Month: February 2015

OECD report highlights need for structural reforms

Posted on by Ashton Wenborn

Marking the first day of the G20 Finance and Deputy Bank Meeting in Istanbul, the OECD has released its 2015 edition of Going for Growth: a report that assesses the progress made by each member country and identifies the changes needed in order to boost the economy. The report, which was presented by OECD Secretary-General Angel Gurría and Turkish Deputy Prime Minister Ali Babacan, refers to the sluggish growth that still persists in a majority of the G20 countries, more than six years after the financial crisis began.

The report describes how many advanced economies are in the midst of a
vicious cycle

The OECD underlines the ongoing concerns for advanced economies, as illustrated by recent growth revisions, such as slowing productivity, infrastructure restraints, long-term unemployment and resource misallocation. Chronic shortfalls in demand and the slow pace of structural reforms can be attributed to this continued period of stagnation. “It’s important that structural policies, in addition to improving growth prospects in the medium-term, can help support demand in the short-term. The ones we focus more on are investments and global trade, because these are two elements that can directly help with demand,” Alain De Serres, Chief Economist at the OECD, told World Finance. In order to restore healthy growth, the report recommends that resolute policy changes must be made and followed up with the appropriate legislation, thus ensuring implementation at all levels.

The report describes how many advanced economies are in the midst of a vicious cycle, whereby growth is undermined by weak demand, which in turn reduces demand further as consumers and investors become increasingly risk averse. The OECD recommends the promotion of investment as being vital for countries to break out of this rut, with a focus on infrastructure spending being particularly important. “This is where governments can push, because they can increase public investment and help with infrastructure investment; they can try to improve the regulatory environment to facilitate the combination of private and public investment into infrastructure,” said De Serres.

The obstacles to foreign trade and investment, such as high tariffs, as well as legal and administrative obstacles, have hindered the potential for growth. This is an area in which can be drastically transformed in order to promote economic activity among G20 states. “There is still more to be done in terms of facilitating the entry of new firms, those that have new ideas, and allowing them to tap into resources so that they can grow more rapidly,” explained De Serres. Other suggestions made by the OECD include increased investment of R&D and promoting the pursuit of innovation, as well as the global integration of knowledge-based capital. Furthermore, key drivers of productivity gains can be achieved through greater wage dispersion, in addition to broader access to all levels of education and skills development. The report also highlights how job creation can be boosted through alleviating labour taxes and reforming labour market policies.

First Bank of Nigeria on African banking trends

Posted on by Ashton Wenborn

The African banking industry is attracting huge interest worldwide, where the opportunity of an untapped market in Nigeria, where 35 million adults keep their cash at home, shines bright. World Finance speaks to Bernadine Okeke from First Bank of Nigeria about the market’s potential.

World Finance: Well Bernadine, let’s start with the private banking industry, which is still emerging in Nigeria. How does it stand today and how do you see it developing?
Bernadine Okeke: Many of our clients are entrepreneurs, and therefore it’s new wealth, first generation wealth, emerging wealth. And therefore it needs to be managed in a particular way. It’s not the same as it is in Europe or in the US. Our entrepreneurs are learning how to invest and manage wealth, rather than simply churning it into their businesses.

So it gives us an opportunity to actually educate an entire nation about the next opportunity to manage wealth, to grow wealth and to transit this wealth. From one generation to the next.

I know that a lot of foreign banks are very interested in the Nigerian private banking space. But I also believe that the domestic market has room to grow. And that many Nigerians are finding their way back to Nigeria and bringing this wealth back, so it creates a massive opportunity for us to capture this market.

The other trend that we see is a reduction in barriers to trade between west African countries and other countries on the
African continent

World Finance: Well Nigeria has the highest population in Africa and also the strongest economy. So what kind of an investment opportunity is it, and how does the economy stand today?
Bernadine Okeke: We have well over 170 million people, and the saying goes ‘one in every five black people on this earth is a Nigerian.’ You can imagine the investment opportunity of having 170 million wallets, in the space of the size of Texas in the US, to be able to sell your goods to.

Also there has been a recent rebasing of our economy, and that has actually shown that rather than having or believing that the economy is all oil and gas, there were many other industries that actually contributed to the revenue of the country. And these include telecoms, agriculture, financial services; even human capital development, among several others.

Each of these are actually private sector driven and therefore presents an opportunity for massive investment, if you want to take the risk of being in a third world economy that is emerging. And what we’re finding is, the returns are fantastic, because with an economy that is growing at well over 8.1 or 8.2 percent per year. The risk return ratio will be probably about the best in the world.

World Finance: Well, First Bank of Nigeria operate internationally, so what trends do you foresee impacting the African banking industry in the coming 12 months?
Bernadine Okeke: Families in general are becoming more connected to the internet, and as a result of that they are expecting many of their banking services to be delivered electronically. This is a great opportunity for banks like ourselves to use technology to create financial inclusion.

We can actually use mobile phones to deliver services to customers and then use the electronics base for online banking. I’m sure you have heard of M-Pesa out of Kenya, where they actually deliver services through a mobile phone. At FirstBank we have Firstmonie, which does the same thing, and therefore I can text money to you or I can pay for services using a mobile phone.

What this really will do for the African continent is actually help us leapfrog, from cheques to cards to mobile phones, and we might end up not having as many cards in our wallets, as you find in most western countries.

The other trend that we see is a reduction in barriers to trade between west African countries and other countries on the African continent.

World Finance: So how do you see Nigeria’s economy growing and how are you set to capitalise on this?
Bernadine Okeke: We have focused in the past, and will continue to focus on, the small and medium scale enterprises. Providing them with the necessary credit financing; also with the skills acquisitions they need to run their businesses because a lot of times, they do not have those skills. And then to support them as they move into other markets. Also supporting the government through our ability to fund private public partnerships and things like that.

Our bank is 120 years old older than the country. And I think we have been a major player in the growth of the economy, and we will be around for another 120 years, doing just that.

World Finance: Well finally, what’s First Bank of Nigeria’s strategy for future growth?
Bernadine Okeke: To focus on the SME space, the retail space, but also innovation. Being the go to bank for new solutions as things come up. There are some regulatory head winds which will impact everyone in the Nigerian space. But we will come up with whatever we need to do, to be able to remain a viable player and a profitable bank, for the next 120 years.

Mashreq’s banking expertise makes it a leader in UAE financial market

Posted on by Ashton Wenborn

These are exciting times for Mashreq, a leading bank in the UAE and one of the most successful in the Middle East. It has launched a new corporate identity that builds on its history of innovation and customer service and illustrates to the wider world just how committed it is to its customers, to the continued building up of its comprehensive expertise and market knowledge, and to nurturing its top-class reputation in the industry.

The bank’s new identity is illustrated by its new logo, but the logo is only a small part of the story. What really matters is the new direction of the bank’s brand and above all that the brand is always focused on the relationship with the customer.

Mashreq is not a bank that devises products and services to meet its own needs. Instead, the needs that direct the bank’s plans and initiatives are those furnished to it by its customers. The bank’s approach to customer service is founded upon its pursuit of excellence, which is the cultural and commercial catalyst for everything that the bank does.

Mashreq is not a bank that devises products and services to meet its own needs

Overall, the main competitive advantages that Mashreq has established in the highly competitive UAE banking industry are: financial strength, a wide breadth of products, services and solutions, strong customer relationships, and a strong brand customers can identify with.

Quality and quantity
As well as offering personal-banking services, including a considerable diversity of accounts designed to meet all the likely customer requirements that are presented to the bank, Mashreq has established a significant reputation in the area of corporate and investment banking.

For example, on the lending front, Mashreq offers trade finance, project finance, corporate finance, contracting finance and lending for businesses. The bank also offers a wide range of cash management services for businesses, a comprehensive suite of business banking products and services. The bank, in addition, provides all necessary treasury and capital market products including a margin desk, foreign exchange services, equities services and domestic trading facilities in equities.

The corporate banking service provided by Mashreq is, like all areas of its business, founded on the bank’s understanding of the needs and demands of its business clients.

The bank is fully aware that every corporation or firm that makes use of its services has different requirements and that in order to provide the best products and services to individual business organisations, the bank seeks to know as much as it can glean from the organisation about the its requirements, in order to make sure that what the bank offers is fully appropriate to those requirements.

Mashreq’s banking expertise is tried and tested. The bank has been customising banking and financial services to millions of individual customers and corporate customers ever since its foundation back in 1967. Now, not far from half a century later, the bank is one of the leading financial institutions in the UAE and has an increasing retail presence both in the UAE itself and also in other parts of the Middle East including Bahrain, Egypt, Kuwait and Qatar. Both in the UAE and beyond, Mashreq focuses on providing its individual customers and corporate customers access to the innovative products and services they need to carry out with maximum efficiency their own financial objectives.

In surveys, Mashreq is always among the highest performing banks in the region. For example, in 2004 it was awarded the EMEA Finance Best Cash Management Services in the Middle East at Sibos. Mashreq was also awarded the Best Corporate Account Product Award for the Middle East by The Banker Middle East. These awards show the quality of the bank’s customer service and the excellence of its products.

Going further
Such is Mashreq’s penetration within the UAE that one in every two households bank with it. The bank also has customer service centres in all key retail locations in the UAE and runs one of the largest ATM networks in the country. There are also a dozen Mashreq overseas offices in nine locations across Europe, the US, Asia and Africa.

Of course, other banks have won awards and other banks have established infrastructures and networks. Mashreq, however, believes that it goes further than its competitors by bringing a quality of vision, leadership and single-minded commitment and devotion to its goals. Indeed, so vital is the bank’s perception of how it outshines its competitors that its organisational culture is specifically based on fundamental commercial values and upon the highly significant features of vision, mission and goals.

The bank’s vision includes such key factors as an absolute commitment to customers, the banks determination to use state-of-the-art technology to ensure that its customers are getting the best service and also that customers are enjoying maximum security in terms of their assets and their data.

On the mission front, the bank considers that it has an edge, defining its overall strategy as a highly relationship-based bank. It is a bank that delivers a superior service, a bank that is in fact the primary bank of choice for almost all its customers. Mission, though, is about internal qualities as well as qualities of products and service and best attention to customers’ needs.

As far as an overall end goal is concerned, Mashreq endeavours to be the best in its field at everything it does. This is not a goal that can be entertained lightly or that can permit any room for complacency or resting on one’s laurels. The bank is working towards achieving such an ambitious goal by pursuing a culture of maximum quality in customer service offerings and one of continuous improvement.

Track record
Mashreq has also managed to achieve an enviable track record when it comes to innovation in the financial sector. One of the most effective tests of a bank’s devotion to service and to overall quality is how rapidly and effectively it implements the very latest technology. The banking and financial sectors have traditionally been one of the first sectors of commerce to deploy new technology. Why? Ultimately the reason is always the same: because this new technology gives customers a better service. For example, Mashreq was the first UAE bank to offer chip-based credit cards, digital point-of-sale readers and an investment fund directly linked to the Indian stock market. As always, this particular innovation was triggered by the bank knowing that some customers wanted this facility and so the bank introduced it for the customers.

On the brokerage front, Mashreq Securities is a wholly owned subsidiary of Mashreq and offers full brokerage services for all UAE equities. The brokerage service at the bank is based on industry best practice and as anybody would expect from any organisation that is part of Mashreq Bank, the standards of service, execution and, where necessary, advice, are among the very best in the UAE banking industry.

Mashreq also owns Mashreq Capital, a wholly owned subsidiary that has a licence to operate from the Dubai International Financial Centre offering the widest range of investment and brokerage services. Mashreq Bank also has wholly owned subsidiary, Makasab, which offers mutual funds and associated services for sophisticated investors. The subsidiary Mashreq Al Islami is the Islamic banking division of Mashreq, and offers a broad range of corporate and retail products that comply with sharia law.

Overall, the aim of Mashreq’s Corporate Banking Group is to spearhead the very highest quality of relationship banking based around a fully customer-centric approach to offering banking services. Mashreq Bank sets out to win the privileged status of being the primary bank of corporate clients, and the bank will spare no efforts to achieve this fundamental goal. The Corporate Banking Group delivers world-class investment banking services to its customers particularly in areas customers find so crucial such as corporate finance, real estate and investment services, including both Islamic and conventional types of service.

The strength and expertise of the banks corporate finance division is shown by its winning the Best Loan House in the UAE Award from EMEA Finance for two years in a row and reaching the number two ranking for Middle East 2013 Book Runner Loan League Table.

Through its comprehensive range of activities in the UAE and beyond, the awards it has won, and in the confidence it has gained from its customers in the UAE and around the world, Mashreq has shown itself to be a bank that people like doing business with and like having as their primary bank.

Mashreq will never rest on its laurels; will always be seeking to meet fresh challenges and to find new ways of giving individual and corporate customers a great service.

Indonesian economic growth at five-year low

Posted on by Ashton Wenborn

According to data released by the statistics bureau, Southeast Asia’s largest economy has seen GDP expand 5.02 percent in 2014, to $663m, compared with 5.58 percent in 2013.

This growth is the weakest expansion since the height of the financial crisis in 2009

This growth is the weakest expansion since the height of the financial crisis in 2009 when the economy grew just 4.6 percent. In the fourth quarter, the economy grew a better than forecast 5.01 percent from a year earlier, but it then contracted 2.06 percent against the third quarter.

Speaking to Channel NewsAsia, Gareth Leather, Asia economist from Capital Economics, said the figures “help to underline the challenge facing the country’s new president, Joko Widodo, who despite a promising first few months in office faces a tough challenge to reinvigorate the economy.”

The export of goods and services make up 24 percent of Indonesia’s economy and saw the lowest growth last year at one percent from 5.3 percent in 2013.

Investments, which contribute 33 percent of the economy, and household spending, which contributes 56 percent, also fell behind with growth lagging at 5.1 percent and 4.1 percent respectively.

President Widodo, in his first full year in office, won office partly on a pledge to revive the slowing economy and has pledged to cut through red tape surrounding investments as well as slashing fuel subsidies, promising to divert the money towards boosting the economy.

Competences enables companies to step up their security

Posted on by Ashton Wenborn

Military strategies are methods of arranging and manoeuvring large bodies of forces during armed conflicts. There are offensive strategies, defensive strategies, and strategic or intelligence concepts. These strategies can also be applied to business management.

The management of any asset, such as materials or equipment, is absolutely critical for the health of an organisation. The same holds true for data because it represents the entire organisation. It is an important business asset, since it is the raw material used to run an organisation and produce information vital for its survival. That is why, more than ever, major companies in the financial services industry are looking to the Chief Data Officer (CDO), which is a new role for many institutions, to be the steward and champion of enterprise information management.

Data is an important business asset, since it is the raw material used to run an organisation and produce information vital for its survival

The role of the CDO
Three years ago, by appointing John Bottega as its CDO, Citigroup became the first financial institution to formally create a c-level data executive position. Bottega, who has 20 years experience managing and transforming reference data functions at Credit Suisse, Merrill Lynch and the Lehman Brothers, became responsible for planning and managing the CIB’s data strategy, policies, line functions and data investments. He is currently the CDO of the New York Federal Reserve.

According to a recent report by Capgemini, there are no less than 18 reasons why an organisation needs a CDO. Among the reasons are that financial services firms need to become information-centric enterprises, and strategic thinking and decision-making is needed on the issue of whether data should be centralised or distributed.

It has also been commonly accepted that a Data Management Organisation (DMO) is needed to support the CDO. A DMO is a group of people responsible for designing, creating and implementing data management policies, procedures, practices and processes. Its purpose is to ensure that all areas of the business consistently have the accurate and relevant information they need to do their job.

Unfortunately, most DMO’s today are company-centric – relying only on company internal data/resources – and thus remaining in that area neglecting some of the relevant datasets, which could also be easily collected from:

  • Publicly available sources; often referred to as open source intelligence (OSINT);
  • First-look impressions of a specific or isolated event by any of the organisation members, which we will call significant events (SE) for the purpose of this editorial;
  • Visual intelligence analysis.

We at Competences propose to have another look at why these alternative sources of data collection derive from military intelligence concepts, and which should seriously be considered in your DMO. Established in 2004, the headquarters of Competences are in Praia, Cape Verde, and specialises in the security sector. From global companies operating in Africa, police and paramilitary forces, customs and immigration services, special forces, intelligence, and the armed forces. We enable Fortune 500 companies and governments to reach a level of security and autonomy through our knowledge and understanding of the African continent.

Open source intelligence
Derived from public information, OSINT is tailored intelligence or data that is based on information that can be obtained legally and ethically from public sources. It includes a wide variety of information and sources, from media, social networks and web-based communities to government data, professionals and academics.

OSINT is both a force and resource multiplier. It provides a practical strategic and competitive advantage that complements the advantage provided by traditional DMO sources, it is available at a low cost, and cannot be ignored. For the financial sector, OSINT does offer three major advantages for planning and strategising.

Firstly, when encountering situations involving external factors – like for investment abroad or due-diligence investigation on a potential partner – OSINT is frequently the only discipline able to respond rapidly, and it provides the manager with a rapid orientation adequate for decision-making. It is also a means of achieving significant savings, in that many essential elements of information required by the manager can be acquired from open sources at a lower or even no cost, in less time, than from classical commercial capabilities, with the added advantages that OSINT is often more up to date, and requires no legal risk in its acquisition.

Finally, whether it precedes or follows traditional data collection, OSINT can protect company information sources and methods by serving as the foundation for data support to joint-venture initiatives where it is not possible, or desirable, to reveal capabilities and limitations to partners.

Significant event tracking
We view the SE as historical data. We believe SE give a first-look impression of a specific or isolated event. This can be an order cancellation, a default in debt re-payment, a threat of a lawsuit by a dissatisfied customer, a delay in the delivery by a supplier, or any other event a specific staff member documented and reported in real-time. In our perspective, the information contained within a single or group of SIGEV’s is not very sensitive. The events encapsulated within most SIGEV’s involve either financial loss or incident, commercial success or failure – any event which incurs a financial, social or commercial consequence for the organisation.

We feel that SE are similar to a daily journal or log that an employee may keep. They capture what happens on a particular day and time. They are created immediately after the event and are potentially updated over a period of hours until a final version is published.

Each business unit can have its own procedure for reporting and recording SE. In human resources, SE normally involve personnel issues, such as absentee information incident, or any conflicted situation involving an employee and its supervisor. The report starts at the work-group level, and goes up to the department, territory, and even up to the business unit level.

In an overseas mission configuration, a corporate delegation may observe or participate in an event, and the delegation leader may report the event as an SE to the company headquarters. The manager will then forward the report to its director. Once the director receives the report, he or she will notify the COO, conduct an action, or record the event and further report it up the chain of command to the CEO.

Once an SE is reported, it is further sent up in the company hierarchy. At each level, additional information can either be added or corrected as needed. Normally, within 24 to 48 hours, the updating and reporting of a particular SE is complete. At corporate level, the SE is finalised and published. The ultimate purpose is to collect and analyse operational data in order to provide daily operation reporting, relevant to a manager’s daily decision-making process.

Deciphering anomalies
A visual intelligence analysis environment can optimise the value of massive amounts of information collected by financial services companies. It allows analysts to quickly collate, analyse and visualise data from disparate sources, while reducing the time required discovering key information in complex data. Such environmental help determines real-world links between people, social networks, companies, organisations, websites, phrases, documents and files by:

  • Rapidly putting together disparate data into a single cohesive intelligence picture (from a wide range of data types, including telephone call records, financial transactions, computer IP logs and mobile forensics data);
  • Identifying key people, events, connections and patterns that might otherwise be missed;
  • Increasing understanding of the structure, hierarchy and method of operation in a fraudulent networks;
  • Simplifying the communication of complex data to enable timely and accurate operational decision-making;
  • Capitalising on rapid deployment that delivers productivity gains quickly using a well-established visual analysis solution.

For a while now, visual intelligence analysis methodology has been a part of the Human Terrain System, a US Army programme that embeds social scientists with combat brigades. Several investigations, including an investigation into fraud in the US Army, are reported to have used such capabilities. It is also used by several police departments to analyse social contacts and networks.

The tools that we briefly described do not resolve the fundamental issues that companies are facing today regarding their data management alone. The dysfunctional cycle of data chaos continues to grow, as the tool-technology approach fails to get data under control. Change is definitely needed. A DMO is the catalyst for this change, because it brings focus to many and processes of data management. Military strategy could be applied to provide a new perspective on your company data management approach.

Live multi-gaming: a new win for Macau?

Posted on by Ashton Wenborn

Macau is known as the Las Vegas of the East, although, ironically, its gaming revenues currently exceed the figures generated by the gambling industry in Las Vegas – by almost six times.

Being the largest gaming city in the world by revenue, Macau faces constant challenges to keep developing its gaming industry in order to fulfil the new needs of clients and casinos alike. Such clients constitute the main industrial and economic pillar of this Special Administrative Region of the People’s Republic of China.

Macau and its casinos should be looking to offer new and creative solutions

VIP gaming has been, in past years, the biggest reason for the casinos’ tremendous success in Macau. However, it is now the time to broaden the gambling business to the mass market. In fact, attracting more than 30 million visitors per year, Macau and its casinos should be looking to offer new and creative solutions through which smaller bets made by huge masses of players may become as profitable as huge bets from select individuals.

Live multi-gaming (LMG), which is already being explored by several casinos, could be the key to successful expansion into the mass market, taking into account the opening of various new large casinos in Macau until the end of 2016.

A solid bet
LMG systems are integrated gaming devices that involve a traditional live dealer handling one or several types of casino table games (such as baccarat, roulette, black jack, etc.). The results of each game are reported to each player’s electronic terminal from which their bets are placed and the payouts announced. LMG therefore combines basic electronic gaming technology with the traditional live dealt casino games. This means, inter alia, that less dealers are needed to serve an enormous number of players, although the results of the games (and, thus, the gaming experience of the players) is determined exactly as it would be at a real table – not through any sort of computer generated algorithms.

In Macau, as the number of real gaming tables operated by each casino is capped by the government, LMG plays a unique role in the development and expansion of good casino operations by allowing virtually an unlimited number of betting terminals be linked to a single live gaming table. Gaming machines are locally regulated and supervised by the Gaming Inspection and Coordination Bureau (DICJ), notably through the enforcement of the Administrative Regulation 26/2012.

Legal approval
Nevertheless, several nuances of LMG, namely the fact that the casino games involved are operated by live dealers, raise several interesting points regarding the applicability of the Administrative Regulation 26/2012.

It can be legally questioned if the definition of ‘gaming machine’ covers LMG solutions or if those fit the definition of ‘game located in a computer server’. There are some good reasons to possibly reject both such thesis (and also any way of inclusion of LMG in the definition of Section 31.2 of the Administrative Regulation – ‘game supported by computer server’ – since LMG terminals may not operate autonomously vis-à-vis the whole LMG system). This is especially relevant when you consider that all the casino games (such as baccarat) are handled as if they were played at a real casino’s gambling table.

Thus, it is questionable, inter alia, for the companies providing LMG solutions to the casinos, even considering the fact that DICJ has not been treating LMG as real gambling table games, are legally obliged to require the approval by DICJ of LMG sets. In addition, pursuant to the same Administrative Regulation 26/2012, the DICJ should not only approve gaming machines, but it is also the competent authority to authorise any entity to supply such machines to the casinos.

Accordingly, gaming machine suppliers have to require DICJ administrative authorisation to operate in the Macau gaming industry, and have to comply with several requisites in order to obtain such authorisation. They must perform their commercial activity through an affiliate or a limited liability company by shares (sociedade anónima, according to Macau Law). Its share capital must be wholly represented by nominative shares and such company’s activity (as reflected in the respective articles of association) may only consist in “producing, supplying, assembling, installing, programming, repairing, adapting, modifying, technically assisting and maintaining gambling machines”.

Obviously, some of the legal issues arising in respect of the approval of LMG’s by DICJ may also be raised in regard of DICJ’s legal competence to authorise the performance of activities by any entity that intends to provide LMG solutions to Macau casinos.

Whereas, from a technological point of view, LMG’s are a well-known solution to the gaming industry worldwide and an unquestionable asset for the local gaming industry, the relative novelty of Administrative Regulation 26/2012, and the hybrid nature of LMG’s, raise particular issues, which gaming operators and providers of gaming solutions are likely to confront.

‘To hell with it. Let’s get the money out there’: Paul Krugman on Asian Infrastructure Investment Bank

Posted on by Ashton Wenborn

World Finance speaks to Paul Krugman, Nobel Prize-winning op-ed columnist and economist, about the merits of China’s proposed Asian Infrastructure Investment Bank.

China has cemented its status as a global financial heavyweight, but many wonder whether the advent of the Asian Infrastructure Investment Bank is giving the country a new title, and that’s as the World’s lender. Well that’s a question that World Finance posed to Nobel Prize-winning economist Paul Krugman at the latest Asian Financial Forum.
Paul Krugman: This issue about regional banks stepping in and to some extent supplanting or supplementing the Washington based institutions, sure. Anything that supplies more money where it might be useful is a good thing.

There was a time way back when, when the US tried to block that because we had various reasons, but we really just sort of wanted the stuff run from Washington, but not now. The hell with it, let’s get the money out there, and if it’s a way to recycle funds within Asia that’s good.

TriGranit: retailers must adapt to e-commerce revolution

Posted on by Ashton Wenborn

Consumers are constantly evolving, adapting to the dynamic retail market and the rapid development of new technologies. With the type of visitor and the market changing so quickly, in-depth consumer research conducted on a regular basis is essential in order to evaluate, track and benchmark key metrics such as a visitor profiles, dwelling time, conversion rates, visiting frequency, spend, satisfaction and penetration rate for retail outlets to remain competitive, successful and, most importantly, relevant.

Changing priorities
Social communication has far greater importance today than it had in the past. Global social responsibility also weighs heavily on a number of people’s minds, along with the needs of family, community, society and the environment – which greatly influences purchasing decisions. Accordingly, shopping centres need to place a higher value on family, community and experiential retailing. Leisure-based centres catering for families are more likely to entice higher-spending visitors with a more directed dwelling time.

Modern consumers are quickly adapting to the digital revolution. E-commerce, combined with smartphones and tablet devices, not only offer consumers very competitive prices due to lower operational costs of electronic retail, but also provide the largest assortment and quantity of products ever available to them, just a few clicks away, accessible from anywhere. Consequently, modern consumers have become more comfortable, knowledgeable, and aware of opportunity. The shopping centre model is losing ground as the convenient shopping solution.

The shopping centre model is losing ground as the convenient shopping solution

As convenience and the internet create a breakdown in community structures, retail shops may respond by increasing their size, and become more like showrooms – providing customers with an interactive experience. Early e-commerce experiences were designed where retailers tried to replicate their retail stores online. Now cutting edge retailers are duplicating their online experience in-store.

Today, shopping centres are becoming more than just a shopping destination. Industry leaders are beginning to position their centres as a place that offers meaningful lifestyle experiences, a fun destination for all age groups and families to spend quality free time together. This is something web-based experiences cannot offer. Shopping centres therefore need to provide consumers with more non-retail experiences in order to compete with the convenience of e-retail, and to meet the increasing demand for physical leisure and entertainment.

Electronic retail is progressing, and now offers a wider range of collection and delivery options, including same-day delivery. However, the market seems to be shifting towards the click-and-collect formula. The click-and-collect model is welcomed by shopping centre managers and landlords alike, the trendsetters of which are already devising future concepts to meet these consumer demands. However, the traditional stores will still remain.

As shopping becomes more and more of a leisurely activity, and mobile technology fundamentally changes the way that consumers interact with brands – this allows consumers to shop while on the move. Shopping centres need to embrace new technology as well and incorporate synergic solutions into modernised business models.

Non-retail tenants
Services, including the post office, dry cleaners, telecommunications, fitness, medical and shoe repair are vital to accommodate the daily non-retail needs of consumers. These should be complemented by unique, specialised services that can offer a more pleasant, convenient and comfortable shopping centre experience, with concierge and VIP services, centralised home delivery, free Wi-Fi, work areas with power outlets for laptops and mobile phones, children’s play areas, valet parking and car wash, expert product advice and consultancy, electric vehicle charging station, bicycle related services, and well-trained customer service staff. Moreover retail outlets should tailor to the demographic profile of the catchment area and the current market intricacies.

Leisure and entertainment are both gradually becoming an integral part of shopping centres’ marketing strategies, and for now, they are still an effective means of image differentiation.

Shopping centres need to move away from costly architectural features like fountains, and include factors such as climbing walls or other high-adrenalin based activities that encourage shoppers to pause and watch. ‘Edutainment’ concepts can cater to both children and adults, and provide excellent synergy with brands and tenants. In the retail market of the future, these shopping centres will represent an average lifestyle. Shopping centres of the future are not likely to be termed in this way, but described more accurately as ‘lifestyle’ centre.

These will offer a complete real-life experience focusing on leisure activities, entertainment and edutainment, services, along with food and beverages. A typical shopping journey will likely to begin online, and in many cases, will continue inside lifestyle centres providing visitors with experiential retail. An unprecedented proportion of space will be allocated to leisure, entertainment and edutainment functions, including new and unique concepts targeting all age groups.

Fig 1

Multi-channel marketing
Lifestyle centres will perfectly merge the physical and online world through sophisticated multi-channel strategies, the development and gradual implementation of which can already be seen from industry leading shopping centre managers today. As one of the largest fully integrated regional real estate investment, development, and management companies in Central and Eastern Europe, TriGranit is also going to use this channel.

With operations in nine countries across central and Eastern Europe, the company has a large portfolio of completed trophy assets, and a pipeline of over €4bn of major mixed-use developments, as well as a number of public private partnership (PPP) investments, and is positioned well to participate in the expanding real estate markets.

In shopping centres, this means that not only all communication channels – touch screens, websites and mobile applications – should share the same content management system, but that offers, messages or interactions should also look and behave the same. More importantly, they should be personalised based on customers’ interactions in other channels. This will create unique experiences, which will lead to increased customer engagement and loyalty, as well as an increase in conversion rates as a result of precisely targeted messages.

Lifestyle centres will facilitate social interactions and provide a full day’s experience for families and groups of friends alike. At the heart of a lifestyle centre will be leisure activities. Food and beverage will not be limited to an improved food court, but will provide a wide range of options from fine and family dining to casual dining, cafes and bars that interact with the entertainment components.

Retail in lifestyle centres will comprise mainly of showrooms accompanied by click/reserve, and collect points. Many online orders will be placed for delivery, but most will be reserved or purchased online and collected at click-and-collect points located within the lifestyle centres. Showrooms will provide consumers with the opportunity to test, see and feel products including electronic equipment and devices, and to try on clothing.

Denmark defends euro currency pegging

Posted on by Ashton Wenborn

As the European Central Bank (ECB) finally gets started on its large-scale bond buyback strategy, many countries that have pegged their currencies to the euro have faced the prospect of drastically dwindling values. While the Swiss government abandoned plans to tie the Swiss franc to the euro in light of the Quantitative Easing, Denmark policy leaders have insisted they will maintain their own pegging.

Further rounds of bond buybacks in the Eurozone could heighten the pressure on the country to scrap its ties with the euro

In an effort to maintain the pegging but avoid a rapid devaluation of the krone has seen the Nationalbank cut interest rates four times during the last three weeks. The rate on bank deposits now sits at – 0.75 percent, a record low for any global economy.

Lars Rohde, the Nationalbank’s governor, told the FT that such a strategy could go on indefinitely. “The main message is that we are ready to do whatever it takes to defend the peg. We have unlimited access to Danish krone and we have no restrictions on our balance sheet.”

However, while Rohde seems insistent on Denmark maintaining the pegging, further rounds of bond buybacks in the Eurozone could heighten the pressure on the country to scrap its ties with the euro. Some analysts believe it might be inevitable, with BNY Mellon currency strategist Neil Mellor telling The Wall Street Journal he felt the bank will “ultimately have to break the peg.”

Ever since 1982, Denmark’s central bank has pegged the krone to the dominant European currency – initially the German deutschemark, before following the euro. A referendum in 2000 over whether to adopt the euro was rejected by Danish voters, but that has not prevented the two currencies maintaining a close link ever since.

The news comes just weeks after ECB Governor Mario Draghi got his wish to start a massive round of quantitative easing that has amounted to €1.1trn worth of bond buying. However, it has not been without a few caveats to placate German opposition, with much of the risk of the quantitative easing being maintained in individual states.

A crude response: great oil price correction coming soon

Posted on by Ashton Wenborn

For months, oil watchers have seen the steady decline of prices. They’ve now hit a record-making seven month consecutive low. Now given these dismal prospects, is there any hope for a Brent benchmark bump-up? World Finance speaks to oil markets expert Gaurav Sharma to find out.

World Finance: Gaurav: it’s a big question on everybody’s mind. Are we going to see a bottoming-out of prices?
Gaurav Sharma: Interesting times! I would compare it to, sort of a skating ring analogy. We have a lot of to-and-fro. We’ll see the oil price fall further; it could fall below $40. Then we have a stabilising in the range that we are: somewhere between $40-55.

This situation will last probably up until the summer. Then what I see from thereon is a surplus correction kick-in.

World Finance: How low are we really going to go?
Gaurav Sharma: The way I see it, we could go as low as $35. Now, what’s happening at the present moment in time is, we have the three major producers: the US, Saudi Arabia, and Russia, all collectively pooling up to somewhere in the region of 30 million barrels a day; in excess of 30 million barrels a day.

Right now everybody thinks that we’re just awash with oil; which is pretty much close to the truth

Here we are! We have this supply glut, and the way I see it is, it is driving prices down; but this cannot be sustained. This cannot be sustained in the long-run.

World Finance: So who’s going to prompt this change among the big players?
Gaurav Sharma: I think it’s going to be the Russians. Because the Russians are suffering from a double-blow. They’re suffering because of the sanctions; then the oil prices are going down. And of course the sanctions have resulted in a lot of their international oil and gas partners – the likes of Exxon Mobil, Shell, and so on – from sharing their technical know-how.

Now, if you take all these three factors into account, I doubt that Russian production can be sustained above 10 million barrels per day.

World Finance: Let’s talk about some of the over-arching macro-economic realities that we face right now. Christine Lagarde, head of the IMF, is warning about a drawback on investments as well as consumption; first, can you tell me if oil prices are responding quickly enough?
Gaurav Sharma: I would say, with near 70 percent certainty, that the oil prices are currently ahead of the curve.

It is a big, big bonus. Now, you cite the IMF chief, and I would say that the IMF itself, and the World Bank, and the OECD, and several independent analysis organisations, have observed that if you look at the positive effect of declining oil prices, it could add up to 0.5-1 percent of GDP. Especially to some of the emerging markets, who are heavily reliant on oil and gas to power their economies.

It’s disputed: everybody comes up with a different percentage. And you know, data is always… the projections are forward-facing, but the reality’s always looking backwards.

World Finance: Given this reality, what then does it do to commodity prices?
Gaurav Sharma: The way that I see it is, if we go back to the pre-financial crisis years, you looked at a basket of commodities, and they were always to the up-side. Then of course we had this financial tsunami in 2008-09; the whole basket of commodities, oil included, nose-dived.

Then we had a very interesting event. We had the Chinese give their own economy a massive, massive, $400bn stimulus. What happened that time was that the whole thing got flagged up again. We had again, a sort of mini-bubble.

This correction should have happened five years ago, but it didn’t. And again, the sort of leading voices were out there, calling it, ‘Oh yes, see here, it’s the commodities super-cycle.’ I’m very sceptical about that term; why can’t we just call it an ordinary cycle?

World Finance: So oil of course is only one of many indicators on commodities; so why are we hearing forecasters weighing so heavily on the impact of the slump in the market? It’s sort of a misnomer, wouldn’t you say?
Gaurav Sharma: I would say so; because another thing is, oil gives a lot of market commentators the pretext to, sort of, appear to be a little bit more shocked than they ought to be.

World Finance: Let’s talk about it, I mean… oil market watchers get paid to talk about…
Gaurav Sharma: Haha! Absolutely.

World Finance: …how important their industry is in the larger scheme of things. And yes of course, it drives markets forward. But when there is this over-emphasis, what sort of implication does that have? Don’t you think it sort of, misleads the public, in many ways?
Gaurav Sharma: Absolutely. We talk about all the upheavals in the oil market, but I can tell you for a fact: oil is one of the easiest commodities that you can trade on the market. You only need to fork up a price of about 10 percent of a barrel. You can buy as few as a thousand barrels. Let’s say, at today’s prices you could probably put a bet in at about $500!

World Finance: The million-dollar question, Gaurav, let’s leave you with this. Will the price fluctuation that we’ve been seeing in the oil markets make for a more bullish or bearish 2015?
Gaurav Sharma: I am still overwhelmingly bearish. I would still say we will sort of have this fluctuation between $35 and $55 as far as oil is concerned, all the way up to June.

As I said earlier, I do not see the current levels of production being sustained. And that will definitely have a bearing. We will see some of these projects… I mean, if you look at some of the independent upstarts in the US. You look at some of the Russian projects. You look at the Arctic. You look at Brazilian deepwater.

Some of these projects were not event profitable at $100 a barrel! Now if these projects could not be sustained, even at $100, how do you think it’s going to be sustained at $50?

So there will be a correction. We will see some of these projects being put on hold, some of them being financed at a massive premium… all of this will be, sort of, price positive, as far as the direction of the oil price goes, because it will create the perception that less oil is coming out of the market. Which isn’t the case right now.

Right now everybody thinks that we’re just awash with oil; which is pretty much close to the truth.

Silk Road’s Ulbricht guilty of seven charges

Posted on by Ashton Wenborn

Ross Ulbricht, the man responsible for creating the largest black-market on the internet, has been found guilty of operating the Silk Road website under the alias “Dread Pirate Roberts.” The illicit online marketplace was created in 2011 and facilitated the purchase of illegal narcotics through the use of Bitcoin, which made transactions untraceable.

Ulbricht escaped murder charges

On February 04, a jury in Manhattan took less than four hours to find Ulbricht culpable for seven charges brought against him; including money-laundering conspiracy, narcotics-trafficking conspiracy, computer-hacking conspiracy and running a criminal enterprise. The website creator has a legion of fans, many of which protested against his arrest throughout the trial.

The jury was told how the underground hub, which operated in multiple countries around the world, had generated $213.9m in sales and a further $13.2m in commission. Despite being accused of ordering the assassination of a Silk Road user that had blackmailed him, Ulbricht escaped murder charges as the crime had not actually been carried out.

Ulbricht’s arrest in October 2013 was made while he was logged into the website as “Dread Pirate Roberts” in a San Francisco public library. Sentencing is due to take place on May 15; some say Ulbricht may face a life sentence, which entails a compulsory 20-year term. A statement by defence lawyer, Joshua Dratel, has confirmed that an appeal will be made.

Judge Katherine Forrest prohibited Dratel from calling experts witnesses, saying that the defence had failed to give prosecutors enough time to prepare. “I think it would have been a very different outcome if the jury had been permitted to hear all the evidence,” the defendant’s mother, Lyn Ulbricht, had told Bloomberg.

Russia and China together: Europe pays price for America’s strategy

Posted on by Ashton Wenborn

World Finance speaks to Dr Marcus Papadopoulos, Editor of Politics First, on what Russia’s growing international ties mean for Europe.

World Finance: Well one of the off-shoots of the Russia-Ukraine crisis of course is the two major super-powers, Russia and China, being pushed closer together. And they’re already firming trade ties with energy. So what’s their relationship today?
Marcus Papadopoulos: Politically, relations between Russia and China are in a very, very good state. And of course you can contrast that to the 1960s onwards, when both countries fought numerous border battles, and there was a big falling out.

But since the collapse of the Soviet Union, Russia under Boris Yeltsin and under President Putin have created a very good relationship with each other. Politically there’s a lot of trust now; militarily there is an organisation between them, the Shanghai Cooperation Treaty. And also economically: Russia still supplies vast amounts of oil and gas every year to China.

[R]elations between Russia and China are in a very, very good state

And also the Chinese military, which is growing in the world. And it’s far from being a super-power, the Chinese military. But it still relies on high-tech Russian military components. So for example, the Chinese a few years ago, they managed to get a fifth-generation attack plane in the air. Well, that’s very impressive. But they don’t have the components for the cockpit, and they can’t manufacture, so they rely on Russia. So Russia earns a lot of money every year with supplying China with high-tech Russian goods.

And also there’s the potential for Russia to supply China with natural water. Because China lacks water, and water as we know is vital for industry. And the Chinese have been on at the Russians for numerous years now, to start supplying China with water.

The problem for the Russians is their lakes along the Chinese border, they go north as opposed to south. So the Russians – they’re great engineers – and no doubt one day they will be able to turn those rivers southwards into China. And if they can do that, from a revenue point of view, Moscow will be onto a winner.

World Finance: And energy-wise, how are the two countries linked?
Marcus Papadopoulos: China receives the bulk of its oil and gas from Russia, and pays a great amount of money for that.

And in 2014 we had that huge, that ground-breaking gas agreement between themselves for over 30 years. Russia’s going to supply China with natural gas, and the Chinese will pay $400bn for that: so it’s a huge amount of money there.

So China heavily relies on Russia for its energy, and Russia at the moment relies to a great extent on China for revenue.

Europe is going to suffer

World Finance: So this relationship can’t be good news for Europe.
Marcus Papadopoulos: Europe is paying the price for going along with America’s geo-strategic strategy. That’s what the crisis in the Ukraine is about: it’s been brought about because of the Americans.

If you look at a modern-day map of Europe, on the western borders of the Russian federation, from the Baltic Sea to the Black Sea, you will see its borders are littered with EU and NATO member-states; with the exception of the Ukraine. And the Americans since 1991, Ukraine’s independence, have been trying to draw Ukraine into the west’s orbit.

So the Europeans – apart from the British government – were reluctant to place sanctions against Russia. But nonetheless, the European Union is a staunch strategic ally to Washington; and when it matters, allies stick together.

But nonetheless: Europe is going to lose out. Its SMEs in particular are going to lose out, because they’re suffering at the moment. JCB in Britain has complained to Prime Minister David Cameron that its sales to Russia are going down because of the sanctions. That’s hardly conducive to the British economy.

So ultimately, from a business point of view, Europe is going to suffer. And in the future, if it doesn’t receive the amount of energy that it receives from Russia at the moment, where else is it going to receive it from?

Investment One Financial Services on Nigeria’s momentous growth

Posted on by Ashton Wenborn

After experiencing one of the most dramatic periods of economic growth ever witnessed in Africa, many wonder if Nigeria’s momentum will slow following the 2015 elections. World Finance discusses with Nicholas Nyamali of Investment One Financial Services.

World Finance: Now the maturation of the local investment sector has been something that people have been talking about, all over the world. Do you think that the progress that has been made should be pegged on government support, or has it been something the markets have created for itself?
Nicholas Nyamali: I think it’s a combination of both. The government has done a lot to provide the enabling environment, and the private sector has built on that in introducing some of the products that we currently find in the capital market today.

World Finance: So tell me about some of the most decisive issues that Nigerians are going to be thinking about, as they enter into the polls?
Nicholas Nyamali: I’ll put that in two categories: the general population will be looking out for security, looking out for more jobs, infrastructure improvement.

[T]echnically I see the government going into deficit if they do not find other sources of increasing their revenues

Those in the economic space will be looking for stability in the currency, and ensuring that the government policies, whoever is in government, will continue to drive the progressive policies that have led to the development of the market.

World Finance: The Central Bank of Nigeria says that these elections are not going to deplete its reserves. Now from a GDP perspective, do you think that is indeed going to be the case?
Nicholas Nyamali: The depletion of the reserves will not come from the election. I think the current fall in oil prices, is seen to a fall in reserves in the countries’ currency.

World Finance: Do you think that the political chaos that we are seeing in the country, is also contributing to some of that instability?
Nicholas Nyamali: The political chaos I do no think has been responsible for some of the instability. It’s more economic; the falling oil prices has led to lower FX revenues for the government which has impacted the results of the Central Bank.

World Finance: Now let’s talk about the long-term impact on crude prices.
Nicholas Nyamali: Crude oil prices have been low and recently going from $100 to about $70 a barrel, this will continue for a while. This is impacting government revenues so technically I see the government going into deficit if they do not find other sources of increasing their revenues, because the current expenditure of the government is a bit high.

In terms of the elections, chances are they will continue to spend, to bring out programme policies before the election date, so we may run into a deficit here in terms of government spending.

[I]f we get political stability, currency stability, I think the economy will just go to the second level

World Finance: We know that people will be watching to make sure that these elections are handled properly. If that is the case, if the country is able to transcend political chaos; do you think that that’s going to amp up investor confidence in the country as a whole?
Nicholas Nyamali: I think so. Politics is one, and it has a significant impact in terms of GDP, growth, foreign investment in the country.

The second issue is the stability of the currency, and I think the CBN is trying to address that currently. And if we get political stability, currency stability, I think the economy will just go to the second level.

World Finance: You’re an investment manager: this is your industry, your bread and butter. What do you think the government will need to do, in terms of shoring up more support in the marketplace?
Nicholas Nyamali: I think number one is FX stability. We have currently seen capital flight, because of uncertainty regarding the value of the currency. Once we can ensure that there is FX stability we think that some of the funds that have left the country would come back. And I think that is what the economy currently needs, or the capital market needs today, to ensure it gets back to the boom level that we’ve seen in the past years.

World Finance: Nicholas, you sound very optimistic about the prospects of Nigeria post election.
Nicholas Nyamali: Yes I am very optimistic.

LEXeFISCAL: the UK remains a safe bet for investment

Posted on by Ashton Wenborn

In spite of the recent anti-political grumbles of its electorate, the UK remains one of the safest bets for individuals and companies looking to invest their money. A long-standing democracy with a highly respected legal system and a friendly attitude to new business, the country has come out of recession in a better state than most. That’s why the Chinese, for example, have invested twice as much in the country since 2012 as they had in the previous seven years.

Clifford Frank, Senior Partner at LEXeFISCAL in London, is used to guiding clients through the trickier elements of the UK’s tax and legal systems. He tells World Finance why Britain is the ideal place to invest and what potential investors should look out for.

Why should corporations invest in the UK?
To begin with, there is a very favourable tax regime for companies, with a 20 percent corporation tax starting rate for profits up to £300,000 ($469,992). Profits in excess of £1.5m ($2.35m) are taxed at 21 percent, but that’s being reduced to 20 percent from April 2015.

I believe the UK needs to be in the EU for the purpose of trade and for the ease of travel. Without the EU, ultimately, it will
be isolated

For companies with ring-fence profits (income and gains from oil extraction activities or oil rights in the UK and UK/continental shelf) these rates differ. The small profits rate of tax on those profits is 19 percent, and the ringfence fraction is 11/400 for financial years starting April 1st 2011, 2012, 2013 and 2014. The main rate for the aforementioned financial years is 30 percent. Indexation allowance allows for the effects of inflation when calculating the chargeable gains of companies or organisations, while in terms of personal taxation, the maximum rate for an individual is 45 percent, which can be minimised with correct planning.

With regards to the law, there’s a respected legal system, which is easy to understand, so disputes can be resolved without too many difficulties. Britain also has a well-educated workforce (60 percent of London’s workers are graduates), which means human resources are good. The infrastructure is great, too, so it’s easy to get around, and it’s well connected to the rest of the world through its air and rail hubs.

What else is there to look out for?
The UK has a large number of agreed international tax and investment treaties with the rest of the world, plus we’re a member of the ICSID, the World Bank arbitration agreement. Entrepreneurs are welcome here – setting up a company in the UK can be done in under three hours, while establishing a public limited company is straightforward too: the cost of establishment is £50,000 ($78,204) of which only £17,500 needs to be paid up before the company can commence trading.

Every country has difficulties for businesses to overcome: what are the UKs?
As you’d expect from such a well-established state, a lack of compliance can be a hazard. It may be customary in certain countries to pay an official in order to secure a contract, such as a contribution to build a hospital or school. If you come to the UK, unless law covers such payments, this could be construed as bribery, leaving the company and management liable to prosecution under the Bribery Act of 2010. This act has wide-reaching and serious consequences for companies operating with a connection to the UK.

There are strong laws regarding health and safety too, particularly in the construction industry where a lack of compliance can see you held responsible for accidents that happen on your site. This may see your company and its managing directors prosecuted under the Corporate Manslaughter Act.

Finally, the UK’s financial sector is highly regulated. It’s a criminal offence to offer investment advice here without authorisation – you could be in breach of the Financial Conduct Authority. If your company’s in financial difficulties and has to be liquidated, the corporate veil may be lifted, the limited liability protection removed and directors made liable for that debt. There are lots of traps out there, so guidance and advice is needed.

What sort of companies are made welcome in the UK at the moment?
At present, the UK is especially attractive to the film, television, IT and video-gaming sectors, as there are new rules in place that give special relief to encourage investment in these areas. Banking, as you’d expect, is always welcome too. The building industry isn’t as enticing because of proposed changes to the capital gains tax regime. At present, non-residents currently enjoy tax-free capital gains when they dispose of UK-sited properties, but this will change from April 2015. In my opinion, this will hurt the UK property sector.

Is the UK is a flexible location for investors?
Yes, it could be seen as one of the best tax havens in the world. I’ve already mentioned the 20 percent corporate tax rate, the maximum 45 percent personal tax rate and the various exemptions from capital gains tax. But there’s more for the canny investor.

The UK has entrepreneurs’ relief with a lifetime exemption, whereby capital gains on the disposal of qualifying business assets, including shares, are taxed at just 10 percent, up to £10m ($15.65m). Moreover, inheritance tax can be avoided with correct planning, too, and profits remitted to the UK from subsidiaries are not subject to further taxation, as long as qualifying conditions are satisfied. These are just a few examples that make establishing a business in the UK so attractive.

The anti-EU party UKIP is a growing presence in the UK’s political scene. What would happen if the UK left the EU?
In my opinion, the UK will not leave the EU, despite the recent success of UKIP. The UK can survive without the EU, but if it does leave, further barriers will be put up against British firms as they try to export to the continent. On its own, the UK simply isn’t a vibrant enough market.

Quitting the EU would also mean the cost of doing business would be pushed up, but on the other hand, the UK would be free to maintain its fiscal polices which could further improve its status as a favourable tax haven. However, I believe the UK needs to be in the EU for the purpose of trade and for the ease of travel. Without the EU, ultimately, it will be isolated.

Do international companies get a good deal in the UK?
Absolutely. For example, if a person has a UK company with a subsidiary in Singapore, it trades there and pays tax at 17 percent in that country – three percent less than the UK. Those profits can be repatriated back to the UK without any additional tax charge at the UK end.

The key in the UK, like any other country, is preparation. If you plan properly and use the legislation correctly, keeping track of your tax affairs can be simple.

What makes LEXeFISCAL different to its competitors?
LEXeFISCAL is a niche, boutique organisation – a one-stop shop. We’re able to offer our clients tax, legal and corporate planning in one place.

Following numerous legal challenges experienced by the Big Four consulting firms (plus the demise of Arthur Anderson and rise of Accenture) that highlighted the conflict of interest between audit and tax departments, clients want to separate their advisors. LEXeFISCAL is leading the way as a firm focusing on tax and legal advice.

By providing a combined tax and legal service we’re able to serve domestic and international clients, established in the UK, with the legal advice needed to do business here (except conveyancing or criminal defence).

Without wanting to sound morbid, we also try to get our clients to recognise that accidents can happen at any time: it may not even be a death, it could be loss of capacity. Our key clients have in place lasting power of attorney that will enable their appointed attorney to manage their business or health affairs, avoiding a meltdown. We look at the client’s position today, but also at what could happen to them in the future. It’s a life-long service.

Your headquarters are in Berkeley Square in Mayfair – how does this reflect your business values?
Indeed, we’re based in one of the most exclusive parts of London because we deal with clients who appreciate quality, service and price. Our location reflects this. We’re happy to deal with clients of every size, not just large companies. We believe that LEXeFISCAL alleviates the burden of doing business in a world littered with laws, especially tax laws. And that affects everyone, no matter how much they’re worth. Always remember that every taxpayer has a right to organise his or her affairs in the manner that results in the smallest tax burden.

The Eurasian Economic Union: a force for good?

Posted on by Ashton Wenborn

On January 1, the Treaty of the Eurasian Economic Union came into effect for its four founding members, Russia, Belarus, Kazakhstan and Armenia. For the first time in the post-Soviet space, an economic alliance based on the principle of equal representation has been created, with claims to enable the free movement of capital, goods and labour among member states. A more integrated and evolved entity than both the Customs Union and Single Economic Space, the EEU plans to enforce a single market for oil and finance by 2025. Kyrgyzstan is expected to join the EEU in April, with other prospective members, such as Tajikistan and Vietnam, currently in talks.

The union constitutes a population of 175 million people and a total GDP that is expected to reach $3trn next year; consequently it offers a plethora of investment opportunities for the region. The EEU ranks first in the world for both oil and gas production, and third for iron production, making it a sizeable economic force to reckon with in the international arena. “Countries inside the EEU and from outside are now able to tap into a mammoth depository of industrial, agricultural and natural resources,” comments Dr Marcus Papadopoulos, Editor of Politics First magazine and expert on Russia and the former Soviet Union.

European fears of a Russian imperial takeover of former Soviet countries have been frequently voiced, particularly in light of recent events in Crimea. Disapproval has also been raised by other countries in the region, including societal pockets in the member states themselves who fear a loss of national sovereignty. Yet, Papadopoulos argues that current member states joined the union voluntarily and did so “as they are historically, culturally and linguistically tied to each other”. Whether economic integration and development is legitimate or not, the union will struggle to shake a reminiscence of the USSR and the threatening image that it has so quickly acquired.

Despite ardent cultural and linguistic links, the union faces a multiplicity of challenges, particularly if regulations are
not enforced

Quarrelling neighbours
Belarusian president Alexander Lukashenko has been a driver of Eurasian integration since the mid-nineties. Yet recent trade disagreements with neighbouring Moscow have resulted in a series of public spats, potentially jeopardising the whole project. “The dispute showed frustration of the Belarusian authorities that this institution is not actually working. All decisions are still made on political rather than technical level. Trade restrictions are used as means for political manoeuvring despite legal commitments”, Yarik Kryvoi, Director of the Minsk-based Ostrogorski Centre tells World Finance. Despite a Russian embargo on the goods of 23 companies, Belarus has not pulled out of the EEU. The dominant reason behind eager Belarusian support of the union comes down to oil; with preferential duties for exports, the country can save a considerable amount of its revenue. Presently, the rate negotiated with Russia is extremely favourable, amounting to $1.5bn and approximately two percent of Belarus’ GDP, according to the European Council on Foreign Relations. This figure can be attributed to Russia’s currently weak bargaining position, and so is far from guaranteed for future deals.

As with other countries in the region, Belarus is also facing financial crisis, with indications that mimic its economic collapse in 2011. Given Russia’s present economic climate, the same level of fiscal assistance that was granted to Belarus may not be feasible this time around. This could add to the rising tension between the two member states, as can recent efforts by Minsk to forge closer ties with Kiev. The result could be a scenario whereby Belarus is unable to draw resources from its powerful neighbour, making the union increasingly undesirable.

Challenges for Armenia
Aside from the obvious geographic impediment of Armenia’s partnership with fellow member states, there are other prominent challenges to contend with also. Despite a period of growth following Armenian independence in 1991, recent global and regional pressures have caused the economy to contract. Since December, the dram dropped to its lowest level since 2006, falling 9.4 percent against the dollar. Concerns of Russia’s economic decline spilling over into Armenia are ample now that the countries are more closely tied, particularly given the repercussions that have already rippled across the region. Furthermore, despite recent sanctions that have created a gap in Russia’s agricultural imports, Armenia did not fill this supply shortage as hoped. In fact, Armenian exports to Russia decreased by nearly $10m to $133m in the first half of last year, even though figures reaching over double that amount in 2013. This rouses further doubts of whether a positive economic impact for Armenia can actually be achieved as a result of closer ties with Russia and other member states.

Of particular concern for the Armenian economy is the sacrifice of its Association Agreement with the EU in order to join the EEU. The benefits of less stringent standards, as well as more flexibility in terms of investment opportunities, allured the economic elites in Armenia. Yet, by joining the union, the country must now engage in risky trade reorientation from Europe to Eurasia. Armenia’s traditional liberalised economy is also obligated to embrace higher tariff rates and more protectionist policies, whereby a loss of trade output is likely, particularly as the country must now renegotiate its terms with the WTO. Perhaps most at risk is Armenia’s thriving IT sector, which accounted for a third of exports in 2013 and a fifth of the country’s GDP. The EEU’s additional regulations for IT and less sophisticated intellectual rights therefore pose a threat to the promising sector, as well as to continued investment from the US. Prices are also expected to rise, indicating a further reduction in exports and making Armenia’s membership with the EEU even more questionable.

Landlocked Kazakhstan
President Nursultan Nazarbayev instigated the idea of the EEU in 1994, and has been a long-standing enthusiast for Eurasian integration. This level of support ties in with the widespread belief that Kazakhstan will benefit the most from the EEU, particularly as it enhances its position within the global market and increases cross-border trade along the 6,846km frontier it shares with Russia. Of particular fiscal significance to landlocked Kazakhstan are the transportation links that the EEU can provide; an evident incentive for membership with the union. Greater prospects for export opportunities lie ahead as the country gains access to each member state’s transport infrastructure by 2025.

In spite of consistent support for the union, Kazakhstan’s economy has developed considerably in recent years, making EEU membership less pivotal for the country. “Now, the principle of acting as an equal partner in the region most likely drives his commitment,” argues Zach Witlin, Eurasia Associate at the Eurasia Group. This is further illustrated by Nazarbayev’s devotion to the project despite growing division within Kazakh society and the creation of an anti-Eurasian Movement in 2014. This internal discord raises the question of whether membership will continue if a new regime is elected in the future; thereby presenting another channel of scepticism for the future of the EEU in the event of an exit by its second largest economy.

Russian epicentre
Accusations of the strongest member of the union attempting to revive the legacy of the Soviet Union are rife. The annexation of Crimea and tension with Ukraine fuelled such concerns over the last year, both within and outside of the region. Moscow has attempted to dispel this notion by granting equal representation to each member states. All four countries have two representatives, thereby illustrating Moscow’s endeavour to create an equal union and to arouse Eurasian integration, despite its considerably larger population.

Russia benefits economically from the union and by creating a trade bloc around itself that enhances cross-border trade with its neighbours

Of course, Russia benefits economically from the union and by creating a trade bloc around itself that enhances cross-border trade with its neighbours. Yet with Russia’s economy currently facing numerous challenges, the viability of the EEU is now under question. As a result of Western sanctions and a drastic drop in oil prices, the rouble has fallen drastically against the euro and the dollar, losing over 50 percent of its value last year. With sharp increases to interest rates and inflation, the current economic climate in Russia echoes that which induced the crisis in 1999. As a result, interest in joining the EEU has waned, for both prospective members and even current members. Another detrimental product of tension with Ukraine has resulted in Russia losing a significant trade partner and prospective member state. The idea of Eurasian integration now faces a stumbling block, thus presenting an ideological misstep in the project.

Chances for success
In theory, the EEU is a promising supranational organisation, with the potential for significantly enhancing economic cooperation within the region. Given its vast population and natural resources, the union has the capacity to become a powerful economic force, with considerable clout in the international arena. The principle of regional integration is compelling, as it is for the EU, yet with a greater historical significance to the amalgamation. Despite ardent cultural and linguistic links, the union faces a multiplicity of challenges, particularly if regulations are not enforced. “With no concrete plans for common financial regulation, and regulatory harmonisation still in progress even after the creation of the Single Economic Space in 2011, the formation of the EEU will not by itself have significant near-term impact on its members’ trade and economic output,” Witlin tells World Finance.

In addition, each member state faces its own financial hurdles, and so banding together at this time may not result in the economic prosperity that advocates propose. The bureaucratisation of integrating the four countries may also delay economic development for each country; as could the enlargement of the union, with less developed economies drawing resources from stronger member states.

The aspect of power sharing between authoritarian leaders also raises doubts about a conducive climate for cooperation, with different objectives and outlooks for each member state potentially inducing tension in the future. The most disheartening factor regarding the viability of the project is the ongoing trade disputes currently in play within the EEU. Russia’s dispute with neighbouring Belarus shows no signs of subsiding yet, bringing to question its obligation to the union’s rules; an imperative factor for the long term success of the project. “They reflect the long shadow politics will cast over each member’s commitment to the union’s rules at any given time,” says Witlin. With indications of a readiness to default on regulations and a lack of obligation to the principles of the union from the outset, the signs of an ineffective partnership loom, making the organisation seemingly more symbolic than tangible at this present time.