Liechtenstein walks the walk when it comes to sustainable banking

Quality, stability and sustainability are the three long-term cornerstones of Liechtenstein’s economy and its financial strategy. For the country’s banks, this means offering integrated solutions, tailored products and premium services for their domestic and international clients.

Figures published in April this year prove that Liechtenstein’s banks are on the right track; in 2018, assets under management surpassed CHF 300bn. More than half are booked in Liechtenstein, which underlines its appeal as a location, but also the international reach of the banks the country attracts.

Sustainability must be embodied in corporate culture and promoted at the strategic level, with commitment coming from the top

At the start of June, S&P confirmed Liechtenstein’s long-term AAA country rating, highlighting its stability. Not only does the country have a track record of economic reliability, its financial institutions share the same approach. Banks operating in Liechtenstein stand for low-risk business models, as demonstrated by their average Tier 1 capital ratio of over 20 percent.

Weaving sustainability into corporate culture
With its reputation for stability solidified, Liechtenstein’s banks are turning their attention towards sustainability, the third cornerstone of the banking centre strategy. Sustainability is a factor affecting the entire value chain and all levels of a business’s hierarchy. As such, Liechtenstein’s financial institutions operate with a business model that prioritises long-term success over short-term gains. This sustainable approach has become an integral part of their corporate culture.

Sustainable investments will soon become banking’s new normal. Since the Paris Agreement was signed in 2015, there has been an urgent need for action, however, the challenges of achieving sustainability are multi-layered and complex. Therefore, the United Nations developed its own guidelines in the form of its 17 Sustainable Development Goals.

According to consulting firm PwC, the annual global investment volume required to achieve these goals is $7trn. Currently, only one seventh of this immense amount is financed by public funds. Thus, the financial sector, particularly banks, must play a central role in mobilising and channelling these resources. This brings with it great responsibility, but also huge opportunities.

Change comes from the top
Sustainability must be embodied in corporate culture and promoted at the strategic level, with commitment coming from business leaders. This is precisely where the strength of Liechtenstein’s financial centre comes from. Consequently, acting in a responsible manner, with long-term outcomes in mind, is a distinguishing feature of the country’s economic landscape.

In Liechtenstein, sustainability is broadly enshrined in policymaking and upheld by the population, reflecting the importance that has traditionally been placed on acting in a sustainable and responsible way. Hence, Liechtenstein and its banks are perfectly positioned to play an active role in guiding the world towards a more sustainable economy. They have shown in the past that they are not just able to talk the talk, but are prepared to walk the walk too.

As proof of their commitment to sustainability, many banks operating in Liechtenstein have set up their own sustainable commitments. For example, LGT’s social and corporate responsibility initiatives focus on the UN’s Sustainable Development Goals. The agenda outlines 17 goals that encompass economic, social and environmental domains, forming the scaffolding of LGT’s sustainable objectives.

Meanwhile, the Liechtensteinische Landesbank offers an ecological and renovation mortgage, which invests in new buildings that meet Minergie energy standards. Neue Bank has also launched a sustainable investment option, in the form of its Primus-Ethics mandate. The asset management product places investment in morally irreproachable securities.

Asset managers and private banks can generate a much greater leverage effect through balance-neutral transactions, incentivising companies towards more sustainable behaviour than is possible through lending alone.

Creating clear guidelines
While some progress has been made, Liechtenstein’s banking sector has not yet achieved its sustainability goals. A major challenge will be to use technology to transform the economy’s environmentally friendly credentials. Younger generations will play a key role in this respect. Schroders’ 2017 Global Investor Study shows that 52 percent of Millennials often or always invest in sustainable funds, compared with 31 percent of Baby Boomers.

Millennials are not only interested in short-term performance, but also in whether their money is being invested in a meaningful and responsible way. What’s more, for this generation, the daily use of digital technology is a given.

The combination of these two factors is set to be a powerful force in the finance sector. The banks and economies that take advantage of the Millennial mindset will find their sustainable transformation significantly more effective.

Additionally, asset owners will be crucial for a more sustainable future. Their preferences ultimately decide how capital is channelled into the economy. At present, there is no commonly agreed definition of sustainable investment. The taxonomy that is currently being developed under the leadership of the European Commission aims to establish an EU-wide classification system.

With a robust and workable definition, banks and other stakeholders will be better equipped to enhance awareness, deliver on investors’ preferences and improve investment advisory and suitability.

The Liechtenstein Bankers Association aims to help the country develop into one of the leading financial centres in sustainable finance. We want to be part of the solution, not the problem. Ultimately, we must make a real impact for the benefit of our clients, future generations and the planet.

Building a bright future for Kuwait

The global economy is changing: technology is becoming more deeply integrated into everything we do; the invisible hand of the market is ever-changing in its preferences; and geopolitics is, as always, casting its shadow across global financial systems. The government of Kuwait and Kuwait International Bank (KIB) understand that it is not possible to stand still amid these moving tides. In order for the economy to grow, we need to understand the dynamics of global finances and be flexible in matching them.

Kuwait aims to strengthen its private sector and drastically increase investment from outside the country

Kuwait has successfully made changes and commitments that will help navigate these coming changes, while also improving the economy’s standing in the international system. In fact, Kuwait’s entry into the upper tiers of the global economy is being carried out against the backdrop of its Vision 2035 plan, which was launched in 2017 as a blueprint for diversifying the economy. As with similar plans like Saudi Arabia’s Vision 2030, Kuwait aims to strengthen its private sector and drastically increase investment from outside the country.

Rising stock
Over the past year, the Kuwait stock exchange, Boursa Kuwait, has been among the best-performing markets in the Gulf Cooperation Council (GCC). In 2018, it advanced its plans to attract international investment via the progressive implementation of international standards, thereby bridging the gap between Boursa Kuwait and the best-performing stock exchanges in the world.

This progress was perhaps best demonstrated by Kuwait’s transition to secondary emerging market status within the FTSE Global Equity Index Series. During a semi-annual review that took place in September 2018, the first half of the market transitioned, and was followed in short order by the second half in December.

Boursa Kuwait’s rapid ascent does not stop there. According to S&P Dow Jones, Kuwait is on track for an upgrade to emerging market status. London-based MSCI, for its part, is also weighing a potential reclassification of Kuwait from being a frontier market to an emerging market.

The exchange has also taken steps to drastically improve its transparency and liquidity, and to increase the number of shares traded by reclassifying its indices. Creating a transparent environment for trading has strengthened confidence in the market itself. The comprehensively supervised mechanisms that Boursa Kuwait has implemented have effectively removed any lingering doubts buyers and sellers may have had about participating in the market.

Further, Boursa Kuwait is increasingly important for the country’s long-term economic prospects. As a result of the significant efforts that have been made to reform it, stocks traded in the market are increasingly attractive to both Kuwaiti and international investors. It is one of the largest stock exchanges in the MENA region, and the country’s economic prosperity is further reflected in its position among the top 10 countries in the region in the World Bank’s Doing Business 2019 report.

Since the stock exchange was privatised, its transition into a competitive trading platform in the region has required the implementation of numerous tools and mechanisms. Today, the stock market has more efficient and accessible capital from both within and outside Kuwait as a result.

Foreign investment
The progress already made does not mean that the country is not taking additional steps to accelerate its climb. A medley of strict standards, international best practices and legislative measures are being implemented across the country to further pry open the floodgates to foreign investment.

The structural modifications made to the stock market, in tandem with changes to the legislative framework governing it, have paved the way for foreign investment. Foreign ownership of local banks, for example, was previously banned before the passing of Decree 694/2018.

An influx of foreign money has had a marked effect not just on capital markets, but on the entire economy, as envisioned in Kuwait’s long-term development plan. Currently, indirect foreign investment stock in Kuwait stands at around $800m. Additionally, Kuwait is one of several Gulf nations whose governments have pivoted towards digitalisation.

This trend is bringing modern technological systems to markets that foreign investors might have otherwise perceived as static or antiquated.
Technological change has not only been pushed at the governmental level, but also by financial institutions that have been at the forefront of the digital revolution. Innovation is both encouraged from the top down and grown organically from the ground up, which in turn is driving innovative business models across the Kuwaiti economy.

Moreover, Kuwait’s high level of political stability had been recognised by the major credit agencies, which see the country as having low political risk. Moody’s has given Kuwait an Aa2 rating, reflecting its strong investment opportunities. Increased investment flows have already had the knock-on effect of stimulating entrepreneurship and creating new businesses, which has then led to increased job creation. Programmes that have been initiated across Kuwait to feed the private sector have further buttressed this.

Human capital
For KIB, a crucial pillar of Vision 2035 is ‘creative human capital’, as it aligns with one of the bank’s core driving principles: supporting Kuwait’s national workforce. It is to this end that KIB has developed a series of training programmes for its staff and devoted significant resources to developing its employee base.

The bank has also implemented a comprehensive financial literacy programme for the wider community, with the aim of improving financial and economic awareness. In so doing, KIB is effectively investing in the future of the country’s financial system, as incoming employees are more in tune with how the economy works. The aggregate effect of this education will benefit not just Kuwait’s financial sector, but every industry in the country.

Human capital is the foundation of financial prosperity, and nurturing it is as important as any investment that can be made. Economies are, after all, managed by humans, and it is only through their success that economies grow. Through such investments, economic growth is not only achieved faster, but more sustainably, as workers become more productive and technologically savvy.

Oil prices
Like most Gulf states, Kuwait’s economy has historically been heavily dependent on its oil revenues. The government is well aware of the fluctuating nature of oil prices and the effects they can have on the economy. This was most starkly demonstrated in 2014 when the price of oil crashed due to high global production, the effects of which were felt not just in Kuwait, but across the Gulf.

Daily oil prices in 2018 were relatively unpredictable, and thereby acted as a function of unprecedented volatility in the market. The macroeconomic, geopolitical and technological factors that have caused instability in oil prices are not expected to see any meaningful change any time soon – these factors include a decrease in aggregate global economic growth and oil consumption.

This slowdown is reflected in industrial activity and freight transportation, which is expected to expand at a slower pace over the next year. Another is increasingly weak demand for oil in Europe and Asia: this can be attributed to environmental concerns and the accelerating uptake of renewable energy, which is maturing to the point of not needing government subsidies.

Separate from the demand-side factors, supply-side considerations include OPEC policies and the growth of shale production in the US, as well as sanctions imposed by the US on oil-producing nations. Kuwait has taken steps to mitigate these effects. In the near-term, the country’s sovereign financial reserves will continue to act as a buffer that softens economic shocks. Sovereign wealth vehicles like the Kuwait Investment Authority provide other revenue streams that reduce the country’s reliance on oil income.

In the long term, the government has a number of fiscal reforms in the pipeline that will apply more stringent measures aimed at bringing government debt under control and spurring economic growth. These reforms include the slashing of unnecessary expenses and the implementation of a value-added tax. The country’s budget will also be restructured to absorb market volatility. Below the governmental level, companies will have to further their technological advances while maintaining strict market discipline and improving their productivity.

Over the next year, we expect Kuwait’s economy to grow despite challenges posed by oil fluctuations and low prices. The fact that Kuwait is largely dependent on oil revenues also means that the country’s finances are heavily influenced by factors outside its full control. One of the more important external factors are policies set forth by OPEC – namely, the level of oil production agreed upon by the organisation. To stabilise prices, OPEC has already made efforts to decrease oil production in a bid to balance the market, carrying out a round of production cuts that took effect in January.

Naturally, steering the economy towards more private sector activity, as well as exploiting other potential markets, will continue to grow as national priorities. The first steps have already been made, and for Kuwait, the only way is up. KIB has been at the forefront of Kuwait’s financial relations with the rest of the world since its creation in the early 1970s and will continue to lead the way for decades to come.

How AVANGRID is working to meet the world’s growing electricity demands

Electricity is essential to our lives today: our connected world, our economy and our society depend on it in a way we never have before, and this will intensify as we embrace innovations like electric vehicles. At the same time, more intense weather patterns are testing our infrastructure in new and challenging ways. Meanwhile, policymakers are looking for ways to lower CO2 emissions and employ clean energy solutions. These trends provide an amazing opportunity for energy companies like AVANGRID to lead the way in delivering safe, reliable and clean energy to meet changing demand.

According to the US Energy Information Administration, the use of wind, solar and other renewables is projected to increase by nearly a third by 2050. However, the shift to renewable energy brings its own set of technical challenges, to which the industry must adapt. Responding to these challenges – and capitalising on the opportunities that arrive with them – requires us to think differently. That’s why AVANGRID embraces innovation as a core value. We invest significantly in talent and technology to unlock innovation across our businesses. Moreover, we have implemented a corporate governance system that firmly entrenches a commitment to sustainable development and ethical conduct – guiding everything we do.

Clean future
AVANGRID is a young company, formed in 2015 from the merger of Iberdrola USA and UIL Holdings. Today, it is listed on the New York Stock Exchange and has approximately $32bn in assets and operations across 24 US states. While AVANGRID’s utilities have been providing electric and gas services to communities on the East Coast for more than 150 years, we are also at the forefront of the transition to a clean energy future. In addition to our focus on bringing innovation to our utility business, the company is a leader in renewable energy through Avangrid Renewables, which owns and operates 7.1GW of electricity capacity and is the third-largest generator of wind power in the US.

More intense weather patterns are testing our infrastructure in new and challenging ways

At almost nine times lower than the US utility average in terms of CO2 emissions intensity, AVANGRID is among the cleanest energy generation companies in the country. We have also pledged to achieve carbon neutrality by 2035. Further, we are investing in better, smarter, stronger power grids that are hardened against extreme weather and can be restored quickly after sustaining damage.

As one of the largest US operators of renewable energy facilities, with approximately 6.5GW of installed renewable capacity, AVANGRID is already at the cutting edge of the clean energy revolution. Now, we’re turning our attention to the largely untapped resource of offshore wind.

The US is ripe for development in this field, particularly in the Northeast corridor, where wind potential is among the best in the country. Currently in the permitting stage, Vineyard Wind – Avangrid Renewables’ joint venture with Copenhagen Infrastructure Partners – is poised to develop an 800MW offshore wind farm off the coast of Massachusetts. With construction due to begin later this year, it’s expected to be the first large-scale offshore wind farm in the US at the start of operations in 2021.

Vineyard Wind and AVANGRID have also won Bureau of Ocean Energy Management lease sales and rights to develop wind farms on additional sites off the coast of Massachusetts and North Carolina. Meanwhile, other East Coast states, including Connecticut, New York and New Jersey, have announced requests for proposal in a bid to bring more offshore wind energy to their power grids.

As part of the global Iberdrola Group, AVANGRID is well positioned to kick-start the industry’s development. Indeed, Iberdrola has the global experience and expertise to help develop offshore wind capacity in the US. Incidentally, offshore wind power is one of the key drivers of Iberdrola’s growth, with 544MW of installed capacity as of 2017, mainly in the UK, Germany and France.

Pioneering solutions
As renewables account for an ever-growing share of the national energy portfolio, we’re imagining new ways to deliver their full benefits to our customers. One such initiative is Avangrid Renewables’ new ‘green’ Balancing Authority, which launched in 2018. The Balancing Authority allows Avangrid Renewables to deliver a tailored blend of energy from various sources to customers in western US states, thereby ensuring a stable, low-carbon supply.




Number of US states in which AVANGRID has operations


AVANGRID’s installed renewable energy capacity

Another project, still in the approval phase, seeks to capitalise on the growing demand for clean energy in New England and the availability of abundant hydropower resources in Canada’s Quebec province. New England Clean Energy Connect proposes to deliver up to 1,200MW of clean, reliable hydropower via a transmission line running from the Quebec border to Lewiston, Maine. If approved, the project will be New England’s largest source of carbon-free electricity through 2063 and beyond. Moreover, it is expected to produce nearly $1bn in economic benefits for Maine through to 2027.

As the energy industry responds to the call for more clean generation, transformational change is also underway on the distribution side of the business, which manages the grid that brings electricity to homes and businesses. The proliferation of private solar power and the rise of electric vehicles, among other trends, threaten to upend decades of conventional wisdom about managing demand and loads on electric grids. Energy companies are challenged to accommodate these new demands on existing infrastructure, while providing customers with opportunities to reduce their energy usage too.

In New York, Avangrid Networks companies recently launched four pilot programmes to evaluate how energy storage systems can help offset load during system ‘peaks’ – when grids are near capacity and energy prices are high – and take advantage of low-cost energy supplies available during low-demand periods.

These systems use batteries to store energy when demand and costs are low, and either return that energy to the power grid or deliver it directly to end users to offset system peaks. For instance, the battery-supported electric vehicle chargers recently installed in Rochester, New York, can provide a quick charge without taxing the grid, and then recharge when demand is low. A similar concept is being tested at the circuit, substation and individual customer level. Broadly applied, these technologies could help Avangrid Networks companies to use existing infrastructure more efficiently, thus avoiding the need for costly upgrades, while also helping to shift demand to periods when clean energy is available at low cost.

We’re also employing new technology to empower customers to better manage how they use energy, thus helping them to reduce their overall usage and lower their costs. Digital smart meters, coupled with web-based customer portals, provide customers with insights into how they use energy, so they can discover opportunities to save. These tools also support programmes and technologies that can incentivise customers to shift some of their energy usage away from peak times. They can even unlock the prospect of improving grid efficiency through remote energy management.

Safe, reliable service
All of these efforts contribute to our provision of a modern and resilient grid that is capable of delivering energy to customers safely and reliably. We are already seeing the impact of increasingly frequent and severe storms on the power grids we operate, so we’re taking action to protect our customers from absorbing the brunt of these weather effects.

In 2013, floodwaters from Hurricane Sandy threatened to inundate a critical power substation in Bridgeport, Connecticut, which could have potentially left thousands without power for weeks. Since then, we’ve launched a project to relocate that substation to higher ground. It is expected to be in service at its new location by 2021.

In New York and Maine, we’ve proposed a $2.5bn, 10-year ‘transforming energy’ initiative to harden our power grids against storms. These measures aim to reduce storm-related outages through accelerated pole replacement, increased preventative vegetation management, and the installation of independently powered microgrids that can keep critical facilities up and running, even when the surrounding power grid goes dark. This initiative includes a full rollout of smart meter systems to electric
customers in New York.

AVANGRID is also taking action to protect customers from the growing threat of cyberattacks, which, if unchecked, could disrupt our systems or even damage our electric and natural gas infrastructure. Through ongoing collaboration with our industry peers, regulators and other partners, we are working to detect attacks and prevent them from endangering the energy grid we all rely on.

Our leadership team is engaged with industry groups, such as the Edison Electric Institute, the American Gas Association and the North American Electric Reliability Corporation (NERC), to combat this issue. We also participate in joint training and drills, such as NERC’s biennial GridEx grid security exercise, to share information and maintain a high level of readiness. Meanwhile, our employees receive annual cybersecurity training that teaches them to recognise and report potential cyberthreats, including malware spread by email, which could leave the organisation vulnerable to intrusion.

Through our scholarships, internships, partnerships with top universities and employee development programmes, AVANGRID actively invests in the next generation of energy leaders, who have the skills and talent to rise to the energy challenges of the future. At our annual Innovation Challenge, AVANGRID employees partner with students from top universities to compete for scholarships and cash prizes in a competition, where they propose solutions to some of the sector’s most profound issues. We see this as a model for how our company and the industry can develop the forward-thinking mindset necessary to adapt to a fast-changing energy landscape.

We live in a world that’s rich in resources and alive with energy. Our challenge is to have the vision and imagination to use them productively and wisely. By harnessing renewable technology, investing in modern, reliable infrastructure and focusing on innovation, AVANGRID is well positioned to lead the industry into a clean energy future.

The booming battery market brings significant opportunities to mineral-rich Finland

The forecasted increase of electric vehicles (EVs) is huge: according to the International Energy Agency, there will be around 125 million EVs on the road globally by 2030. The battery market is surging in parallel, with the raw materials market set to join it. However, until circulation technology is developed further and totally new battery technologies appear, there is sure to be a shortage of primary raw materials, such as cobalt.

The Finnish mineral potential is substantial, particularly for lithium, cobalt, nickel and graphite

In Europe, Norway is racing ahead in terms of EVs, but China will soon become the frontrunner on a global level. Even so, other markets are making progress of their own. Finland may only be a small economy, but it has notable strengths in the development of battery technology, particularly in terms of raw materials, chemicals, control systems and industry machinery. Collectively, Finland and Sweden control close to 80 percent of the global underground mining equipment market. Nevertheless, the battery challenge facing the EV market is a global one, meaning that all countries, big and small, must contribute to solving it.

Buried treasure
Finland is already a major producer of battery metals in Europe. For mobile batteries, the Finnish mineral potential is substantial, particularly for lithium, cobalt, nickel and graphite. The known lithium reserves in Finland are around 20 percent of the global total. Further, Finnish mining company Keliber is now developing a new lithium mine in the west of the country and estimates that it will start production in 2020.


Electric vehicles globally by 2030


of the global underground mining equipment market is controlled by Finland and Sweden


of global lithium reserves are located in Finland


of global cobalt chemicals are produced in Finland

At present, global cobalt production is very much concentrated in the Democratic Republic of Congo, which contributes more than 50 percent of overall global production – a figure approximately equal to the amount currently used by the battery industry. The supply risk of depending so heavily on one market is obvious. Further, if the current growth scenarios for EVs materialise, primary cobalt production must increase by more than 10 times what it is today.

Globally, only one percent of cobalt supply is obtained from primary cobalt mines – the rest is a by-product of copper and nickel ores. Currently, Finland is the biggest producer of cobalt in Europe, with all the country’s cobalt associated with copper and nickel ore minerals. Annual cobalt production in Finland is approximately 2,000 tonnes, and is mainly produced by mines in Sotkamo and Kevitsa. If all reserves are converted to useful resources, Finnish cobalt production could reach approximately two percent of global production within a few years.

Today, the most promising exploration and mine development project is Anglo American’s Sakatti multi-metal mineralisation in central Lapland: the reported grades are high, and the potential reserves are large. In addition, the Geological Survey of Finland is currently mapping potential ore reserves for cobalt, copper and nickel across possible metallogenic areas. In addition to lithium, nickel and cobalt, Finland is also likely to have graphite reserves on a significant scale.

Unearthing potential
Freeport Cobalt in Kokkola, located in the west of Finland, is the biggest cobalt refinery in the world, with an annual production of 10,000 tonnes – slightly less than 10 percent of global production. Alongside Nornickel’s refinery in Harjavalta, this means that Finland is producing approximately 13 percent of global cobalt chemicals. Currently, Terrafame’s cobalt is sold as part of nickel concentrate, but the company has decided to invest close to €300m ($339m) for a cobalt and nickel sulphate plant, with production scheduled to start in 2021. In addition to its mining operation, Keliber is also constructing a chemical plant to produce battery-grade lithium hydroxide, which is also scheduled to start production by 2021.

Given these developments, I believe Finland is well on track to further develop its battery sector. In the fields of primary mineral production, chemical production, battery control systems, and the electrification of machinery in mining, forest and maritime environments, Finland can be a leader in Europe. That being said, car production in Finland is marginal, and having a battery gigafactory in the country could be challenging.

In Finland’s favour is its enviable investment environment: the country has good infrastructure, is politically and economic stable, and the corporate tax rate is very attractive, at only 20 percent. The research and development landscape and accompanying financing routes are well developed, and the country’s entrepreneurial mindset is engineering-focused. These ingredients are necessary for any industry cluster, and especially for the complex battery value chain.

Electrification and green energy solutions are essential and are sure to happen sooner or later. We will see new technological breakthroughs and their deployment in industrial products faster than we thought possible. The future offers a lot of opportunities to create new innovations and businesses in this area – when it arrives, Finland will be leading the way.

Cities must adapt quickly to accommodate the flood of people moving to urban areas

Dick Whittington was by no means the first or last person to journey to London to discover whether the streets really were paved with gold. According to Trust for London, an estimated 426,637 people from both the UK and abroad moved to the city between 2014 and 2015, the latest period for which figures are available. The trend is not limited to the UK either: according to StreetEasy, more than 264,000 people moved to New York between 2017 and 2018, while, according to Federal Reserve Economic Data, 146,542 made Hong Kong their home in the first six months of 2017.

This influx of opportunity-seeking people has left many cities bursting at the seams, with ageing public and private infrastructure creaking under the weight of new residents. From transport to irrigation, education to healthcare, it’s clear that a wide variety of facilities are in need of modernisation. What is less certain is who is responsible, or how best to go about it. The answer to these questions may lie in consultation and collaboration, in order to ensure that urban landscapes advance in a way that improves the lives of residents.

Talking it out
One of the greatest issues that befalls cities today is a lack of engagement between those building infrastructure and those they are building it for. When this feedback loop functions effectively, it’s a powerful tool that can be used to shape the fabric of cities. In France, for instance, the Commission Nationale du Débat Public (CNDP) hosts early-stage debates on potentially contentious developments, with all interested parties given equal resources to make a case. Of the 61 projects debated by the CNDP between 2002 and 2012, 38 were significantly modified.

One of the issues is a lack of engagement between those building infrastructure and those they are building it for

However, in many cases, these consultation structures are not so well implemented. In AECOM’s 2019 The Future of Infrastructure report, which surveyed more than 10,000 residents in 10 global cities, 52 percent of respondents said that requests for feedback on infrastructure improvement or investment came at too late a stage to be meaningful. By having the opportunity to comment, but not enact change, on ill-designed or poorly suited projects, urban residents have the worst of both worlds – they may be forced to live with infrastructure that they know could do more harm than good.

When it comes to commercial and residential projects, the picture is bleaker still. While some considerate developers do take the time to consult with local residents, these companies’ own business interests remain the predominant driving force. “The commercial fundamentals for each side are: what the developer can get planning permission for; how much it would cost to deliver the finished project; [whether] there is a market for the proposed development and how much income will be generated; and [whether] the site can be bought at a price that leaves a sufficient margin…to make it viable,” explained Don O’Sullivan, CEO at property developer Galliard Group.

Generating profit in urban landscapes, though, is hugely challenging. Availability of land stock is often very limited, and developers can be forced to pay extortionate amounts for plots, which is then transferred to the final purchase price. In San Francisco, for example, land is so scarce that the plot itself can account for up to 80 percent of a home’s cost.

This often results in an affordability gap between what potential tenants or buyers can afford and what developers are willing to accept for newly constructed properties. Some developers are dissuaded from taking on new projects in the fear that they will not draw profit or even recuperate the significant upfront costs involved in development; this then leads to a shortage of available homes. “The massive undersupply of housing is what drives up the price of sites and – by consequence – the finished homes,” said O’Sullivan.

Conflict of interests
In urban areas, developers must also ensure that land is safe and ready to be built upon. “Every site is ‘brownfield’ in London, and the other urban locations where Galliard work, so there is always some element of demolition and contamination to manage,” said O’Sullivan. This previously developed land not currently in use generates an additional cost burden: in the US, for instance, the average per-site cost for brownfield treatment is an estimated $602,000, less than a third of which is covered by a government grant.


people moved to London between 2014 and 2015


people moved to New York between mid-2017 and mid-2018


people moved to Hong Kong in the first six months of 2017

In a bid to obtain lower-cost land, some contractors have advocated for the development of green space – an option that is unpopular with city residents. There are a huge number of benefits in preserving urban parks, from providing outside areas for exercise to reducing city pollution and boosting the mental health of residents.

The fact remains, though, that they are expensive to maintain, and do occupy valuable land that could be utilised for high-density housing. For instance, the average size of a studio apartment in Manhattan is 550sq ft – if Central Park, which is around 34 million square feet, were to be completely developed, there would be space for almost 62,000 studio apartments just at ground level, without accounting for skyscrapers.

On the other hand, New York residents would lose all of the health and environmental benefits derived from urban green space. Aligning social, ecological and economic goals is near impossible in this regard.

Another option for developers is to build homes further away from transport links. Again, this is problematic as prospective buyers or tenants are then forced to endure longer commutes – and they expect a price reduction on housing as a result. Additionally, developers are less likely to obtain planning permission for inaccessible sites. “Access to transport links always positively influences sales prices, but in London it also affects planning – there is extra weighting attributed to sites with good public transport options nearby,” O’Sullivan explained to World Finance.

In pursuit of collaboration
It’s clear that more alignment between commercial, governmental and public interest is needed – and that begins with creating opportunities for all stakeholders to have their say. Similarly, the success of this endeavour relies on an understanding that the growing popularity of cities necessitates additional infrastructure development, and any reticence about that is simply not a productive attitude. “Our general experience is that almost every politician wants more housing built – as long as it is not next to where their voters live,” said O’Sullivan. “If communities campaigned to encourage development in their area, the world would look very different.”

One potential solution is increasing private sector involvement in public infrastructure projects. This would allow developers to have their say on proposals relating to transport or energy systems, for example, and would remove some of the logistical barriers to residential construction and building management. It’s certainly popular with urban residents – 63 percent of respondents in AECOM’s survey wanted more private sector involvement in city infrastructure. They hoped this could contribute to better financing, development, delivery and management in public facilities, which – given that 61 percent of respondents experienced power outages and 43 percent suffered an interruption to their water supply in the past year – is clearly needed.


of AECOM survey respondents want more private sector involvement in city infrastructure


of AECOM survey respondents have experienced power outages in the past year


of AECOM survey respondents have experienced interruptions to water supply in the past year

O’Sullivan explained that Galliard already contribute financially to infrastructure development in the form of tax, which amounts to “tens of millions [of pounds] annually”. As for delivery and management, he told World Finance that there used to be a private finance initiative (PFI) to do just that, but it was “formally killed off by the UK Government in 2018”.

PFIs, which allow private sector companies to invest in public infrastructure, were pioneered by the UK and Australian governments and have found particular success in Spain: both the Parque Forestal de Valdebebas in Madrid and the Ciutat de la Justícia in Barcelona were built under PFI contracts. The Parque in particular has significantly boosted Madrid’s environmental credentials: built on the site of a former illegal dump, it now removes an estimated 1,250 tonnes of carbon dioxide from the air every year, according to Foro Consultores Inmobiliarios. This not only alleviates pollution for city residents, but also facilitates property development in the area by replacing what was previously an eyesore with a selling point for construction firms. However, if PFIs are mismanaged – as was the case in the UK with companies like Carillion – they can collapse, leaving the taxpayer to foot an extortionate bill.

The success of joint projects like PFIs relies upon all stakeholders working collaboratively to ensure that urban infrastructure is fit for purpose for both current and future residents. After all, in the majority of countries, thriving cities are the lifeblood of the national economy – they are the birthplace of technological innovation, the lynchpin of financial markets and the setting for transformative political decisions. It is imperative that urban spaces are constructed to underpin their purpose.

Top 5 emerging fintech hubs

Fintech is proving to be one of the most fruitful sectors for venture returns. According to Juniper Research, fintech companies will generate $638bn in revenue in 2024, a 143 percent growth on estimated revenues for 2019.

As Brexit uncertainty clouds the prospects of one of the world’s financial capitals, London, there is a growing interest in the fintech hubs emerging elsewhere. Around the globe, cities are opening their doors to foreign investment and creating incentives for start-up creation, all in the hope of tapping into this burgeoning market. According to a survey by Startup Genome, these are among the top emerging fintech hubs to watch right now:

São Paulo
Brazil has more fintech start-ups than any other Latin American country, and most of them are consolidated in the country’s financial centre, São Paulo.

Home to the European Central Bank and more than 200 banks – most of which are foreign – Frankfurt plays an important role in the EU’s financial system

Owing partly to a decade-long financial crisis and the high concentration of power in the country’s five largest banks, many Brazilians have become distrustful of traditional banks, having come to associate them with high interest rates and bureaucracy. As a result, approximately 40 percent of Brazilians are excluded from traditional banking services. This has made the city a thriving space for disruptive fintech start-ups.

One such start-up is Nubank, a Brazilian online bank and credit card operator, which is currently one of the most highly valued privately held start-ups in Latin America. Over the next 10 years, Brazil’s fintech market is projected to generate potential revenue of up to $24bn.

One country poised to see an explosion of opportunities after Brexit is Lithuania. In February of this year, the country saw around 100 British financial companies apply for a licence in the country. This is in part because Lithuania has been creating a favourable regulatory environment to help start-ups flourish. For instance, the Bank of Lithuania’s regulatory sandbox allows firms to test new technology before releasing their products to the market.

The country also has the shortest waiting time for e-money or payment licences in the EU. As such, the World Bank placed Lithuania 14th out of 190 countries in its Ease of Doing Business index in 2019. With the number of fintech firms in Lithuania having doubled between 2016 and 2018, the country appears to be well on its way to becoming a leading fintech hub.

Estonia has one of the highest rates of start-ups per capita in Europe. According to Startup Genome, 29 percent of all jobs created by these start-ups are within the country’s fintech industry. One of the most prolific unicorns to emerge from the Baltic country is international money transfer company TransferWise, which raised $280m in investment in 2017.

This surge in start-ups has in part been driven by Estonia’s e-residency programme, launched four years ago, which allows people to register a business in Estonia from anywhere and run it remotely. The government also created the Startup Estonia initiative, which provides training programmes for start-ups and education for investors.

Furthermore, Estonia is considered to be one of the world’s most advanced digital societies. According to CNBC, 99 percent of its public services are available online and it has stronger broadband than many countries across the developed world.

Home to the European Central Bank and more than 200 banks – most of which are foreign – Frankfurt plays an important role in the EU’s financial system. As a result, the city is well-placed to attract cutting edge start-ups. The business community in the country encourages such ventures through a number of programmes, including accelerators and corporate involvement initiatives. In 2016, Deutsche Bank launched Digitalfabrik, which supports the development of digital banking products, while platforms like TechQuartier have been created to connect start-ups with banks, investors and mentors.

Financial institutions and newcomers alike are keen to drive innovation, partly inspired by the city’s start-up success stories. Perhaps the most well known of these is 360T, a foreign exchange trading platform. In 2015, Deutsche Böerse bought 360T for $796m in Germany’s largest start-up acquisition at the time. Although Berlin is still largely considered the tech centre of Germany, it appears Frankfurt is quietly fostering a start-up ecosystem that could one day rival the capital’s.

Bengaluru (previously Bangalore) is anticipated to become one of the next big tech hubs. One of Asia’s fastest growing start-up ecosystems, the city is home to 438 fintech start-ups and has been dubbed the ‘Silicon Valley of India’. One such start-up is Bengaluru-based Zerodha, an online broker that has transformed stock trading in India.

While fintech is in its early stages in India, the opportunities are rapidly growing. The country recently overtook China as Asia’s top fundraising hub for fintech. These opportunities are especially exciting in areas such as payments, which constitute the largest share of fintech start-ups in India. As a testament to the country’s potential, Mastercard is planning to invest $1bn in India over the next five years and has opened offices in Gurgaon and Bengaluru.

Zurich Insurance takes care of Turkey’s population

Last year was challenging for all emerging markets, including Turkey. A strong dollar, high interest rates in the US, trade wars and political uncertainties in developed markets all led to deterioration in risk perception. In response, emerging market currencies were negatively impacted due to massive capital outflows by the third quarter of 2018. Fortunately, however, thanks to its economic attributes and resiliency, Turkey recovered quickly and returned to its growth path.

Turkey boasts an extremely favourable demography: its 80-million-strong population, which includes a young, educated and tech-savvy workforce of 32 million, creates momentum for the economy. The government has also implemented crucial structural economic reforms in recent years, which have contributed to a strong banking sector and have had a major impact on Turkey’s resistance to economic shocks. Turkey now has Europe’s lowest debt-to-GDP ratio at around 35 percent, a budget deficit of around 1.8 percent, and low household debt of 17 percent. Overall, the Turkish economy is well diversified, with no dependence on any single industry, commodity or country.

Performance of the non-life insurance segment is directly linked to overall economic activity in Turkey

The Turkish insurance market, which is currently worth around $25bn, consists of three main segments: non-life, life and private pensions. The non-life segment is valued at $10m, making up around 40 percent of the Turkish insurance market. Performance of the non-life insurance segment is directly linked to overall economic activity in Turkey, which has experienced 15 percent annual growth in the past decade, as the economy itself has grown at an impressive rate.

There is potential for further growth, as non-life insurance penetration currently stands at only 1.3 percent of GDP – much lower than the average for OECD countries. Most insurers operating in the segment are foreign-owned or partnered, showing it is a popular area of investment for foreign companies.

The success story
As the result of an acquisition, we entered into this high-potential non-life segment as Zurich Insurance Group in 2008. Since then, we have invested over $500m in the sector. Through a very effective restructuring programme that launched in 2013, our performance has become a huge success story. Based on the latest market results, today we are the most profitable company among international players in Turkey’s non-life market.

Our strategy of focusing on bancassurance and partnerships plays a key role in this best-in-class performance. Zurich’s mission is to be the most successful insurer in terms of initiating and managing partnerships. As the only company with two exclusive bancassurance partners in the market, we reach almost six million customers across 2,000 points of distribution. We are also second in Turkey’s insurance market in terms of branch productivity, and have almost a 10 percent market share in bancassurance in the lines of business in which we are strategically active.


Turkey’s debt-to-GDP ratio


Turkey’s budget deficit


Turkey’s household debt level

Our success is not limited to financial performance either. Over the past five years, our Net Promoter Scores have improved by almost 60 percent, as we actively listen to our customers and take action accordingly. This high-quality performance has been recognised externally as well: Turkey’s most popular online customer request communication platform, Sikayetvar, recognised us as the top insurer in their Achievement in Customer Excellence Awards in both 2017 and 2018.

At Zurich Turkey, we have a broader view of our customers: ‘external customers’ are our end customers and distribution partners, whereas ‘internal customers’ are our employees. As a result, we give equal weight to ensuring our internal customers are happy, and we aim to help them achieve their very best – something that is crucial to our success.

The numbers speak for themselves: since 2013, our employee engagement scores have improved by almost 65 percent, which made us the best rated in terms of employee engagement among all Zurich Group markets and a case study for global best practice. Furthermore, our voluntary turnover ratio has decreased from 25 percent in 2013 to around 10 percent in 2018.

A crucial aspect of this success story is sustainability, which is only possible with a strong governance environment. Our risk and internal control teams work very closely with the business, actively managing risks and proactively taking necessary measures. This environment ensures best performance in a sustainable manner.

An innovation pioneer
Actively listening to customers is not the only reason behind Zurich Turkey’s excellence in customer satisfaction. Our goal is to always offer the most innovative products and services to our customers. For instance, with digitalisation becoming increasingly common in the Turkish market and cybersecurity becoming a big concern as a result, we have acted swiftly to become a pioneer in cyber insurance.

We are the first company in the market to have developed and launched a cybersecurity insurance product for individuals and small-business owners. This is a new-generation product, which not only provides coverage for cyber risks, but also helps customers protect their critical information, such as credit card numbers and passwords, from cyberthreats through a web radar service.

As another example, we have developed Turkey’s first all-risk-type product for small-business owners, therefore providing a one-stop shop for their insurance needs. We have also developed a new health insurance product that is unique in the market thanks to its focus on inpatient treatments.

Over the past five years, we have taken a number of actions to foster innovative and customer-orientated service processes. Through the use of artificial intelligence and cutting-edge redesign technologies, we are now able to make claim payments in as little as two days. Further, our average end-customer request resolution time has improved by 70 percent, to less than two days.

Meanwhile, our average bancassurance partner request resolution time has decreased by 60 percent, to less than one hour. We deliver almost all of our policies to our retail customers digitally via SMS, and we have also developed a new mobile interface for our customers, from which they can access our assistance services with just one click. Our customers appreciate all these efforts, as reflected in the improvement of our Net Promoter Scores.

Investing in society’s future
At Zurich Turkey, we strongly believe that business is not just about making profit. We strive to carry out numerous corporate social responsibility (CSR) projects that reflect our values. Our CSR activities are focused primarily on women and children, as we strongly believe that the best form of insurance for a society is the wellbeing and empowerment of these social groups. In this context, we are proud to announce that we have recently started a six-year CSR project that will have a nationwide impact: in collaboration with the Ministry of National Education and the Turkish Education Association, we will be supporting female teachers who are assigned to work in rural villages and towns in remote parts of Turkey.

The objective is to try and reduce the environmental, physical and professional challenges experienced by teachers, to enhance their knowledge, to improve their confidence, and to nurture them as ‘social entrepreneurs’ in their own communities. With this initiative, we aim to reach 1,000 female teachers, more than 30,000 students and 150,000 family members in Turkey by the 100th anniversary of the Turkish Republic in 2023.

We play a vital role in Turkey’s arts and culture scene as well. Since 2014, we have been the insurance sponsor of the Istanbul Foundation for Culture and Arts (IKSV), a leading art foundation in Turkey. Through this partnership, many projects and festivals have been jointly organised. For instance, during the International Istanbul Film Festival in 2018, more than 100,000 people watched around 230 international films.

In the same year, the Istanbul Music Festival hosted around 500 local and foreign artists and was attended by some 16,000 art lovers. Then there was the Istanbul Jazz Festival, which had an audience of 52,000 people watching 450 artists across more than 50 different concerts.

Our partnership with IKSV is not limited to organisation-based sponsorships. At present, we are working together to restore old Turkish movies: we recently restored Silky (ipekce in Turkish) and this year we plan to work on 10 Women (10 Kadin), in which one of Turkey’s most popular actors, Turkan Soray, played a leading role.

We were able to achieve so much in the past six years thanks to our vision, and are well on track to becoming the country’s best insurance company as rated by our clients, shareholders, business partners and employees. As we arrive at this significant milestone, we have also been named as Turkey’s best general insurance company in the World Finance Global Insurance Awards, the sixth year in a row we have been honoured in these awards listings.

Going forward, with our 150 years of insurance know-how and global expertise, we will continue to offer the very best to our customers, providing them with the confidence that they are being well looked after.

Top 5 countries with the highest trade tariffs

When Donald Trump took his seat in the White House, he promised to shake up global trade as part of his ‘America First’ policy. The US president certainly upheld that promise, initiating trade attacks on China, the EU and neighbouring partners such as Canada and Mexico. The trade war with China, in particular, has upset global markets, which have risen and fallen at each new development.

In an era where developed nations swear by low tariffs and free trade, the US has firmly stuck a spanner in the works. With the prospect of increased tariffs looming, World Finance lists the countries that impose the highest charges on imported goods.

1 – The Bahamas (18.56%)
The Caribbean’s wealthiest country also imposes the world’s highest tariffs on imported items. Despite relying on imports – the country has a trade deficit of $7.781bn – the Bahamian Government raises 60 percent of its total revenue from import taxes. While the basic tariff rate is levied at 35 percent, a growing list of tax-free items has reduced the average tax rate to 18.56 percent.

Despite relying on imports – the country has a trade deficit of $7.781bn – the Bahamian Government raises 60 percent of its total revenue from import taxes

It’s a stark contrast to the Bahamas’ tax rates; the country imposes no income tax, corporate tax, capital gains tax or wealth tax. Along with the tariffs, the island, which is located just off the coast of Miami, relies on tourism, mainly from the US, to drive its economy.

2 – Gabon (16.93%)
Located on Africa’s west coast, this Francophone country is one of the continent’s medium-sized economies. While its crude oil reserves and abundance of timber have resulted in a healthy trade surplus of $2.79bn and steady GDP growth since the start of the millennium, unemployment remains high, along with poverty rates. In addition, the country’s failure to diversify its economy has resulted in a slowdown in recent years.

Gabon is part of the Central African Economic and Monetary Community (CEMAC), an alliance between seven Central African nations, where no tariffs are imposed on its partners – though trade between them is rare. However, elsewhere around the global the CEMAC community imposes high charges on imported goods such as food and raw materials.

3 – Chad (16.36%)
The landlocked Central African nation is another CEMAC member, again following the imposition of high tariffs on imports from outside the alliance. Trade makes up 68 percent of Chad’s GDP, though unlike Gabon, the nation has run up a trade deficit in recent years, at $630m. However, much of Chad’s trade is informal – 80 percent of residents rely on agriculture and the exchange of cattle – and has never been recorded. Therefore trade estimates should be treated with caution.

Oil and agriculture make up the majority of Chad’s exports, with over half heading to the US. Imported rice and flour are subject to the lowest tariffs at just five percent, which increases to 30 percent for tinned foods and electronics.

4 – Bermuda (15.39%)
The isolated British overseas territory has one of the world’s highest GDP per capita, as a result of its offshore financial services. Considered a tax haven with loose regulations, an estimated 18,000 foreign companies operate on the island. Bermuda is scarce in resources suitable for exports and has a non-existent manufacturing base. Therefore, most of its products are imported, mainly from the UK.

The high tariffs imposed on goods account for a large proportion of government revenue and generally reflect expensive retail prices. The majority of products are subject to a charge of 22.25 percent, though this is lower for food, and tariffs on essential medical items are removed altogether.

5 – Central African Republic (14.51%)
The third CEMAC country to make this list, the Central African Republic (CAR), is one of the world’s poorest countries. The nation is trapped in a civil war, which decimated its GDP in 2013 and has resulted in substantial foreign aid being needed to support the government and its citizens. CAR is rich in natural resources and possesses a range of minerals such as diamonds, gold and uranium. However, smuggling is rife in the country and a large percent of goods end up in the hands of illicit traders.

Crops such as coffee, cotton and tobacco are also exported, however, despite its supplies, the country imports nearly double the amount it exports. In a similar vein to its fellow CEMAC members, CAR’s imports mainly consist of food, as well as machinery to aid the country’s mining sector.

Venezuelan President Nicolas Maduro remains defiant as his second term begins

On January 10, Venezuelan President Nicolas Maduro began a second six-year term in power, despite an international outcry over the legitimacy of his re-election, further isolating the South American country in the iron grip of an economic and humanitarian crisis.

The 56-year-old heir of Hugo Chávez, Maduro has presided over the Venezuela’s worst economic crisis in history. The country’s economy has collapsed by almost 50 percent in the past five years, contracting by 15.7 percent in 2017 alone.

While this so-called ‘economic war’ originated under Chávez, it has been exacerbated by Maduro’s failure to cut public spending during the 2014-15 oil glut and the subsequent devaluation of the country’s most precious commodity. Maduro, meanwhile, has blamed the crisis on a capitalist plot to drive up inflation rates.

Maduro was elected after Chávez’s death in 2013 by a margin of just 1.6 percentage points, the closest vote in the country’s history. His re-election in May last year was also mired in scandal, with accusations of vote buying and corrupt electoral processes running rife.

Last week, 13 of the 14 members of the so-called Lima Group, a Latin American bloc that includes Brazil, Argentina and Canada, announced that they would not recognise Maduro as a legitimate leader of Venezuela. The most fervent critics within the bloc include Brazil’s far-right leader Jair Bolsonaro, who has described Maduro’s communist ideology as “despicable and murderous” and in 2017 vowed to “do whatever is possible to see that government deposed.”

In the US, the Trump administration has also stepped up pressure on Maduro through the application of economic sanctions. The latest measures, announced this week by the US Treasury Department, aim to curb a currency exchange scheme that allowed corrupt government officials to siphon off billions of dollars in illegal profits.

“Our actions against this corrupt currency exchange network expose yet another deplorable practice that Venezuela regime insiders have used to benefit themselves at the expense of the Venezuelan people,” US Treasury Secretary Steven Mnuchin said in a statement on January 8.

President Trump himself has also suggested that the US was prepared to use military action against Venezuela if necessary.

Most members of the Lima Group have called their diplomats home from Venezuela and will not send delegates to Maduro’s inauguration as per international custom, according to diplomatic sources.

Meanwhile, while the rest of the world turns its back on Venezuela, its citizens are desperately crying out for help. Rampant hyperinflation, currently approaching two million percent, has devalued salaries in the country to the point that the monthly minimum wage is not longer sufficient to purchase a box of eggs. The IMF expects it to rise to 10 million percent by the end of the year.

Venezuela’s Living Conditions Survey found in 2017 that 75 percent of the country’s citizens has lost an average of at least 19 pounds (7kg) over the previous year as they simply could not afford to feed themselves adequately. The same survey revealed that 87 percent of the country was living below the poverty line in 2017, with a staggering 61.2 percent classed as extremely poor.

Maduro’s response to hyperinflation has been to raise the national minimum wage, which has only fuelled the issue further, meaning that Venezuelans spending ability actually decreases with every raise. In August 2018, Maduro launched a new currency, named the ‘sovereign bolivar’, which was pegged to the state-backed petro cryptocurrency. This did nothing to solve hyperinflation, which simply began again from the base benchmark set by the new currency, while the policy drew international ire as the petro cryptocurrency is regarded as fanciful by many other world powers.

According to the United Nations, some three million people have emigrated from Venezuela since 2015, in a frantic bid to escape malnutrition and the rising crime epidemic. While Maduro’s government has repealed access to crime data and has ceased to publish official figures, research from the NGO Venezuelan Violence Observatory put the country’s violent death rate at 81.4 per 100,000 citizens in 2018. This makes Venezuela the most violent country in Latin America, with more deaths than notorious crime hotspots like El Salvador and Honduras.

As the country sinks further into socio-economic ruin, it seems increasingly less likely that it will be able to pull itself free without substantial international aid. All the while Maduro remains in power, however, there is scant chance of that aid coming to fruition. Meanwhile, the country’s impoverished citizens become ever more desperate, with malnutrition, disease and rising crime posing ever greater threats to their lives.

World Bank slashes 2019 forecast amid global economic slowdown

The World Bank has warned of “darkening skies” for the global economy, leading it to cut its growth forecast from three percent to 2.9 percent for 2019.

A downturn in the US economy increases the probability of a global recession to 50 percent

In its Global Economic Prospects (GEP) report, issued on January 8, the international financial institution cited elevated trade tensions and the contraction of financing conditions as key reasons for the downgrade.

The US-China trade war is named as a significant concern, along with dismal performance in the US, the world’s largest economy. In 2021, the US’ economic expansion is forecasted to be just 1.6 percent, compared to last year’s 2.9 percent rate, as a result of rising protectionism and the diminishing effect of tax cuts.

Unlike some commentators, the World Bank is not forecasting a recession for the US in 2019. It has said, however, that a downturn in the US economy increases the probability of a global recession to 50 percent.

The 200-page document also highlighted that emerging markets have been hit particularly hard by adverse macroeconomic conditions.  “In a nutshell, growth has weakened, trade tensions remain high, several developing economies have experienced financial stress, and risks to the outlook have increased,” it stated.

Increasing debt in emerging markets is also marked out as a source of concern, particularly if the global economic downturn gathers pace. According to the report, median government debt has risen by more than 17 percentage points of GDP since 2013, creating vulnerabilities in developing economies and leaving them more susceptible to market fluctuations and compromised rapid recoverability.

“The majority of Low Income Countries would be hard hit by a sudden weakening in trade or global financial conditions given their high levels of external debt, lack of fiscal space, low foreign currency reserves, and undiversified exports,” the GEP document observes.

Prospects for sub-Saharan Africa are notably poor, with the report predicting per capita growth of less than one percent. This rate is not sufficient to lift the region, which is forecasted to hold 86 percent of the world’s poorest people by 2030, out of poverty.

The World Bank expects challenging financial conditions to continue into 2020, for which it has also cut its growth predictions from 2.9 to 2.8 percent.

The global financial institution is also facing its own challenges, as its president Jim Yong Kim unexpectedly resigned on January 7, three years before he was expected to retire. While the succession process is supposed to be open, the World Bank has been governed by an American since its inception in 1944, due to an unwritten rule struck up between the US and its European allies after the Second World War.

Developing nations are now expected to redouble their efforts to nominate non-American candidates for the prestigious position, creating a challenging environment for the US, which has always typically nominated a successor. The final decision lies with World Bank shareholders.

European Central Bank confirms end of quantitative easing programme

Following a decade of recessions and financial crises, the European Central Bank (ECB) announced on December 13 that one of the most extensive quantitative easing programmes ever seen would come to a close. The unanimous decision by the ECB council was widely expected – the bank has long signalled it would end new purchases this month.

For four years, the bond-buying scheme has kept interest rates, and therefore borrowing costs, at historic lows to encourage investment from European governments. At a press conference regarding the decision, Mario Draghi, President of the ECB, said that at times quantitative easing was “the only driver of this recovery”. In total, the programme pumped €2.6trn ($2.94trn) into the eurozone economy.

Despite it being one of the more contentious economic policies among European politicians, advocates have credited Draghi’s programme with propelling a robust post-crisis recovery.

Beginning in 2015, the ECB’s quantitative easing policy followed the actions of the UK and US. The UK created £375bn ($550bn) of new money in its quantitative easing programme between 2009 and 2012, while the US Federal Reserve bought bonds worth more than $3.7trn between 2008 and 2015.

Although the decision to end the stimulus programme signals that Draghi has increased confidence in the health of the eurozone, the cessation comes at a time of slowing growth

Although the decision to end the stimulus programme signals that Draghi has increased confidence in the health of the eurozone, the cessation comes at a time of slowing growth. The ECB chief warned that rising uncertainty had forced the bank to downgrade growth forecasts.

Following healthy expansion in 2017, when the eurozone grew at its fastest rate since the financial crisis, this year’s third quarter saw growth slow to a four-year low of just 0.2 percent. In fact, Germany, the eurozone’s largest economy, shrank from July to September.

“The risks surrounding the euro area growth outlook are assessed as broadly balanced,” read Draghi’s statement. “On the one hand, the prevailing positive cyclical momentum could lead to stronger growth in the near term. On the other hand, downside risks continue to relate primarily to global factors, including rising protectionism and developments in foreign exchange and other financial markets.”

The euro fell 0.3 percent against the dollar in response to the ECB’s decision, while the ECB said it would continue to reinvest the proceeds of bonds that are now maturing.

Why wine continues to be one of the most secure global investments

Following the 2008 financial crisis, investors have become much more cautious about their activities – even more so as a result of the market volatility and record low interest rates for the last decade. This unpredictability has led to an enhanced demand for diversified investments, including passion assets. This term describes physical commodities that the investor gains pleasure from owning – cars, coins, antiques and fine wines – and that prove stable in all types of economic conditions.

Real estate consultancy Knight Frank found that 68 percent of respondents to its annual Attitudes Survey, published in its Wealth Report 2018, said their high-net-worth clients had become more interested in these sorts of investments. In its 2017 Luxury Investment Index, Knight Frank also discovered that of the 10 luxury investments it tracked, eight had increased in value over a 10-year period. In the decade from Q4 2007 to Q4 2017, fine wine experienced a 192 percent growth.

In the decade from Q4 2007 to Q4 2017, fine wine experienced a 192 percent growth

One of the main benefits of investing in wine is that it has huge consumer and collector demand. Global alcohol consumption is estimated to have grown by 0.1 percent in 2017, which equates to 3.5 million nine-litre cases, according to market researcher IWSR. In comparison, global wine production has dropped to a historic low, with the International Organisation of Vine and Wine confirming that production is at the lowest level since 1957 as a result of poor weather conditions across the EU. In investment terms, this means wine has become more attractive as a commodity based on the supply vs demand economic laws.

Historically, wine has performed well in pure investment returns and has the benefit of being a tax-free asset. There are numerous ways to invest in wine, whether through a winery, physical wine, a wine fund or publicly traded stocks and shares. As these areas can be tough to navigate, one of the main methods investors can enhance their knowledge is through the use of an investment specialist.

Cult Wines is an award-winning global leader in fine wine investment and collection management services. The company has featured in The Sunday Times’ Fast Track 100 in three of the last four years and won the prestigious Queen’s Award for Enterprise: International Trade in 2017. Cult Wines prides itself on openness and transparency and has a huge amount of experience and data at its disposal to help investors succeed in the wine market. This is borne out by the strength of its average portfolio returns, which have consistently outperformed the industry benchmark.

The company has grown dramatically from a start-up in 2007. In addition to its headquarters in London, it has offices in Hong Kong and Singapore. Its website caters to a global audience, offering a comprehensive overview of the company’s services as well as an introduction to the world of fine wine investment; providing a wealth of tools to kick-start the investment process, including a fine wine directory, a guide to wine investment, videos and events.

Tom Gearing, Managing Director at Cult Wines

Speaking about the importance of its service, Tom Gearing, Managing Director at Cult Wines, said:

“High levels of customer service are crucial for any successful firm, but we strive to go one step further, as what we offer is bespoke to each and every client. We see the relationship with our customers as one that is defined by this personal approach, delivered by our Portfolio Managers – who maintain each client relationship from inception and for the whole duration, typically over many years. In turn we offer comprehensive services to help people invest in the best wine, such as sourcing, logistics, storage, analysis, reporting, technology and accounting. We constantly seek to improve what we do on a daily basis and pride ourselves on our attention to detail.”

To discover more about the service, go to or read the Cult Wines Fine Wine Investment Guide here.

EU-Japan trade deal ratified by EU parliament

On December 12, following nearly five years of negotiations, the European Parliament finally approved the EU-Japan trade deal. It is hoped the agreement, the largest ever struck by the EU, “will raise the benchmark for international commercial ties”.

President of the European Commission Jean-Claude Juncker said in a statement: “I praise the European Parliament for today’s vote that reinforces Europe’s unequivocal message: together with close partners and friends like Japan we will continue to defend open, win-win and rules-based trade.”

The deal binds together two economies that together account for a third of global GDP

The agreement was ratified with 474 votes in favour, 156 against and 40 abstentions. Japan’s parliament agreed to the deal earlier in the week. Once EU member states approve the pact on February 1, 2019, the trade deal will create the world’s largest free trade zone.

The deal binds two economies that together account for a third of global GDP. It will remove EU tariffs of 10 percent on Japanese cars and three percent for most car parts. Japanese duties on cheese and wine will also be scrapped.

Additionally, it will open up services markets, including financial services, telecoms, e-commerce and transport. An estimated €58bn ($66bn) of goods and €28bn ($32bn) of services are exported by EU businesses to Japan each year.

Before the US withdrew its signature, Japan was part of the 12-nation Trans-Pacific Partnership. However, Donald Trump’s rejection of the deal saw Tokyo turn its focus towards other prospective partners.

In similar circumstances, after negotiations regarding the Transatlantic Trade and Investment Partnership stalled with the US, the EU also branched out to find other potential partnerships.

“Everyone knows there is a tariff man on the other side of the Atlantic,” said Bernd Lange, Head of the European Parliament Committee on International Trade. “Our answer is clear. We are not tariff men, but the people of fair trade.”

Japan and the EU face continued tension with Trump, who has imposed tariffs on imports of steel and aluminium. Nevertheless, both parties have pledged to start separate trade talks with the US.

Deutsche Bank reports suspicious tax transactions to German authorities

Deutsche Bank has notified German authorities of a number of suspicious transactions that may have allowed customers to falsely claim dividend tax credit, according to data from an internal review.

The transactions in question relate to the issue of American depositary receipts (ADRs). Non-US companies use ADRs to trade on US exchanges, as they are denominated and pay dividends in US dollars.

In July this year, Deutsche Bank was fined $75m for its part in fraudulent ADR transactions

Normally, to issue an ADR a depository bank must hold the equivalent number of domestic shares in custody. When contacted by a counterparty seeking to purchase an ADR, the bank swaps the domestic shares for ADRs. This process removes both the ADRs and the domestic shares from the market.

However, some banks can pre-release ADRs, issuing them before the underlying shares are received, provided the broker acting for the counterparty signs off on the transaction.

This effectively means the shares exist in two places simultaneously. As part of the deal, the counterparty theoretically promises the ADR issuer that it will not claim a tax credit on those shares. In the case of Deutsche Bank, this promise was not upheld.

According to sources familiar with the document, the German lender’s internal review found that more than five percent of its pre-released ADR transactions between 2010 and 2015 had potentially been mishandled and German dividend tax credit claimed erroneously.

Deutsche Bank estimated that the potentially suspicious transactions accounted for around €25m ($28.5m) in German withholding tax. Up to €5m ($5.7m) of this sum may relate to transactions between different units of Deutsche Bank, which acted as counterparties for one another in various transactions.

The review did not include data on whether irregular claims were actually made. If any capital was claimed by its own staff, however, the bank will be expected to repay it in full to the German authorities.

German politician Gerhard Schick said the review clearly demonstrates “illegal conduct.” He told the Financial Times: “you cannot claim tax credit for taxes which you did not pay in the first place.”

The US Securities and Exchange Commission (SEC) has been investigating pre-release ADRs since 2014, after discovering “industry-wide abuses”. A number of lenders, including ITG, Citibank and Deutsche Bank, have already reached settlements with the SEC regarding improper handling of ADRs.

In July this year, Deutsche Bank was fined $75m for its part in fraudulent ADR transactions, with the SEC stating that the lender had been “negligent” in ensuring that counterparties actually owned shares.

Finance Minister Olaf Scholz will tackle Deutsche’s latest misgivings in German parliament on December 11. Deutsche Bank declined to comment on the allegations.

Nigeria moves further towards financial inclusion with Eyowo app

In recent years, many political leaders have become concerned by the levels of economic inequality in the world, much of which is caused by the number of people who have little or no access to the basics – education, health care, power and financial services. The problem of financial inclusion is most pronounced in low and middle-income emerging markets and has a huge impact on an individual’s ability to start a business, pay for education and engage in other opportunities to further their economic prospects.

Africa has big issues with financial inclusion. Nigeria has one of the largest unbanked populations; of its 197 million population, only 30 million have access to banking services, as of 2017. Policymakers are trying to remedy this through the country’s Financial Inclusion Strategy, but many see technological development as the best long-term solution. Numerous fintech organisations have opened in the country to provide citizens with easily accessible banking products. The Circle Group, for example, has produced Imaginarium, a group-based app to encourage friends and family to make joint savings and investments.

Eyowo can be used on a wide variety of devices, meaning users do not need smartphones to access
its services

One Nigerian organisation that has made huge strides in enhancing financial inclusion is Softcom, a technology company. It has done much to support Nigeria’s unbanked population through its new mobile application, Eyowo. This product allows people to make transactions using only their mobile phone so a user can send money to anyone who has a phone number with or without a bank account and internet connectivity.

What separates Eyowo from other products is its convenience and accessibility – as long as you have a GSM phone line, you can use Eyowo’s features.

Currently, if someone in Nigeria wants to pay for a service or product, they can do so through one of the following channels: online transactions, point of sale (cards) and cash, all of which pose various challenges to its users with risk associated to cash theft and the struggling digital infrastructure to support electronic payments. Eyowo takes away these risks, as money can be sent or received using just a mobile number and can be accessed offline. Given that internet connectivity has a low penetration rate of just 50 percent, Eyowo’s creators see its offline potential as a great way to move towards financial inclusion.

Eyowo has empowered Nigerians with its facilities

Eyowo can be used on a wide variety of devices, meaning users do not need smartphones to access its services. The app, which was launched in July 2018, is safe and easy to use. It offers biometric face ID and fingerprint verification for those with smartphones. Users can access the app online using their PIN, meaning they can still use the service if they don’t have their phone to hand. Users can also send money to a bank from a phone and perform card-less withdrawals at an ATM.

In addition to its main functions, Eyowo also works as a kiosk system, meaning agents can make money from providing financial services through the app. Once designated as a kiosk, a user can earn commission when they perform financial transactions on another person’s behalf, such as cash withdrawal, funds transfer, bills payment and airtime recharge. Eyowo’s inventors hope this will improve the fortunes of people living in Nigeria and contribute to the country’s sustainable development goals. The company has plans to bring Eyowo to more destinations in the future.

Since launching in 2007, Softcom has worked within the education, energy, financial and telecommunications sectors as a technology partner to the leading organizations in the sector.

Softcom’s goal is to connect people and businesses with meaningful innovation, Eyowo is another step forward in connecting over 70 million unbanked Nigerians with mobile phones to financial services that will improve their lives.

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