and uranium.

Agriculture is promising to become another attraction to foreign investors; not only those seeking to invest in agribusiness, but also providers of goods and services to all the sectors that service agriculture, such as machinery and equipment suppliers and power generation. Traditionally the sector has remained stagnant, although the majority of Tanzanians depend on agriculture for their livelihood. In June 2010 the government launched a new agricultural initiative known as Kilimo Kwanza – Agriculture First – which is a blueprint for the country’s green revolution, transforming the sector into a modern and commercial one through investments in infrastructure such as roads, inputs such as high yielding seed varieties and fertilizer, and new technology.

High-calibre support
These developments in the mining and agricultural sectors are a clear wake up call to providers of legal services. With the influx of new investors and the complex transactions that will surely be generated, there will be a groundswell of demand for legal services that are beyond the capacities of many law firms in Tanzania. One firm to respond to the call is CRB Africa Legal, an association of local firm CRB Attorneys and the South African-based English law practitioners Africa Legal. Charles R B Rwechungura, founding partner of CRB Attorneys and now managing partner of CRB Africa Legal, saw the need to transform the law practice into a firm properly profiled to meet the demands of the international clients who will make Tanzania their destination. The association with Africa Legal was formalised in February 2010, and the firm now enjoys the presence of two English law consultants, Adam Lovett and Nick Zervos.

The firm has a total of 12 fully qualified Tanzanian lawyers, three partners, four associate partners and five legal officers, and its clients include multinationals, private equity funds, financial institutions, banks, national corporations and non-governmental organisations. With a proven track record of advising on and structuring transactions throughout Tanzania and East Africa and extensive specialist knowledge in core industry sectors, it is well placed to service the mining and agricultural sectors to the required international standards.

CRB Africa Legal frequently acts for investment funds and financial institutions investing in, disposing of or restructuring their investments in large scale agri-businesses. It also advises agri-businesses on raising finance, selling assets and on complex labour, environmental and land issues impacting their businesses. Mr Rwechungura has been appointed as arbitrator in several disputes involving investments and infrastructure projects within the agri-sector.

For clients in the mining industries, the firm can assist in all aspects from extraction to processing and export. Financing (including project finance), project development, mergers and acquisitions, joint ventures, regulation and licensing, assignment of licences, production sharing agreements, concentrate supply, mining and off-take contracts all fall within the lawyers’ expertise. The firm also handles disputes and has acted on a number of arbitrations in the mining and metals sector, and regularly advises on complex labour, environmental and land issues impacting mining operations.

Multi-sector specialists
Senior partner Victoria Makani is a specialist in employment, labour law, citizenship and immigration. Victoria and her team regularly assist national and multinational corporations operating in Tanzania with their labour and immigration issues. Services include advising on employment disputes, drafting and reviewing employee contracts and policies and advising on employee taxation compliance.

CRB Africa Legal’s energy team includes lawyers with years of experience advising on the financing, structuring, development and implementation of a range of power generation and power distribution projects. Environmental law specialists support the firm’s work in the mining, telecoms, agricultural and power sectors, while the banking team acts for banks, credit, micro-credit and other financial institutions, as well as corporations raising finance. The company has advised several banks on obtaining Tanzanian Central Bank licences and establishing green-field operations in Tanzania, and the M&A team has also advised on the acquisition of stakes in existing banking businesses across East Africa.

Goodluck Jonathan gives Nigeria place for optimism

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The disposal is expected to be one of the biggest privatisations ever embarked upon in Africa, with asset sales likely to be in excess of $10bn. If it succeeds in boosting power generation where previous efforts have failed, Nigeria’s non-oil economy can be expected to grow exponentially over the next decade, bringing immense rewards for the power companies who succeed in helping Africa’s crippled giant to switch the lights on.

Despite decades of broken promises by successive military and civilian governments to reform power generation, expectations for the power sector asset disposal are high. Paradoxically, Nigeria is sub-Saharan Africa’s biggest oil and gas exporter, yet it has one of the lowest per capita supplies of electricity in the world.

The scale of the Nigerian power sector calamity is difficult to exaggerate. On a good day, Nigeria can generate around 3,000 mega watts of electricity – about one tenth of what South Africa generates with a third of Nigeria’s population. Even tiny Ghana, with one sixth of the population, generates more electricity than its giant neighbour.

But there aren’t that many good days. Power generation frequently falls below 1,000 mega watts, leaving the country with as little as a couple of hours of electricity a day. Blackouts and brownouts can last for days, even weeks, while some regions may have no power for months at a time – if at all. Estimates on the balance of supply and demand vary considerably, but it is generally acknowledged that demand is running about 25 times in excess of supply.

Consequently, the Nigerian economy – like those in many other African countries, has been forced to run on diesel generators. Nigeria currently accounts for 40 percent of all the generators imported into Africa. The Central Bank of Nigeria estimates that 60 million Nigerians are reliant on diesel generators for their main source of electricity, and they spend about $14bn a year on the imported fuel needed to run them.

An unhealthy reliance
Everything in Nigeria, from street corner mobile phone chargers to five star luxury hotels, rely on noisy, foul-smelling, diesel generators to run their businesses and bring light to their homes. For everyone else who can’t afford to buy and run a generator – the other 90 million Nigerians, kerosene lamps and candles are all that is available. Little wonder that jokes about the power sector are the main focus of Nigerian national humour.

The origins of Nigeria’s power sector failure date from the successive military regimes that ran and plundered the country prior to the return to civilian rule in 1999. Long-term planning, without which big ticket assets like power stations, cannot be designed, constructed, operated and maintained, was not a strong feature of military rule.

As a result, no new power stations were built in Nigeria for more than two decades. Most of the country’s existing power generation assets are now thirty or forty years old, and most of those break down constantly because of aging equipment, poor maintenance, a lack of spare parts, and an acute shortage of the skills needed to run them.

Former President Olusegun Obasanjo, who led the transition to democratic rule, attempted to reform Nigeria’s decrepit power sector with the 2005 Electricity Power Reform Act. It replaced the discredited state-owned generator, the National Electric Power Authority (NEPA) – known to Nigerians as “Never Expect Power Always” – with the new Power Holding Company of Nigeria (PHCN), which – because of its failure to bring about any improvement in electricity generation, soon became known to Nigerians as “Please Hold Candle Near”.

The 2005 Act broke up NEPA into its component parts, 11 regional distribution companies, six generating companies and one transmission company, in anticipation of their eventual privatisation. But then the reform impulse stalled. Instead, Obasanjo embarked in 2006 on a crash programme to build seven new, federally financed, gas-fired power stations, which were supposed to add 3,000 mega watts to the national grid within two years.

To date, nearly five years later, and after spending an estimated $15bn, not one of the new gas-fired power plants has come on line. After ten years of civilian rule, Nigeria is now generating less electricity than it was the generals were running the show, and Nigerians have had enough.

Obasanjo seemed to think that Nigeria’s power generation problem could be solved by just throwing large amounts of money at it. Unfortunately for Nigeria, it had the hard cash on hand to throw around. A poorer country would not have had that luxury, and would probably have achieved much more with considerably less.

But Nigeria lacked the power plant project management expertise and the domestic gas collection stations and transmission lines required to ensure that the new power plants were built on time, and were able to operate once completed. Even today, it is estimated that there are more than 250 shipping containers full of the generating equipment needed to run the planned new power plants sitting in Nigerian ports waiting to be collected.

Desperate to solve the one problem that effects every single Nigerian business and domestic household, President Goodluck Jonathan – with the backing of a new generation of reform-minded technocrats, has dusted off the old privatisation plans, and announced his intention to fast track power sector reform. There have been plenty of groans from Nigerians and foreign investors alike of “here we go again”. But this time things could be different.

Nigeria intends to keep the transmission grid as a federal asset, but will out source its management to a private sector operator. Three companies, including Manitoba Hydro of Canada, the Power Grid Corp of India and the Electricity Supply Board of Ireland have been short listed to operate the national grid, and a decision on who will win the contract is expected before the end of the year.

Majority stakes in the eleven regional distribution companies (discos) and six generating companies (gencos) will be offered to core investors, who will be required to form joint ventures with the state authorities, who in turn will exit after a five year transitional period, thereby leaving the new private sector operators in sole control of all Nigerian discos and gencos.

Interest grows
Expressions of interest in running the proposed joint ventures have poured in from all over the world, with China, Brazil, Germany, Canada, Turkey, India and Saudi Arabia leading the way. Each joint venture will be listed on the Nigerian Stock Exchange, and will be required to invest several multiples of the asset cost price in new generating and distribution assets in an effort to boost performance.

The proposed power sector privatisation was hailed by Bismarck Rewane, the head of Financial Derivatives, a leading Lagos-based consultancy, as one of the key pillars of Jonathan’s reform agenda. “If he can come through with power reform, and if it is sustained, it could be a political game changer,” Rewane said. If successful, power sector privatisation could transform Nigeria out of all recognition in three to five years, he added.

The Federal Government of Nigeria estimates that something in the region of $6bn a year for each of the next five years will need to be invested in the new gencos and discos in order to bring electricity supply into line with demand. Clearly, only investors with deep pockets need apply. But given that suppressed demand is currently running about 25 times in excess of supply, along with the fact that Nigeria’s population is expected to grow from around 150 million at present to 280 million by 2050, the medium to long-term demand for electricity can be expected to grow exponentially.

With a presidential election likely to be a little more than four months away, Jonathan failed to address himself to the issue of tariffs – upon which the fate of the entire privatisation exercise rests – for obvious reasons. Telling the electorate that it can have electricity but it will have to pay for it is a sensitive issue, and one that will have to be carefully managed.

Nigerians at present pay around seven naira ($0.047) per kilowatt hour. Neighbouring Ghana, for example, pays the equivalent of 22 naira per kilowatt hour. Even Liberia and Sierra Leone charge more for electricity than Nigeria. So prices are going to have to go up – and go up considerably.

Lamido Sanusi, the Governor of the Central Bank of Nigeria, and Professor Barth Nnaji, the Presidential Advisor on Power, have both suggested that tariffs will have to be tripled to around 22 naira per kilowatt hour to attract sufficient private sector interest. Jonathan has so far shied away from putting a figure on the required increase.

But Nigerians who are able to afford diesel generators are already paying 60 to 70 naira per kilowatt hour – ten times above grid prices – to run them. Even a tripling of grid prices would be cheaper by two-thirds than running private generators. Low income consumers will be catered for with a so-called lifeline tariff – a heavily discounted rate for a specified amount of electricity a month – to ensure that the poor do not suffer from the transition from a state-sector operated to a private sector operated power sector.

The inability to solve the power sector problem to date has been the single biggest drag on Nigeria’s economic development. Last year, while growth rates in much of the OECD were flat or negative, Nigeria notched up growth of 6.7 percent. Growth in 2010 todate has been around 7.4 percent, while growth in 2011 and 2012 is expected to reach double digits – and these impressive growth rates have been achieved – astonishingly – without mains electricity.
The Central Bank of Nigeria estimates that around 60 percent of the cost of producing manufactured goods in Nigeria is accounted for by energy – that is diesel – costs. What could Nigeria achieve if it was finally able to bridge the decades-old electricity generation deficit? The importers and distributors of diesel generators and diesel fuel would see their lucrative markets evaporate, and they are expected to use every dirty trick in the book to sabotage the power sector reform programme. But every other sector of the economy would receive an enormous boost.

Africa is littered with false dawns and broken promises, and Nigeria accounts for a great many of them. But with Jonathan at the helm, backed by a cadre of determined, reform-minded politicians, officials and technocrats, there are growing expectations that this time things could turn out differently. Admittedly, considerable political uncertainty remains on the short-term horizon. No one knows yet whether Jonathan will – or will be allowed – to stand as presidential candidate for the ruling People’s Democratic Party in the forthcoming poll. But he does appear to be the only candidate who can bring power to the people.

Qatar in sustainability drive

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The UN Environmental Programme is directing all developed countries to help emerging nations reduce carbon emissions from buildings and establish worldwide sustainable development assessment systems.

Supporters of the UN drive for sustainable development action include the non-governmental Barwa and Qatari Diar Research Institute (BQDRI). A pioneer in the GCC region, BQDRI is entrusted with realising the State of Qatar’s vision for a beautifully built environment, high indoor environmental quality, and sustainable communities and developments.

Dr Al-Horr’s dream is to create a dignified environment for all to live and work in, based on his vision and strategy for Qatar to be a leader in the field of sustainable development, design and construction. The institute’s ideas are currently being demonstrated in projects under construction such as Lusail City and BARWA City.

How are you contributing to the sustainable development of Qatar?
We are the starting point. The foundation stone upon which Qatar and other Gulf countries will build a better future is a strong set of sustainable development principles like the Qatar Sustainability Assessment System (QSAS). This is the Middle East’s first performance-based green building assessment rating system. BQDRI developed it cooperation with the T.C. Chan Centre for Building Simulation and Energy Studies at the University of Pennsylvania.

QSAS creates sustainable urban environments which have a lower environmental impact than traditional projects. It is also tailored to meet regional needs, preserving the unique Qatari cultural identity and environment.

What makes QSAS different from other guidelines?
It is the best of the best. QSAS integrates best practice from 40 global assessment systems to create a new green building benchmark for Qatar. It’s based on proven green building guidelines, a rigorous sustainability rating system and challenging water and energy standards. Delve into the detail and you discover QSAS criteria are divided into eight categories: urban connectivity, site, energy, water, materials, indoor environment, cultural and economic value, and management and operations – each with a direct impact on environmental stress mitigation. Each category measures a different aspect of a project’s environmental impact. The eight categories are then broken down into specific criteria that measure and define individual issues.

Qatar’s largest developers, Barwa Real Estate and Qatari Diar, have adopted QSAS for all future projects. The system really takes the lead in addressing regional and national energy efficiency policies, reducing carbon emissions, minimising ecological impacts, and ensuring high indoor environmental quality…all the time taking into consideration social, economic, environmental and cultural conditions which are different from other regions of the world.
Among the many QSAS advantages is that the system learns and benefits from other global sustainability rating systems, using the best assessments (according to performance, integrity and flexibility) to overcome the weaknesses of other international systems.

Your groundbreaking work has not gone unnoticed internationally…
QSAS won the Excellence Award for Outstanding Contribution to Sustainable Development at the 2009 International Real Estate Financial Summit in London. And in April 2010 I was awarded the Emerging CEO – Green Buildings prize from the Federation of GCC Chambers at the first Middle East Business Leaders Summit and Awards in the UAE.

Why are these initiatives important to you?
As a socially responsible citizen and qualified engineer, I believe that responsible design, construction and building operations can mitigate the negative effects of Qatar’s built environment, in particular making a significant impact in reducing carbon emissions. And QSAS is key to this. It differs in its foundation essence and from other imported sustainability systems in use in the region. QSAS evolves with the needs of the region, developing and implementing the sustainability concept in Qatar and other countries with similar environments to meet local needs like desertification, scarcity of water and preserving cultural identity.

What other work do you engage with to develop your vision of a sustainable Qatar?
BQDRI organises yearly exhibitions, seminars and conferences to build the country’s capacity to pursue sustainability. On March 1-3 2011 we will host the Qatar Green Building Technology Exhibition and Conference, the first of its kind of the GCC. We also run regular training workshops, ensuring Qatar’s construction industry gets the ‘green building’ message; we’ve introduced the QSAS – Certified Green Professional qualification, and launched the first full version of QSAS including manuals, a tool kit suite and a project management system.

Today the BQDRI remains dedicated to building a strong and vibrant network of respected research institutions, consulting companies, real estate and construction companies, and governmental and professional organisations throughout the region and the world.

We hope to foster a genuine commitment to addressing environmental challenges and empower the construction industry with sustainable applications and practices for the benefit of present and future
generations.

Short-term pain, 
long-term gain

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The credit crisis waves of 2008 triggered a panic across the globe and to all types of sectors, irrelevant of their operating nature. The storm specially haunted the financial services sector, where the Kuwaiti banking sector was no exception to its regional and international counterparts. Crunching derivative loss at one of the prominent local bank, refraining ease financial flow to industries, hefty losses by debt ridden companies and consistent parliamentary blockages to Central Bank’s rescue package were primary causes for the humongous fall of the banking stocks. The market sentiments went extremely bad as banking stocks were out of favour and witnessed a huge selling pressure during Q1 2009. “Credit Facilities” and “Quality of Assets”, the two key functioning areas, remained under tremendous pressure during 2009, however, the Central Bank of Kuwait (CBK) acted swiftly and wisely to tackle and help out the industry of the crunch as it provided all needed support by issuing several verdicts of assurance for depositors and investors, as discussed in the later part.

Credit facilities
Banks are accustomed as a primary financial source for various sectors of economy, which in general lays a strong foundation for the GDP growth of the country. However in 2009, this economic pacer faced the toughest time of its history as inadequate earning opportunities, deteriorating asset valuations, tightening liquidity, increasing NPLs and affiliated soaring provisions mesmerised the whole sector. Such unwanted crisis put severe strains on the balance sheet of banks, especially on those, who borrowed externally and were heavily exposed to real estate and equity markets like what happened with UAE banks. Instigated by this, the Kuwaiti banks too, reported a huge drop in its gross loans and advances. From an annual growth of 21 percent + in the past four years, Gross Loans & Advances were subjected to a mere four percent growth in 2009 against 18 percent in 2008. The minimal positive growth could have been negative if NBK and KFIN, the two banking giants, would not have reported a growth in their respective loan portfolios. Collectively, total credit increased by $3.83bn, out of which NBK shared a whopping 78 percent of total expansion ($3.01bn) while KFIN shared 33.05 percent (1.27bn) after adjusting the negative growth for other banks.

Non-Performing Loans
Regardless of the recent economic rebound, the crisis has nonetheless exposed the need to strengthen the capital adequacy requirements (CAR) besides prudential norms and supervision, monitoring and surveillance. Non-Performing loans remain a key consideration for all the banks, and so the provision for the Gross Advances. Total provisions for the sector reached $6.93bn against Gross Loans and Advances of $105.88bn equals to 6.54 percent for the industry.

Individually, NBK and Islamic company KFIN had the least scale of provisioning while sharing a major chunk of Total Loans and Advances. NBK provided a mere 3.65 percent provision towards its prodigious Gross Advances whereas KFIN cushioned around 5.34 percent on a similar front. Such lower provisions clearly reflect the quality of their advances, however, on the provision coverage front; NBK remains unreachable among its peers, as it provided 90 percent coverage to declared NPLs as of December 2009.

In general, the banks are aiming to reduce NPL portion along with increasing provisions coverage. NBK, KFIN, Boubyan and KIB have already shown their intentions by increasing provisions for gross loans and advances, baring few other banks. NPL classification from September 2008 onwards, continued to stretch in 2009 as Gross NPLs reached a massive $10.46bn, witnessing a jump of 86.71 percent over FY 2008. Emphatically in response to growing NPLs, the banks also increased their provisions by 62 percent, from $2.85bn in 2008 to KWD 4.61bn in 2009, yet the growth remained far below from NPLs impetus. The growing gap between increasing NPLs and Provision instigated total provision coverage ratio to come down at 0.44 by December 2009, down by seven basis points from December 2008 (0.51).

In continuity, it is interesting to see that in a bid to limit risk through diversification, total group’s financial assets and off-balance sheet items distribution towards various sectors declined by four percent in 2009 and reached $176.61bn from $178.85bn, a year ago. Exposure to financial institutions, trading and manufacturing units, and government and other sectors were the key pullers as they reported a decline of 16.2 percent, 12 percent and 1.2 percent whereas the others reported a growth.

Despite ill-fate and depleting returns, “the real estate and construction sector”, continues to attract the banker’s attraction even in FY 2009. As shown in table 2, six banks increased their exposure to the sector, where KFH took a lead by increasing its exposure by around 50 percent. Such increasing confidence in the troubling sector is certainly buoyed by government’s serious attempts in implementing the new 5-year development plan, worth $104.90bn (KWD 30bn). The first ever 5-year mega plan includes the new Silk City worth $77bn, Al-Zour Refinery worth $15bn, Metro Rail project and improving infrastructure to various service sectors, which are certain to strengthen the sector in the long term.

Moreover, as per the latest monthly report by CBK, the construction and real estate sector together are utilising the extended credit facilities given by local banks to the tune of $28.55bn, which is almost 33 percent of total extended credit facilities amounting $87.29bn in July 2010.

Banking outlook
Definitely, the occurrence of the 2008 crisis, severely hammered the fundamentals, as the sector, once enjoyed a superior bottom line of $3.12bn (by September 2008), which plunged all the way down to report a net profit of just $1.08bn for FY 2009. Crippled by the storm, the freefall in net profit was mainly driven by the historical booking of provisions during all the quarters, post September 2008.

In such hard times, the CBK undertook all possible steps to immunise as well as strengthen the financial system. To encourage borrowings, the CBK made multiple cuts to bring the discount rate at its historical low level of 2.50 percent. It also increased the ratio of “Credit Facilities to Deposits” to 85 percent from 80 percent, lifting the allowed growth rates of credit portfolio by five percent and reducing the ratio of KD customer deposits in accordance to maturity ladder to 18 percent from previous 20 percent. Above all, the CBK showed its superiority in the region by approving a kind of financial stability law, which stamps 50 percent government guarantees on new loans, aimed to lend towards the productive sectors in Kuwait. Moreover, to safeguard and depositors investors interest, the CBK tightened the regulations to a minimum of 12 percent CAR as against eight percent recommendation by the Basel Committee. In a nutshell, the CBK aimed to prepare most-suited grounds for the banks to grow its business, in a bid to keep-on moving the economic wheel of the country.

Certainly, all the calculated measures as mentioned above worked positively as the lenders reported a consolidated net profit of $906m for the recent 6M-2010 ending June, up by 16.4 percent, from a year ago. The surge was mainly steered by declining provisions and operating expenses, reconfirming that the “worst is behind”. The halting provisions amid improving sentiments across the board have jointly put up a splendid show of profitability, which is poised to extend in remaining 2010. Looking ahead, the recovery of real estate and construction sector and rising consumption of commodities along with lower rates − are all set to accelerate the pace of banking business in the remaining year of 2010 and 2011.

Shoyeb Ali is Vice President of Investment Research at Muthanna
Investment Company

Gains for insurance in local markets

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Interamerican is a member of Eureko Group, one of the largest and most powerful financial groups in Europe. Its strategy is to build a strong European financial services group, based on its core business of insurance. Its portfolio focuses on selected European countries, with a balance between mature and developing markets. Eureko shares its experience and know-how with all the companies of the Group, in every local market.

Financial strength preserved
2009 was an eventful time for Eureko. Following unprecedented market conditions in 2008, numerous initiatives were started throughout the Group in the knowledge that every crisis offers the opportunity for a new beginning. At year-end 2009, it reported a net profit of €1.4bn, while the gross written premiums increased slightly during 2009 by 2 percent to €19.6bn against €19.3bn in 2008.

In a sector where financial health is a prerequisite for doing business, Eureko made this its priority in 2009. The capital support from shareholders, Vereniging (Association) Achmea and Rabobank, a clear sign of confidence in the Group, took effect in April and laid the foundation for the subsequent firm rise in solvency. The timely investment helped Eureko overcome turbulent economic times as one of a select group of institutions that did not resort to state support.

As a result, the Group’s solvency position rose steadily through 2009, ending the year at a reassuring 216 percent with insurance activities at 251 percent, also supported by its decisive de-risking strategy. Eureko’s total equity improved 36 percent, from €7.5bn at year-end 2008 to €10.1bn at year-end 2009.

With a wide range of products and services that reflects the company’s considerable experience and knowledge, Interamerican is in a position to offer customers solutions which ensures:

– Family’s quality of life
– Income protection
– Guaranteed private pension
– Savings and capital accumulation
– Property protection (car, home, business, etc)

Innovation and achievement
Interamerican is ensuring a competitive position in the Greek insurance market via ways such as:

– Developing new innovative products in all areas, increasing both customers as well as network’s satisfaction, contributing to the success and competitive position of the Company in the Greek insurance Market.

– Having “smart” & flexible pricing is a key factor in the new financial environment and the debt crisis that Greeks are facing. The annual renewable health programs are aiming to provide insurance even to target groups that cannot afford high premiums.

– Strengthening Sales Network distribution.

– Reengineering of Operations in order to decrease cost and increase service levels to both customers as well as sales networks.

Referring to Interamerican’s course and immediate prospects, the CEO of the Group, Mr George Kotsalos, stressed the following:

At Interamerican, we have consolidated the need for constant change, in the spirit of on-going adaptation to the conditions of the economy and society. We follow the rationale of daily development, our steady objective being for Interamerican to be modern. For us, being a modern company means making suitable insurance proposals, being flexible and being innovative. It should be noted that the restructuring of the organisational and administrative functions of the Company, cost control, expansion of the promotion of company products and services through multi-channel distribution that began five years ago prepared Interamerican for Solvency II in the best possible way and, at the same time, shielded the Company during the economic crisis of 2008-2009. Interamerican will proceed along four strategic pillars:

A. Modernisation of all procedures with decentralisation of back office operations.
B. Utilisation of technology, in which the Company has already invested a substantial amount in order to have a client-centric management system.
C. Enhancement of commercial activities, aligning sales with profitability.
D. Promotion and utilisation of human resources.

“Our first priority is to serve an extensive range of customers from every location all over Greece, by taking advantage of our broad multichannel network, such as Agency branches with Financial Advisors, collaborated Brokers, as well as Bancassurance synergies, and Direct channel via internet & call centre, offering them innovative and best value for money products, with high quality service.

It should be mentioned that Interamerican was the first company that launched direct channel in the Greek Insurance Market with Anytime Insurance Online, contributing to the 24h service, reducing cost and providing immediate service.
Focusing on what our customers expect from us in combination with the flexibility to be attuned to the changing market, as well as the company’s economic results, we strongly believe that the Group is on track to succeed its goals” says the CCO Mr. G. Mavrelis.

Finally, Interamerican has also proven in practice, its sensibility in the sector of social responsibility through its activity to the benefit of the community, along with its business reliability. To that purpose, it has planned and implemented a far-reaching and multidimensional Corporate Social Responsibility programme: “Acts of Life”, offering support to vulnerable social groups and contribution with every possible way to the protection of the environment.

A customer centric approach

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Remittances from migrants have received considerable attention this decade, with World Bank estimating the global remittance market at $414bn for 2009, of which over 75 percent are flowing into developing countries. India, with an estimated migrant population of 25-30 million, receives over 11 percent of the global remittances making it the single largest recipient country for remittances, followed by China, Mexico and Philippines.

The onset of the global financial crisis in 2008 led to a moderate decline of six percent in remittance flows to developing countries in 2009 vis-à-vis an average year-on-year growth of 20 percent witnessed since the start of the decade. As per World Bank estimates, the growth trend will resume this year onwards. India inflows have remained comparatively resilient in 2009, with recorded flows of $49bn.

ICICI Bank, India’s largest private sector bank, recognised the remittance opportunity early on in the decade and focused on catering to the diverse needs of the Indian migrants and their recipients in India with a host of contemporary services. ICICI Bank has been the leading remittance player in the India remittance market, enabling remittances from across 40 countries worldwide into India.

On the origination side ICICI Bank has tailored offerings for the diverse segments of the Indian migrants – accessible through its wide branch network, internet, telephone and correspondent bank channels. On the recipient side it leverages the electronic payment infrastructure in India – offering electronic credits into accounts with over 60,000 bank branches of over 100 banks in India, electronic credits into over 15 million resident VISA cards and issuance of bank drafts in India.

Besides catering to the banked customer segment in India, ICICI Bank has launched solutions for under-banked and un-banked customers. Its remittance card targets the urban and semi urban population, offering easy access to funds as well as the advantanges of maintaining a zero balance account and a higher ATM withdrawal limit.

Benefits to migrants and recipients
With an intensive use of technology and centralised operations for building robust straight-through processes, ICICI Bank has favourable cost structures. The benefits of lower operating costs are passed on to the end users in terms of competitive pricing and low cost services compared to traditional modes of money transfer. With a customer-centric approach, ICICI Bank has placed strong focus on establishing a customer engagement infrastructure to ensure round-the clock servicing of its clients.

Current market scenario
Given the large size of the India remittance market, over the last few years the market place has witnessed the entry of multiple players, spanning from Indian and foreign banks to money transfer operators who have launched comparable yet elementary online and offline remittance services for facilitating money transfers into India.

Remitters, today, have varied remittance service needs and which are different to those existing at the start of the decade, given the essential distinction in offerings prevalent then and now. Earlier, the traditional modes of transfers like international wires, cheque or cash-based transfers led the remitter to desire simpler, low-cost and secure modes of transfer for small-value remittances.

Today with the elementary requirements being addressed over a decade, the secondary requirements of the remitter are evolving and discerning. For example, post the global crisis where volatility of the currencies has substantially increased, the remitter of today desires secure and faster services at an assured rate for his/her money transfers that is meant mostly for family maintenance in India.

Customer-centric approach
At ICICI Bank, it is strongly embedded that customer centricity is the key differentiator in its product offerings. Aligned to this philosophy, a host of initiatives are deployed that also address the evolving secondary needs of the remitters:

1. Offering guaranteed rates on online offerings, thus assuming exchange rate volatility risk on behalf of customers.
2. Offering faster money transfers within 24 hours via a partnership approach with a large number of other banks and money transfer companies at origination.
3. Enhancing reach to under banked and un-banked recipients via enabling payout channels that encourage financial inclusion.
4. Proactive service levels and on-boarding programmes specially launched to handhold new migrants through their money transfers.

These offerings have been well-adopted by customers as they now have a wide bouquet of money transfer services available under a “one-stop ICICI Bank remittance service shop” at value-for-money pricing, depending upon their essential money transfer needs at any point in time.

With a significant share of the India-bound remittance market, ICICI Bank is now geared towards extending its unique bouquet of remittance offerings in the non-India remittance corridors.

A sustainable advantage in industrial piping

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Canadoil is an integrated pipe and fittings manufacturer and solutions provider, specialising in designs for highly demanding applications and environments. Principal products include line and process pipe, pipe fittings, pressure vessels and their coatings, as well as the design and engineering of turn-key solutions delivered as prefabricated pipe spools, instrumented skids and modules.

Canadoil piping systems are primarily used in the oil and gas and other energy industries including oil and gas gathering, subsea applications, transportation and processing, downstream applications such as refining petrochemicals and power generation.

Canadoil also supplies systems for applications in other industrial areas such as chemical processes, water treatment and the mining industries.

The principle manufacturing, coating, pre-fabrication and fabrication facilities are all located together at the Amata Industrial Estate in Thailand allowing this location to truly offer a “One Stop Shop”. Integral to Canadoil’s business are its strong track record and reputation for quality and timely delivery along with its unique “One Stop Shop” business model.

The “One Stop Shop” is a unique solution to all piping requirements because it enables Canadoil to handle all aspects of a piping system reliably to deliver a customised piping solution, on a timely basis, through a single interface that ensures full compatibility of all pipe and fitting components.

Canadoil’s manufacturing operations supply customers via the Company’s international footprint of distribution centers, called Regional Sales Offices (RSO), which are set up across the Americas, Europe, the Middle East and throughout Asia.

Enhancing the “One Stop Shop”
The recent acquisition of Petrol Raccord, a manufacturer of high-quality butt-weld fittings based in Italy specialising in nuclear approved products diversifies Canadoil’s market base. Petrol Raccord delivers technically complex products to the high margin niche market serving the nuclear power generation sector. This industry specific set of Canadoil customers are highly risk averse and have no tolerance for defects and delays. The solutions that Canadoil produces to serve this segment are typically rich in materials technology and design and are often highly customised. These customers demand stringent testing and certification. All this supports profit margins that manufacturers of more commoditised products fall short of providing.

Canadoil has successfully partnered with SiemensVAI to engineer and construct a hot-rolled steel plate manufacturing facility located at the existing Amata Industrial Estate site. This hot-rolled plate manufacturing facility is designed to produce 1.2 million tons of steel plate annually and is expected to begin commercial production in 2013.

A keen understanding of the importance to have complete control over the entire production chain from raw material to project engineering and design has resulted in the vertical integration all the way into the raw material manufacturing as evidenced by this latest investment in plate manufacturing. This strategic vision, developed and implemented into reality, will further enhance Canadoil’s ability to meet customer needs and expands the “One Stop Shop” concept beyond anything the industry has ever seen.

Sustaining the competitive advantage
Canadoil believes that many of its smaller competitors lack the global scale, business integration, design and engineering experience to compete for business that involves the customised piping solutions offered by its “One Stop Shop”.

Many of its larger competitors are focused on maximising production volumes and capacity utilisation and thus are too large to flexibly re-configure their manufacturing processes to re-deploy assets economically to serve higher margin niche markets for customised piping solutions.

The inability of both small and large competitors to replicate Canadoil’s “One Stop Shop” business model provides the company with a sustainable competitive advantage.

The other pivotal strategy applied by the company is to continue to deepen the understanding of customer requirements by leveraging Canadoil’s affiliated sales network of 11 RSOs across five continents. These RSOs typically have engineering and industry knowledge and employ sales officers who have a cultural affinity with their target market, keeping the whole team close to the customers.

Canadoil originated in northern Italy in the 1960s, and today is one of the leading North American manufacturers of carbon, hi-yield, alloy and exotic pipe fittings. Its growth includes the establishment of the Coveco manufacturing facility in Venezula in the 1970s and the founding of Canadoil Forge in Quebec, Canada in 1982. In 1998, Canadoil’s very first stocking distribution facility CFC Canadoil, Inc. was established in Houston. Expansion to Asia began in 1999 with the establishment of Canadoil Asia.

Canadoil’s CEO Giacomo Sozzi’s family has been in the piping component business for over four decades. Over this time, the family and their associated companies have established relationships with the world’s leading companies in the oil, gas and other energy industries, including Siemens, Mitsubishi Heavy Industries, Alstom, Exxon Mobil, FMC Technologies and Shell.

Maintaining a worldwide technically experienced team of regional sales offices allows Canadoil to manufacture and provide daily hands-on solutions for use in highly demanding applications and environments involving extreme temperatures, pressures, corrosiveness and abrasion, allowing its end-users to exploit their assets or resources more efficiently. To compete in this segment of the global pipe and fittings market, significant technical capabilities have been developed.

Deals go online

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Years ago the idea of using a virtual data room (VDR) seemed like it would never be accepted. The concept of taking paper due diligence materials and placing them ‘online’ seemed too far fetched to work. People felt the internet would never have the level of security or the speed required to display sensitive corporate information to outside parties.

Once internet connection speeds increased and security measures improved so did the idea of people reviewing information on a computer screen from the comfort of their own office. Today, VDR awareness is still growing and the adoption rate continues to move further downstream from Fortune 500 companies to middle market companies. Additionally, VDRs were primarily viewed as tools for divesting assets by auction. Today the use of virtual data rooms has expanded to acquirers in two party (one buyer, one seller) transactions.

As deal flow returns, many companies will look to grow within their space by add-on or bolt-on acquisitions and as a part of their process they include a virtual data room to help reduce expenses, add a level of security, prove disclosure, reduce transaction time and provide a better experience for them and the seller. One M&A industry professional in the bio-pharmaceutical field they stated that, “using virtual data rooms as an acquirer in conjunction with the face-to-face meetings keeps the team busy working at our office and allows us to facilitate negotiations in person”.

In one-on-one transactions, more buyers are taking the lead to set up and pay for third-party virtual data rooms. After a target is identified the buyer typically issues the seller a due diligence request list. At this stage many first time sellers do not have advisers or the resources to efficiently handle the preparation and oversight of the diligence materials during the transaction. Even though buyers used to be reluctant to make suggestions to a target on how to effectively handle this process they are now more willing to present the option of a virtual data room, even if they are one picking up the cost.

By supplying the seller with a virtual data room during a transaction a buyer is able to receive access to diligence materials faster then they could move their review team onsite. In addition, the buyer can provide access to multiple parties (accountants, lawyers, etc.) who could then review the information concurrently rather then going through binders one at a time. The VDR allows the seller to retain a high level of security on their corporate information during this review process by allowing them to set up various secure access levels and monitor each individual’s activity. If new information needs to be included during the review process the seller can easily make the additions to the VDR rather then making multiple paper copies to distribute. The virtual data room format also allows for quicker sorting of the information through the utilisation of a built-in search feature. This can be helpful for both the buyer and the seller as they try to locate key information during the transaction.

Below are four acquisition scenarios from the buyers’ perspective.

Scenario 1
The first time seller uses their own internal document hosting system to provide access to the due diligence materials. They are located in California and the buyer and their advisers have locations and personnel in several places across the US (Ohio, Michigan, New York and Chicago). Strains in the negotiation start early. The review is delayed because the seller’s firewall makes setting up permissions to outside users more difficult than anticipated. Once permissions are granted, only a limited number of IT personnel within the seller’s organisation are available (sensitivity reasons) to help with questions, troubleshooting and loading additional documents requested by the buyer. There are miscommunications on what information has been made available and reviewed.

Scenario 2
The buyer is located in the US and has found a prospective target in the UK. The target initially chooses to run the deal using a traditional paper deal room held at a law firm in the UK. In order to complete their due diligence the buyer spends approximately $25,000 a week in T&E before suggesting a virtual data room be implemented to expedite the process. More important than the reduction in travel cost and expense, the 24/7 access provided by the virtual data room versus a paper deal room condensed the review time and helped the seller monetise their asset faster.

Scenario 3
The buyer uses outside auditing teams once the transaction closes to review the acquired information during the transition period. The virtual data room allowed the buyer to quickly add the auditing teams to the site and permission them as unique users to see only the necessary information (e.g., not HR materials.) This allowed them to begin the integration process almost immediately upon closure of the transaction. Buyers who utilise a virtual data room will no longer have to wait for a truck full of boxes to arrive or receive volumes of unsecured emails before integrating the new business into their current operation.

Scenario 4
It is two years after an acquisition and a dispute arises in part over whether the seller disclosed certain information. To complicate the matter, many of the professionals who worked on the subsidiary’s acquisition team are no longer with the company. Because the transaction was handled with a traditional paper data room the parties had to go through a long and drawn out process of determining what information was made available pre-purchase. The internal legal officer recognised that with a virtual data room there would have been an electronic record of all documentation disclosed during the transaction. The parties would then be able to search through the electronic files and quickly determine which documents had been reviewed, what information had been disclosed and what parties did the reviewing. This quick access would help settle or reduce their dispute.

Virtual data rooms have become one of the most necessary tools today for the efficient and legally defensible purchase of another company. It’s not surprising that more than 30 percent of the M&A deals done worldwide using a VDR are mandated by the buyer. We expect that trend to accelerate as more people take advantage of technology and services to reach a valuation and buying decision.

Paul F. Hartzell is Senior Vice President of Merrill DataSite

For more information Tel: +1 (212) 367 5950; Email: Paul.Hartzell@merrillcorp.com; www.merrilldatasite.com

Airline launches green initiative

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Kenya Airways regained profitability in the year 2009/10 despite the difficult economic climate. During the year ending 31 March 2010, KQ made an operating profit of $24m. This was a remarkable achievement given the economic downturn experienced during most of the financial year. The capacity deployed increased by 6.7 percent largely driven by new destinations launched, while passenger traffic remained at prior year levels. The 2009/10 financial year was a bountiful one for the company’s shareholders, as the board declared a first and final dividend of $0.013 per share. This represents a total dividend payment of $6m.

The airline expects a more positive financial year to March 2011 given the global economic recovery. Management has put in place appropriate strategies to enhance growth, efficiency and profitability and at the same time ensuring that customer convenience and travel experience is not compromised.

The introduction of the money transfer service M-PESA – which will improve the ticket purchasing process for customers – and the KQ-Msafiri Gold credit card will also have a positive effect on the business. Management will continue to adopt new methods that will improve the efficiency and profitability of the company for the benefit of all stakeholders. In addition, the continued expansion of the network is bringing in extra revenue, with most of the new routes already contributing positive margins, thereby improving the utilisation of the company’s assets.

Stakeholder communication
With over 75,000 shareholders among Kenya Airways’ stakeholders, it is imperative that the airline communicates to the owners and other stakeholders, including and not limited to customers, bankers, suppliers, governments and other industry regulators. The purpose of the constant flow of financial and statistical information is to enable stakeholders to make informed decisions and to comply with regulatory bodies within the industry, governments and others. But with such variety in its stakeholders, the airline faces a tough challenge presenting data that is accurate, meaningful and actionable to everyone who receives it. Such challenges include:

– Complying with the diverse regulatory requirements in the different countries that KQ operates;
– Language barriers for the target audience;
– Complex industry terminology;
– Confidentiality agreements; and
– Commercial sensitivities due to competition.

Recognising the need for openness and transparency in its financial reporting, KQ communicates to stakeholders as follows:

– Quarterly press and KQ website release of operating statistics;
– Half year business and financial review report to the media, capital markets and KQ website;
– Half year investor and media briefing event with Q&A;
– Year-end business and financial report to the internal press, bourses in Kenya, Uganda and Tanzania and relevant Capital Market Authorities in the region;
– Annual general meeting, around September of each year, where the results are presented primarily to shareholders; and
– Periodic airline statistics release to governments and regulatory bodies in the region.

Network expansion
Kenya Airways management is continuously investing in fleet modernisation and development; it has already taken delivery of two Embraer 170 jets and expects one Embraer 190 later in the year. Kenya Airways will also have acquired two 737-300s by the end of the current financial year.

Kenya Airways has embarked on an aggressive route expansion strategy geared at giving customers more connection options. Since last year the airline has launched eight new routes. Kenya Airways today serves about three million passengers annually and flies to 50 destinations worldwide – 41 of which are in Africa. The airline covers over 70 percent of the African continent.

The latest destinations launched include Brazzaville, Libreville, Gaborone, Ndola, Malabo, Bangui and Kisangani. This year the airline has launched a Muscat route and also now serves Juba and Luanda in Angola.

By opening the new routes, KQ is expanding the opportunities for investors to and from Africa as well as increasing options available to tourists visiting the continent. To back up the ambitious route expansion plans and improve the quality of service delivered to customers, the airline has also embarked on training of its staff at its Pride Centre. The airline currently has a workforce of over 4,200 employees of which over 340 are pilots in charge of over 80 daily flights.

Kenya Airways has also signed a Code Share Agreement with several African airlines including Nigerian Eagle Airlines and Zambezi Airlines to strengthen its presence and increase market share in West Africa and Southern Africa. The agreement offers customers extended travel and better connection options in West, East and Southern Africa.

CSR and sponsorships
Education, water, health and environment remains KQ core focus areas in its CSR activities. The following projects were completed successfully during the 2009/2010 financial year.

Education
In line with the “Adopt a School” initiatives, KQ supported a number of schools.

a) Mangu High School in Thika, Kenya was supported through the construction of a computer class at a cost of $9,150.

b) Ikuu Girls Secondary and Special School in Chuka, Kenya was supported through the construction of a dining hall costing $15,850.

c) Esupetai Primary School in Narok, Kenya was supported through the construction of two classrooms, a perimeter fence and the installation of a water tank at a cost of $20,800.

d) Kasagam Secondary School in Kisumu, Kenya is a repeat beneficiary; this year support was through the construction of a computer lab costing $24,400.

e) Kasarani Tree Special School in Nairobi, Kenya was supported by the construction of a carpentry workshop costing $24,400.

Water
With an aim to develop sustainable, safe and adequate water supplies in vulnerable rural communities across Africa, KQ supported the following projects during the period.

a) Gaigedi Community in Vihiga, Kenya by sinking a borehole in Gaigedi Secondary School and installation of a holding tank at a cost of $24,400.

b) Epworth Community in Harare, Zimbabwe by sinking a borehole near the community centre and installation of a holding tank at a cost of $22,000.

Environment
The Plant a Future campaign saw a reconsolidation of the area where KQ has been planting indigenous trees since 2007. This year it replaced 90,000 seedlings that were affected by a long drought and planted an additional 30,000 indigenous seedlings. This project has so far accomplished a total number of 500,000 indigenous trees.

Health
“Bombay Ambulance” initiative provides support for needy patients travelling overseas for medical treatment. The number of discounted tickets provided to needy patients who travelled for medical treatment stood at 44 to Mumbai, two to Amsterdam, and one each to Cairo and London. The company also supported the following initiatives:

a) The Haiti earthquake disaster victims’ relief support project in partnership with the Red Cross between 4 – 28 February 2010 involved collecting cash in the form of loose change from passengers in-flight. The project netted a total of $6,000.

b) Uganda landslide victims: a donation of food worth $7,300 was trucked to Eastern Uganda.

c) The AMREF/Rotary “Changing Lives” project has so far collected $20,000.

As a leading African airline, Kenya Airways has created an opportunity for development by opening up Africa to the world (and vice versa). The company now sees its core purpose as creating sustainable development across Africa. To achieve this purpose, there is a need to foster global partnerships with key stakeholders and ensure peace and security through various initiatives. Kenya Airways is in the process of signing a memorandum of understanding with the United Nations Environmental Programme in a bid to promote environmental awareness and improve education in this area. Kenya Airways has a gallant plan of planting half a million trees every year in an effort to enhance environmental conservation.

The company’s commitment to African peace is evidenced by its partnership with the African Union Commission under the umbrella of the 2010 Year of Peace and Security in Africa. Under this agreement, Kenya Airways will provide communication and financial support to the Make Peace Happen campaign, thereby contributing towards the achievement of its objectives. Kenya Airways is the first airline in Africa to respond to the call by the African Union Commission to the African airline sector to partner with it on the implementation of the Year of Peace and Security programme.

It also recognises the power of sports as an effective unifier, bringing together tribes, nations and people. As such the company is associated with the Tegla Lorupe Foundation Peace initiative, a cause initiated by renowned women’s world marathon champion Tegla Lorupe to help forge peace between the warring communities in Kenya, Uganda and South Sudan, which are constantly engaged in cattle rustling conflicts.

The airline is committed to being Africa’s development partner, creating opportunities that fully exploit its potential; especially among the youth that embody the future of the continent. The KQ brand embraces sponsorships as a key avenue for connecting the brand and customers across the network, thereby building brand affinity and loyalty for Kenya Airways. One of KQ’s major sponsorships is that of Kenya’s National Sevens Rugby Team, at a total cost $200,000 per annum. This sponsorship exposes the KQ brand to rugby fans across the globe at the intercontinental World Sevens Rugby circuit, where the Kenya team plays adorned with the Kenya Airways colours.

The iPod of the wallet

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This platform has been developed to exceed all worldwide payment industry standards.

As a consumer, imagine an easy-to use wallet which can store every card in your wallet – credit, debit, loyalty, prepaid, tickets, hotel keys – everything. Anything with a magstripe or barcode can be digitised and securely placed on the iCache Digital Wallet. At point of sale or online, select what card you would like to use and iCache becomes that card. This is all accomplished without changing anything at point of sale.

As an issuer, imagine the nirvana of digitally guaranteed “top of wallet” positioning, a branded portal that the consumer’s wallet connects to, distributing cards as digital packets and significantly decreasing fraud.

As a retailer, imagine being able to geo-target consumers who have opted in for or are searching for your product or service. You can communicate and deliver offers digitally to the consumer’s wallet for immediate use. For web as well as brick and mortar retailers, you know your transactions are safe with iCache as the payment method is individually bound to the consumer’s fingerprint – all without changing the way you currently process transactions.

The payments landscape is evolving and growing. Over the past 10 years it has experienced double-digit spend and revenue growth, product proliferation and massive industry consolidation. But this growth has been mitigated by diminishing margins, primarily driven by the growing cost of customer acquisition and retention, as well as higher write-offs due to fraudulent activity. Furthermore, the market saturation of traditional payment mechanisms, such as credit and debit cards, has turned these payments into commodities with competitors focusing mainly on share shift.

Overview
The iCache Digital Wallet (IDW) is a small, intelligent portable consumer device that consolidates all the cards in a consumer’s wallet into one single card. The IDW also incorporates contactless payment cards and most barcoded cards or transaction tools, such as loyalty cards, gift cards, coupons, event tickets and airline boarding passes. The consumer manages all the data within the IDW via a computer-based interface similar to iTunes. Critical to the IDW is universal acceptance – it can be used with all the existing Point-of-Sale technology today, requiring no changes by the merchants to accept or process the transaction. The complexity of this solution occurs behind the scenes as the consumer is presented with an easy to use, intuitive device.

The set-up process is simple: consumers receive their IDW in the comfort of their home, connect it to their computer via a USB cable, register their fingerprint with the device, and insert the card data. At that point the IDW is ready for use. Intense security processes prevent the introduction of cards not owned by the IDW owner to be introduced to the IDW. The IDW is used in the same way a legacy form factor (plastic card) would in consumer transactions.

Consumers swipe their finger over the fingerprint reader and upon verification select which card they want to use. The information is then digitally encoded on the single card within the device and the card is ejected for use. In the case of a contactless card, consumers tap the contactless POS terminal with the IDW as they would with their contactless plastic card. For barcodes, the barcode is displayed on the device and can be scanned by the barcode reader.

All data, at the consumer’s discretion, is stored in secure, redundant databases with secure internet access. If the IDW is misplaced or stolen, the data will be rendered inaccessible because of the biometric and database encryption algorithms that are paired to the individual IDW owner. The consumer can download the data to their replacement IDW and have their digital identity restored in a matter of seconds from any computer with internet access. This serves two key purposes – it protects the networks from fraudulent card use in the event of loss or theft, and it protects consumers from the hassle of cancelling their credit card accounts and updating reccurring billing information. Key consumer benefits include enhanced personal security, ease of use and a slimmer wallet. Consumer intercepts performed by a third party organisation revealed an astounding consumer desire for the iCache Digital Wallet, with an 84 percent favourability rating across a wide demographic.

Real estate leaders in Asia

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In November this year, CapitaLand will reach its 10-year milestone since its formation from the merger of Pidemco Land and DBS Land in 2000. Despite the difficult start where it found itself in the perfect storm of the 9/11 attacks, dot-com bust, SARS, war in Iraq and Bali bombing, the Singapore-listed real estate company has grown into Asia’s pre-eminent property business, with a business model that has withstood several crises and still thrived.

Today, the once Singapore-centric developer is an international player active across the real estate segment and value chain. It has presence in more than 110 cities in over 20 countries; it has established businesses in homes, offices, shopping malls, serviced residences and integrated developments; and it has built more than 20,000 homes, manages over 60 shopping malls and operates more than 26,000 serviced residence units.

Meanwhile, its financial structure has been growing from strength to strength with a net gearing ratio of just 0.28x in 1H2010 compared to 0.92x in FY2000. One key factor behind this is CapitaLand’s unique capital recycling model where emphasis is on capital productivity. With this focus, CapitaLand pioneered the Singapore REIT market and has provided many of its success stories, including CapitaMall Trust, CapitaRetail China Trust, CapitaCommercial Trust and Ascott Residence Trust. In total, CapitaLand has six listed REITs of which four are listed on the Singapore Stock Exchange and two on Bursa Malaysia. The platform enables CapitaLand to spin off many of its top-quality mature real estate assets into its sponsored REITs, releasing capital to pursue development projects in the fast growing Asian markets. This strategy has allowed the Group to double its asset base to S$60bn from S$27bn while the combined market value of the listed companies and REITs has quadrupled to S$42bn over the past 10 years.

Another less quantifiable but nonetheless important driver is the Group’s emphasis on transparency and governance. To CapitaLand, these are the cornerstones of liquidity and cost of capital. Transparency and governance are thus not merely regulatory boxes to tick, but are strategically important. Global investors trust CapitaLand to be the custodian of their investment capital and this trust should be treated with respect. Some of the initiatives that CapitaLand has undertaken in recent years include quarterly financial reporting (before it became mandatory) and always embracing prompt and thorough disclosures along international standards. A proactive approach is adopted in disseminating information and channels include not only the Singapore media but international media. CapitaLand has also been early adopters of web based technology such as webcasts, RSS feeds and auto email alerts.

Communication with stakeholders is high on CapitaLand’s agenda. Aside from timely and comprehensive disclosures, the Group strives to maintain a high level of investor access through face-to-face meetings, teleconferences, investor conferences, roadshows and site visits. Since 2009, CapitaLand met with over 1,000 investors globally and participated in investor conferences and roadshows in Singapore, Hong Kong, Shanghai, Beijing, London, Frankfurt, Zurich, New York, Boston, Denver and San Francisco.

Key stakeholder communications
Stakeholders’ education: To help investors and analysts better understand its businesses and strategic approach, CapitaLand stepped up our one-on-one discussion sessions and created data summary templates to provide more clarity and transparency.

Meeting with management: Events are organised to enable investors and analysts to engage with senior management, including forums with business units’ CEOs and the Group CFO.

Retail investors: CapitaLand has been committing more time and resources to cater to this growing pool of investors. The Group participates in retail investor conventions to cater to the needs of the investment public.

Adoption of technology: The web space is a highly efficient channel to dispense news and reference library of corporate information. Much effort has been put into the creation of CapitaLand’s website, including the adoption of automated email pushes and RSS feeds.

The trust garnered from the practice of good governance and transparency has been part of the reason behind the Group’s ability to grow the business over the past 10 years. During the recent global economic crisis, CapitaLand did not encounter any major funding challenges as the investment community understands the Group well and is confident that it will continue to maintain a proactive and disciplined approach in its business and capital management. In February 2009, CapitaLand raised S$1.8bn through a pre-emptive rights offering. This was done to increase financial flexibility should the downturn be protracted and to take advantage of opportunities that might arise. The rights issue was well-received, achieving a subscription rate of 1.22 times. More importantly, the shares were re-rated and began an upward trajectory from the date of the rights announcement.

Almost immediately, CapitaLand completed a seven year S$1.2bn convertible bond which was the largest and longest tenor convertible bond for an Asian listed issuer then, confirming its good standing in the capital markets. With the substantial liquidity, the Group deleveraged its major REITs and allocated S$1bn in capital to expand their China, Vietnam and Ascott businesses, and acquired a portfolio of prime sites in Shanghai through the US$2.2bn acquisition of Orient Overseas Developments Limited (OODL) which helped to expand its presence in China to 36 percent of the Group’s asset base.

In the next 10 years CapitaLand will continue to be guided by the same principles that have taken it so far so quickly. The Group will strive to produce good returns, be highly reputable and have a well established presence throughout Asia.

Europe’s tax divide

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In this matter, the expression “harmful fiscal competition”, which is notably retained by the EU, is often used, though sometimes inappropriately.

The “harmful” character of fiscal competition between states is actually rather questionable and one may seriously doubt the very existence of such a harmful character, regardless of its form and the circumstances that accompany it.
I would like to demonstrate below that fiscal competition is on the contrary, both in principle and application, lawful for states, private enterprises and individuals, as well as beneficial for the economy as a whole.

Europe and it’s two main income tax systems
Europe is divided into two sides which, without recourse to caricature, can be defined as follows.

In the west – that part of Europe which has in a more controversial context been styled the “old Europe” – we find those countries which lie to the west of the old iron curtain, and which maintain a progressive tax system by bands. In a nutshell, this system implies that the more one earns, not only the more one pays in taxes, but also the higher the tax rate for the last slice of taxpayers. This progressive system is, in varying degrees, accompanied by numerous exceptions, consisting in reductions either of the amount due in taxes, or the taxable basis in itself. The pretexts invoked to justify these tax reductions are numerous: economic policy, social benefits, promotion of certain types of ecological behaviour, disguised subsidies to certain sectors of the economy or to specific companies, agreements concluded after collective actions of certain professions exercising their influence upon the state, and so on ad nauseum.

To the east of the former iron curtain, virtually every country uses a very different system, based on the idea of a “flat tax”. An enlarged tax liability is designed to include, in principle, every possible type of revenue whilst avoiding every form of exemption (apart from the bare subsistence incomes) is taxed at a relatively low rate (of about 10 to 15 percent in general).

These “new European” countries have used this flat tax system in order to revive their economies, crushed by decades of collectivism. They did so with success, in most cases.

It should be noted that the “flat tax” system has also been applied by some western European countries though, paradoxically, to certain specific types of income only. Thus, in several European countries, investment income is subject only to a flat tax which usually consists in withholding the taxed part of the revenue at the source. This flat tax system, applied only to certain types of revenue, preferred to others, is reserved for moveable income such as moveable capital and which are the ones most fit to benefit from fiscal competition by means of relocation.

Finally we find countries, such as Belgium, which generally make use of a progressive tax rate (except for investment income, which is generally subject to a flat tax at a rate of 15 percent) but in which the scale mounts so fast that the basic income of a workman reaches 42.5 percent while the rate is capped at 50 percent. This country has thus invented a new system: the semi-flat tax at rates which, elsewhere, correspond to the marginal maximum rate of the progressive tax scale.

Fiscal competition
In countries that use a flat tax, the nature of the competition is obvious. As with big businesses selling the same product, if the basis doesn’t have too many exceptions, it’s simply enough to compare the rates to understand the level of taxation. In those countries that use a progressive tax system with lots of exemptions, the comparison is a very difficult one to make – one has to compare the numerous different rates, the income levels at which those rates become applicable, and on top of that one has to keep in mind the numerous exemptions and reductions.

We are of the opinion that the competition in countries that apply a flat tax is healthier: firstly because the consumer – the taxpayer – is better informed of the choices that are open to him, and secondly because governments can’t favour certain groups in comparison to others by means of tax exemptions. The flat tax has the merit of being “neutral” when not accompanied by too many exemptions or reductions.

Progressive tax systems with multiple exemptions imply, on the contrary, a direct and voluntary intervention by the government, whose fiscal policy not only consists in levying the taxes and fixing the tax rates necessary for covering the state’s expenditure, but also in establishing distinctions between all kinds of taxpayers by means of exemptions, fixed rates or tax credits. Thus can appear artificially created economic sectors (such as windmill energy), based exclusively on tax exemptions and reductions, which benefit certain categories rather than others, depending on the country’s policies.

Even when they are explained by the application of economic policy, these fiscal advantages constitute a form of internal and often even international “fiscal competition”: tempting the taxpayer to adopt certain types of behaviour rather than others by means of tax benefits. Taxes cease to be neutral and to serve the one goal of dividing the cost of state, becoming a political instrument used by national governments.

Strangely enough, the processes of competition which are used, now to promote the so-called “green economy”, then to answer the demands of certain social groups (the farmers, the road transport drivers and over 200 other categories in a country like France), are criticised when their purpose is to benefit the economy as a whole such as is the case for tax reductions and, especially, tax reductions for businesses. When European countries like Romania, Bulgaria or Ireland apply significantly lower tax rates to businesses than others, critics sometimes occur, some people going as far as using the absurd notion of “fiscal dumping.”

Furthermore, when the target is to attract foreign industries or service industries by means of specific tax reductions, people start speaking of “harmful fiscal competition.” Nevertheless, the strikingly official partisans of this notion have never explained to whom this competition is supposed to be harmful.

This step is nonetheless identical to the one traditionally followed every time a fiscal exemption is accorded to a determined group or activity: during the elaboration of the budget, this “fiscal expenditure” has to be compensated by the taxpayer, yet as he doesn’t benefit from the measure, surely it is harmful to the taxpayer. A linear reduction of the tax rate, however, would grant the same advantages to all.

In reality, it has not been established that even the most extreme examples of “fiscal competition”, against which sanctions are taken at the European level, are, in fact, harmful at all to the European Union as a whole. They might be harmful for certain individual states, unable to cope with the competition, but the true question isn’t to determine whether harm is caused to “certain” states but to all of them considered together, and perhaps even more importantly to determine whether this competition is in fact harmful to the citizens and businesses of all of these states: one cannot suppose that the interest of the citizens match, de plano, to the interest of the states.

Beneficial competition
In every sector, the existence of competition can only lead to the blooming of the most efficient, and to the improvement of the condition of the consumer. In the tax field, it is important that the highest quantity of consumers, that is to say, of taxpayers, have the greatest possible amount of choices in order to avoid facing a state-run monopoly, which, like all monopolies, ends up by abusing the situation, producing mediocre products at excessive prices. This way of thinking can also be true when considering the relations between government and citizens.

The EU, one of whose principle responsibilities is to guarantee effective competition, would be well advised to do likewise in the field of taxation.

Flat taxation
As in the field of business competition, it’s always preferable that this competition is expressed in the clearest terms possible for the consumer, who will then be able to make an informed choice. In the commercial field, companies are obliged to show prices in order to allow comparison with the ones of their competitors. In the countries that operate a flat tax system, things work similarly and, in general, it’s enough to compare the tax rates in order to determine which alternative is the more advantageous. This does not work this way for the countries of Old Europe, where the multiplicity of rates and exemptions make the comparison both difficult and misleading.

Furthermore, justice is rarely to be found in a system where the fiscal benefits are generally obtained by pressure groups whose main characteristic isn’t to be representative but rather to be both powerful and well organised.
In Europe, the most heavily taxed continent in the world, the establishment of the most transparent form of fiscal competition possible is essential in order to limit the capacity of states to further increase the burden of taxation, especially since the latter is already excessively heavy in comparison to the most efficient countries.

Thierry Afschrift is a member of the Brussels, Madrid, Luxembourg and Geneva bars

Telecoms boom, gains in Turkey

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With a history of 170 years, Turk Telekom experienced one of its most important developments in 2005, when 55 percent of the company’s shares were acquired by Oger Telecom. Acquisition Monthly, read by international investors, awarded the privatisation process related to the block sale of 55 percent of Turk Telekom shares with the “Award of the year on developing markets” in the field of M&A.

As a leading communication and convergence technology company in Turkey, Turk Telekom with its group companies provide national and international communication solutions customised for its users’ requirements and also integrated telecommunication services from PSTN and GSM to broadband internet.

As of March 2010, the group has 16.4 million fixed access lines, 6.4 million ADSL Connections and 11.7 million mobile subscribers. Group companies have a modern network infrastructure covering the whole country and offer a wide variety of services to residential and commercial customers all over Turkey.

Turk Telekom gives services in all areas of telecommunication together with its group companies TTNET, Avea, Argela, Innova, Sebit, Sobee and AssisTT. In 2009, Turk Telekom’s consolidated investment reached TL2.5bn.
Turk Telekom with its subsidiaries is one of the largest employers in Turkey with 34,000 employees from all over the country. It invests in human resources aiming to achieve a qualified labour force, not only to the telecommunications sector, but to Turkey as a whole.

A Turkish superbrand
While achieving great success with its value added products and services, Turk Telekom became one of the most valuable brands of Turkey; the company has won a number of prestigious awards from around Europe and Turkey.

Turk Telekom received two awards for 13 utility model and 236 trademark applications in the context of Ankara Patent Information Day between 2000 and 2009. Turk Telekom received awards in: “the second highest corporation that made an application between the years up 2000 to 2009 in the city of Ankara in utility model”; “the third highest corporation that made an application between the years up 2000 to 2009 in the city of Ankara” and in “brand” categories.

Turk Telekom was selected as “The Most Valuable Brand in Turkey” by Brandfinance research, published by Capital magazine in 2009. The company also took place in the “Global Best of Breed” list comprising 21 companies determined by Bank of America Merrill Lynch (Merrill Lynch), among 2,973 companies in 68 countries. Turk Telekom was the first Turkish company to enter this prestigious list. The company continued to strengthen its brand value when it was chosen as The Digital Love Brand by Digital Age magazine in 2009.

Turk Telekom is now participating in Superbrands 2009 selection thanks to these successes.

Corporate citizenship
What makes Turk Telekom a superbrand is not only its innovative approach but also its strong corporate citizenship. Turk Telekom adds value to the lives of its customers thanks to its products and services and has gathered all its social responsibility activities actualised throughout Turkey under the “Türkiye’ye Deger” brand.

Besides important social responsibility projects such as Turk Telekom Schools, Turk Telekom Internet Houses, Turk Telekom Sports Schools and e-invoice forests carried out nationally, Turk Telekom has gathered approximately 150 local social responsibility activities actualised by the city directorates under the “Türkiye’ye Deger” brand. Turk Telekom carries out its social responsibility investments primarily in education, sports and environment fields and has won more than 20 awards with the projects actualised during the last year.

Turk Telekom employees can directly attend these projects that are important for the company culture. Thousands of Turk Telekom employees participate in these social responsibility projects as volunteers.

Turk Telekom believes that sports play an important role in improving the communication skills of young people, and for the last 10 years it has supported the training of approximately 28,000 young athletes in 22 disciplines, including basketball, fencing, badminton, skiing and tennis. Turk Telekom Sports Schools provide training in 15 different disciplines, and its trainees have placed in competitions in more than 10 sports nationally and internationally, and been invited to national teams many times.

The group has actualised education projects with an aim to improve education infrastructure throughout Turkey and deploy access to information by eliminating the numeric difference in education. Within the scope of Turk Telekom Schools project, 72 education buildings have been put into service all around Turkey.

This project includes the construction of 76 buildings and upon the completion of the project, more than 30,000 students will have the opportunity to receive education in modern buildings.

Turk Telecom Group
Turk Telekom develops and exports technology to markets of its region together with its group companies TTNET, Avea, Argela, Innova, Sebit, Sobee and AssisTT.

Turkey’s leading broadband internet service provider TTNET offers state-of-the-art internet access to its customers through its extensive sales network. Offering services in 81 provinces of Turkey, TTNET’s product portfolio includes ADSL/VDSL2-fast internet access; TTNET WiFi abroad access service, jointly provided with WiFi wireless internet access and iPass; 3G mobile internet access services, jointly provided with Avea; and G.SHDSL, Metro Ethernet, ATM and Frame Relay internet access services.

Avea is the youngest company of the mobile communication industry, with 81.4 percent of its shares owned by Turk Telekom. With its new generation network, Avea continues to grow by increasing its corporate and retail services and the number of subscribers. Investing continuously in technology, infrastructure, management and human resources, the company maintains its target of improving service quality.

Innova IT Solutions Corp., a pioneering company of the IT solutions and services area, uses its engineering know-how to offer innovative and value-added technology solutions that guarantee improved efficiency and lower costs for companies in all industries from telecommunications to government, and from industry and delivery to finance.

A wholly-owned subsidiary of Turk Telekom, Argela Yazılım ve Bilisim Teknolojileri A.S has been producing innovative technologies and next generation solutions for telecom operators since 2004. With products currently used by many operators across the world, Argela reaches millions of subscribers through its solutions. The company also operates in Dubai through IVEA Software Solutions FZLLC, in which it has a 50 percent stake, and in the US through Argela USA, Inc, which it fully owns. Argela’s priority markets include the Balkans, Saudi Arabia and particularly India. The company also has customers in South Africa, Ukraine, Cyprus, Kazakhstan, Moldova and Georgia.

Joining the Turk Telekom family in 2007, Sebit made substantial worldwide progress in the field of generalising and new business model development, becoming one of the leading companies of the sector to innovate in the school application of educational technologies. Sebit offered a solution to the American market with the Adaptive Curriculum brand, which turned into an international achievement. And the Vitamin brand is regarded today as a telecom product, and telecom companies see Sebit’s products as an important opportunity for offering added-value services to their customers. The education software developed by Sebit creates an opportunity of equal education for everyone. It introduced the internet to Turkey’s children and ensures its correct use, with the motto “there is no education without internet”.

Although it is Turk Telekom’s youngest company, with a history of only two years, AssisTT is now one of the largest call centres in Turkey. Aiming to become a pioneering ‘Customer Satisfaction Centre’ in call centre services in Turkey, AssisTT also aspires to become one of the top 10 companies operating in this area in the EMEA region.

Value added service
Turk Telekom presented the first examples of its convergence products with Wirofon, which brings mobility to land lines, and Vitamin, a leading online education solution.

Wirofon is a system that allows users to make calls from anywhere abroad and be charged for them under their home or office line subscriptions. By using a Wi-Fi enabled mobile phone or any computer connected to the internet, customers can make calls over the web – from anywhere in the world – and be charged using their home line tariffs.

This technology is a good example of Turk Telekom’s improving service levels, aiming to provide its customers the opportunity and comfort of connecting anytime and anywhere. Wirofon has proved successful in the international arena, winning the “Best New Telecommunication Service of the Year” award in the CommsMEA Awards, which focuses on prominent Telecom operators in the Middle East and Africa region.

The video call technology of telecom, the Videofon, is developed by Turk Telekom and Argela engineers. Videofon service can be used by home or office telephones, and also payphones with multimedia. It is possible to browse the web, send e-mail and take photos during conversations when using Videofon technology.

Sebit, one of the subsidiaries of Turk Telekom, gained important successes abroad with its educational software named Vitamin. In November 2009, Sebit received for Vitamin the “Best Content Service” award at the World Communication Awards, the “Best Online Education Solution” award at the CODiE Awards with Adaptive Curriculum, the “Best Science and Mathematics Website Award” at EDDIE Awards organised by ComputED Learning Centre, and received the blue ribbon in the Best Business Development Communication Programme and Best New PR Product/Process/Service categories at the League of American Communication Professionals. Vitamin was also awarded a certificate of achievement in the Most Comprehensive Organisational Communication Programme and Best Corporate Communication / PR Programme categories.

The software has been exported to three different regions and been translated into English, Spanish and Arabic. The other subsidiary of TTNET began offering the TIVIBU Web Television service in February 2010 and reached more than 150,000 customers.

Steering a sustainable course

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Understanding that the positive effect of good corporate governance ultimately results in a strengthened economy, Telekom Austria Group appreciates how important it is for the supervisory board, the directors and the management team to develop a model of governance that aligns the values of all corporate stakeholders, which then is evaluated periodically for its effectiveness.

The Austrian Corporate Governance Code has created the framework for the sustainable management of the Telekom Austria Group since 2003 when the firm voluntarily committed itself to complying with the Code. In January 2010, a revised and updated version of the Code was published, with the most significant changes occurring in the field of the remuneration of the Board of Directors and other executives.

Several provisions of the Code were also adjusted to comply with amendments to the Stock Corporation Act 2009. Thanks to its participation in the Austrian Working Group for Corporate Governance, Telekom Austria Group has been involved in the further development of the standards of corporate governance. In addition, the company has also implemented further corporate governance instruments such as an effective risk management system or the Code of Conduct.

The fundamental pillars of compliance management at Telekom Austria Group encompass the following:

i) The explicit and binding commitment to responsible action in the corporate values of the Group.
ii) The country-specific further development and consolidation of the group-wide behaviour guidelines and standards as set out in the company’s code of conduct.
iii) The monitoring of compliance with the relevant laws and regulations by means of management and process controls within the group-wide internal control system.
iv) The risk-oriented auditing activities of the Internal Audit department, and comprehensive risk-specific training measures at all important group companies.
v) Group-wide compliance organisation to enhance and monitor compliance instruments and strengthen comlpliance culture.

CSR strategy
Inextricably linked to the execution of sound corporate governance is the company’s CSR strategy. Core to this strategy is Telekom Austria Group’s prime strategic objective of achieving steady and sustainable increase in shareholder value, as opposed to expansion at any price. The Group looks to take forward-looking action to ensure the company’s healthy development in the long-term. Its CSR understanding is based on the triple-bottom line (people, planet and profit) with the core business infrastructure being the “glue” that binds these three pillars. The Group seeks to benefit both individuals and societies, including customers and staff, as well as all other stakeholders in the regions in which it operates.

In line with responsible corporate management, value-oriented growth also takes into account regional conditions, environmental and social aspects.

Telekom Austria Group’s CSR process was introduced in 2009 and has culminated in the reorganisation of the strategic sustainability activities and the implementation of a CSR management system on a Group level with the aim of putting in place structures that will anchor sustainability even more strongly within the company.

The responsibilities of the newly-created CSR Board, which comprises first-level managers from the relevant departments, include:

– Discussing and further developing the most important sustainability topics.
– Making strategic decisions regarding the direction sustainability should take.
– Taking responsibility for sustainability in their own departments, and;
– Adopting the annual CSR programme.

The Board is supported by the CSR core team, which is responsible for developing the annual CSR programme and defining key areas in the field of sustainability. The team also gathers ideas from within and outside the company, launches initiatives and identifies synergies between the projects, and is also responsible for evaluating the risks and challenges of CSR-relevant topics. Planning is currently underway to install local CSR structures at the foreign affiliates of the Telekom Austria Group.

The newly established CSR department is responsible for CSR management and the further development of the CSR process at Group level. It is also the relevant interface to all Telekom Austria Group companies and sets the strategic direction. Individual activities are the responsibility of the respective companies and are geared to regional regulations and requirements.

As part of the CSR process, all CSR initiatives and projects were assessed and evaluated in terms of the challenges and opportunities they present to the company and the industry. In addition to detailed benchmarking procedures, the process involved taking into account the analysis provided by ratings agencies and respecting the interests of both internal and external stakeholders, before defining key areas for the Group.

Energy efficiency
Telekom Austria Group operates a Group-wide environmental policy that ensures that it is committed to innovative and efficient energy management, the reduction of CO2 emissions and the increased use of renewable-energy sources. It aims to contribute to the low carbon economy, one which reduces CO2 in order to prevent a dramatic climate change. The company drives innovative projects in the field of e-mobility and smart grids, also entering new fields of business.

The International Energy Agency predicts that global energy demand will double by 2020 due to the need in industrialised countries for rising volumes of data, the rapid upgrading of telecoms infrastructure and increasing broadband penetration, as well as the growing use of modern technologies in emerging markets. The ICT industry therefore needs to sustainably curb energy consumption in all areas.

A1 Telekom Austria – the Austrian operation which was formed in July 2010 as a result of the merger between Telekom Austria (Fixed Net) and mobilkom austria − has embarked on a number of projects that have as their aim the reduction of CO2 emissions. In 2009 A1 Telekom Austria became an industry pioneer when it joined the WWF Climate Group, committing itself to reducing its emissions of CO2 by at least 15 percent or 15,000 tons within the next three years. This target has already been exceeded. By the end of 2009, emissions of CO2 had been reduced by approximately 40 percent to 47,781 tons compared to 80,591 tons in 2008. This is equivalent to the amount of CO2 caused by 3,300 Austrian citizens each year.

A1 Telekom Austria has implemented a pilot project “A1 Energieeffizienz” that is reducing the energy consumption and CO2 emissions of base stations by intelligently managing its resources. Network capacity is adjusted to the volume of traffic carried over the network with no negative impact on network quality. Resources that are not required – complete base stations or parts of them – are temporarily deactivated. The company is already successfully using this energy-saving mode at 303 sites in Vienna and the concept will be rolled out throughout Austria by the end of 2010.

This will make it possible to operate approximately 1,000 sites energy-efficiently, cutting consumption by 10 percent and producing total savings of 438 tonnes of CO2 or 1.2 GWh.

In early 2009 mobilkom austria launched pilot operations with a wind-powered base station, with the aim of wind power supplying up to 80 percent of the total energy requirement. The plan is now to open other such stations by the end of 2010. A further trial that uses alternative sources of energy integrates photovoltaic cells at base stations.

Embracing technology
Further steps to embrace renewable energy have been taken across Telekom Austria Group’s portfolio. Its Croatian subsidiary, Vipnet, uses solar energy to power a number of base stations and the company’s Vip operator in Macedonia is working on developing a solar power project. Telekom Austria (Fixed Net) and Si.mobil are both certified in accordance with ISO 14001 while mobilkom austria has been certified by the Ökoprofit program. In addition, in 2008, Telekom Austria (Fixed Net) became the first company in Austria to receive certification for its energy management system according to the new Austrian Standard ÖNORM EN 16001. Mobiltel has a system that is ready for certification while Vipnet and Vip mobile are on the point of receiving an ISO certification.

Telekom Austria (Fixed Net) has set itself the target of lowering the CO2 emissions generated by business travel by approximately 150 tons per annum. The use of the high-end video conference solution, Telepresence, is estimated to eliminate 25 percent of one-day business trips. This solution is available at eight company locations and involves participants sitting opposite one another with the ability to see each other in life size as if they were in the same room.

In addition, traditional video conferencing solutions, OCS clients and fixed line or mobile telephones can also be integrated. The use of the Telepresence system eliminates travelling time, and the amount of energy consumed as a result of business travel is significantly reduced.

In early 2010, Telekom Austria (Fixed Net) took into service the first prototype of a telephone booth with an integrated charging station. The charging stations model uses existing infrastructure and a convenient form of payment via mobile phone. By the end of 2010, a total of 30 charging stations should be on stream throughout Austria for e-cars, e-scooters and e-bicycles.

Going electronic
Following a campaign to promote online billing Telekom Austria (Fixed Net) increased the number of paperless customers in 2010 by 220,000 to 836,902. mobilkom austria supports the Greenpeace campaign “1,000,000 Good Deeds for Climate Protection” with information and references on its websites, with cost inquiries and online bill notifications. Together with its customers, mobilkom austria succeeded in saving 69 tons of CO2 by successively switching to online billing. Paper consumption was also reduced by nine million sheets last year. Vipnet and Si.mobil also offer their customers online billing.

In addition to Telekom Austria Group leading the way for the delivery of telecommunications systems across the CEE region, it is also leading the way to an enlightened business model with a progressive approach towards renewable energy.

“Insolvency has been like a maze”

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Mexican history has been dynamic and rich. It comes from the ancient great Olmeca, Mayan and Aztec cultures in the prehistoric stage, through 300 years thereafter of colonialism under the Spanish Crown domination; 11 years independence war; two empires – Iturbide and Maximiliano; foreign intervention and invasion wars by the US, England and France; the Republic with Juarez; the 30 years of Porfirism dictatorship; 10 years revolution war that forced Dictator Porfirio Diaz to flee Mexico; 71 years of political party PRI’s totalitarism (Partido Revolucionario Institucional); the current lengthy and costly transitory way to democracy; war against the drug dealers and insecurity, the war against deep and extreme poverty (44.2 percent poverty as per CONEVAL Consejo Nacional de Valuacion de la Politica de Desarrollo Social. As per CEPAL Comision Economica para America Latina 34.8 percent under extreme poverty, with an increase in 2010 of 3.5 percent); having the richest man in the world ($51.5bn); and the war against demography exploitation. Mexico City is one of the most populated cities in the world (22 million).

Mexico has been strong enough to overcome these crises and is taking actions to surmount what has been called “the worst financial crisis ever in the world”. This 2008-09 crisis placed most economies worldwide, from developed and under-developed countries, under recession. The US is now attempting to prevent second recession. Mexico is closely linked to the US economy. This international crisis was, in essence, caused by financiers’ extreme greed, abuse and financial maneuvers as well as weak or lack of timely overview, control and reaction by regulators.

The impact of the 2008-09 US crisis caused uncertainty and volatility although governments did take monetary and tax actions to face the crisis. The Mexican peso devalued 40 percent. The growth index for services has been 2.1 percent, raw materials 3.2 percent and industrial –0.7 percent. During January and February 2010, 128,000 people lost their jobs. As per INEGI’s (Instituto Nacional de Estadistica y Geografia) statistics, consumer trust was down to 78.9, the lowest level in the last 30 years. Some 85 percent of Mexican manufacturing exports are sent to the US, where the automotive sector represents 27 percent. Annual exports had a growth of 5.1 percent; however, in January exports fell –26 percent. Unemployment in 2009 was five percent. In 2009, offer and demand of goods and services fell 9.5 percent, the worst in 28 years. Statistics of INEGI’s report that 2009 has seen the most adverse meltdown in the exchange market of goods and services since 1982, even more intense than that experienced in 1995. From the offer side, GDP fell to a 9.5 percent annual rate and imports fell 18.2 percent. From the demand side, it was affected by the 6 percent fall in private consumption, an index that is equivalent to 52 percent of the total economic activity.

Consumption of families and companies fell to –9.5 percent; export of goods and services fell 14.8 percent, the worst in 30 years; expenditure in fixed assets fell 10.1 percent; inventory fell 475 percent; and in the fourth quarter of 2009 there was an offer and demand decline of 1.7 percent, for the fifth con-secutive quarter.

In 2010 Mexico has experienced a slow general recovery, by means of a rebuttal from the economic crisis and reactivation in the US automotive sector (GDP in Q1 was 4.5 percent and 7.5 percent in Q2), gaining in employment, exports to US and having better levels of manufactures, infrastructure and services, however, Mexican economy is still weak and is shaking due to US weak and shaking economy, under the shadow of a second recession.

Insolvency has been seen like a maze, the seven heads demon or the economy evil. However, insolvency is an effect of financial distress situations, which, in turn, are the effect of economical mistakes or diseases, abuse or greed, whether from the government or private sector or both. Giants’ financial distresses show it: GM, AGI, Chrysler, Lehman Brothers, Bern Sterns, City Corp, inter alia. At the end, insolvency, most of the times, is an effect of human being behaviour, rather than an act of God.

Under financial distress situations, it is of essence to be equipped with a modern, orderly, predictable, accountably, efficient and effective legal insolvency system to protect debtors and creditors’ rights, to optimise assets and as long as possible preserve jobs and businesses. Mexico through its history has lacked such a system. Current insolvency system, concurso mercantil for merchants enacted in 2000 and concurso civil for consumers, enacted in 1932 have been, without a doubt, failed.

In the systemic financial distress situations of the XX and XXI century, Mexico has been forced to overcome distress economies, through vehicles outside insolvency proceedings. It was the case of the FICORCA in the mid 80’s, the UCABE, the FOBAPROA and the IPAB, in the high 1990’s, which were, in fact, official rescue programmes, wherein the government assumed the risks. Risks, which at the end, were paid by federal treasury with taxpayers taxes. Most individuals, consumers, holding high debts, banking debts, mortgages, credit card debts, and other debts had no option but to be forced to participate in ruinous restructuring programmes, recognising and acknowledging the full debt, principal plus interest, payable in a longer period. In other instances, financial systemic crisis have been faced with the support of the international finance institutions, foreign indebtedness and other countries financial support.

Upgrade needed
Mexico urgently requires a 21st century insolvency system. In the insolvency context, financial distress entrepreneurs and individuals look for reorganisation rather than liquidation or at least a fresh start. Debtors seek bankruptcy protection when available, whether in reorganisation, liquidation or out of court settlement. Insolvency systems should provide for timely, orderly, efficient and effective bankruptcy protection. Bankruptcy protection benefits the economy and trading chain, even with a fresh start. Major bankruptcy systems in the UK, US, Canada and Japan regulate and provide bankruptcy protection to prevent insolvency or while under economical crisis.

Even when facing a systemic financial and subprime crisis in 2008 − 2009 that spread worldwide, causing, after the great recession, international financial distress where financial titans fell – AIG, Citi, GM, Merrill Lynch, Bern Sterns, Lehman Brothers – there has been bankruptcy protection to alleviate, rescue or reorganise the bankrupt as well as to give them a fresh start – a hope – and also provide protection to creditors.

For the time being, debtors are seeking out-of court reorganisations and settlements. As the financial situation becomes worse and with rescue programmes being insufficient, in 2010–2011 it is expected that there will be an increase in insolvencies and eventual liquidations. In some cases, there may be a reorganisation plan settled by debtors and creditors to overcome a financial distress situation as a transitory vehicle. On the other hand, distressed financial entities may just close their business and runaway by fact (factual liquidation). It is also expected creditor’s foreclosures and judicial executions since concurso mercantil (insolvency) is not mandatory. In Mexico we have already seen that the Concurso Mercantil Law is not effective. Ley de Concursos Mercantiles strongly needs to be amended. Its structure was patterned in the old Spanish bankruptcies laws of the 18th century. There is an urgent need for an insolvency system that will effectively provide for the 21st century legal regime that will help debtors and creditors overcome the financial stress situation, including labour, tax, suppliers of goods, services and finance, merchants and non merchants, whether large, medium or small. For instance in Mexico, small businesses and non merchant’s (consumer) insolvency lack all bankruptcy protection.

Another feature of the Mexican insolvency system is that labour creditors and tax creditors (federal, state and municipal) are super priority creditors. Labour and tax creditors do not enter insolvency. They are enforced, recognised and paid in their special courts, outside of insolvency. When it happens, generally, there is nothing left for other creditors.

Likewise, only post-petition actions, including arbitration, enter insolvency proceedings under the concurso mercantil. Thus, pre-petition action and arbitration do not join the concurso mercantil.

On the other perspective, Sistema de Administracion Tributaria (SAT) data shows that Mexican IRS records 26.3 million active taxpayers – 16.3 million employed, nine million individuals and 831,000 legal entities. Informal sector – not under IMSS (Social Welfare) government control and non-taxpayers – 12,612,617 in April 2009 accounting for 28.3 percent of total employed people.

We consider that a 21st century insolvency system encompassing and protecting all debtors and creditors, whether merchants or consumer as well as all creditors, including labour, tax and all others may help importantly to overcome and reduce significantly the informal sector and non tax payers, based upon the fact that all of them would prefer the insolvency benefits (such as the automatic stay, discharge and tax benefits) under the formal insolvency proceedings.