World Finance spoke with David Schwartz, from FIBA, on the difficulties controlling terrorist financing through traditional money-laundering laws.
Come back later for a full transcript of this video.
Author: World Finance
What the ZTE Iran case tells us about China’s approach to trade
World Finance spoke with Bill Perry, a US-China trade litigation expert, on what the ZTE Corp case can tell us about the way many Chinese companies approach international trade.
Come back later for a full transcript of this video.
What if cash expired? Oliver Davies revolutionises our monetary system
With all the talk of late about negative interest rates and helicopter money, it seems the war on cash is just getting started. Central bankers are increasingly being asked to drive levels of spending – but this is an impossible task, says Oliver Davies. The author of One Month Money discusses the fundamental problems of our monetary system – and suggests the big idea that could fix them.
Come back later for a full transcript of this video.
African retail banking still has huge growth potential – Guaranty CEO
Countries across sub-Saharan Africa are grappling with the challenges of sustaining high levels of economic growth, amid a backdrop of plunging commodity prices. Segun Agbaje, Managing Director and CEO of Guaranty Trust Bank, discusses Africa’s major economies, the sectors showing most growth, and how banks are turning away from corporates and towards SMEs.
World Finance: Countries across sub-Saharan Africa are grappling with the challenges of sustaining high levels of economic growth, amid a backdrop of plunging commodity prices. Here to discuss is Segun Agbaje, Managing Director and CEO of Guaranty Trust Bank.
Well Segun, first-off: can you talk me through the major economies in Africa – of course Nigeria is leading the way.
Segun Agbaje: Well yes, there is Nigeria. I mean, I try to think of north Africa away from Nigeria. So there’s Nigeria. There’s east Africa – I look at east Africa basically like one zone, it’s becoming an economic zone. In there you’ve got Kenya, Uganda, Rwanda, Tanzania. There is Ghana, which is smaller. Then of course there is South Africa. And then there is Egypt. I think today those are probably the biggest economies I see in Africa.
Then you have Angola, which is obviously oil driven, and Mozambique, which is a gas play, really.
World Finance: And where would you say are the major growth markets, and how are you approaching them?
Segun Agbaje: First in Africa there’s a lot of people who are financially excluded. So retail: banking individuals is a huge growth segment. And the telecoms companies have taught us that. You have countries where you have 140 million mobile lines, and you have 23 million bank accounts. So there’s still so much to do.
And then you have the small and medium-scale SMEs. There’s plenty to do there. There’s food: food is a big thing. There’s the garment industry. Those are the things I see as high growth. I mean, I’ve started moving away from the corporate-type businesses: manufacturing and oil and gas; and coming down to the SMEs and retail-type businesses.
World Finance: Well oil prices have really hit Nigeria – and indeed Africa – how are they impacting the banking industry?
Segun Agbaje: Oil prices is like seven years of plenty and seven years of deprivation: that’s where we are today.
In the banking industry the way you deal with it – at least, the way we are dealing with it – is you make sure that your loan book doesn’t go belly-up as a result of it. You look at the upstream sector, you look at the downstream sector, you try to safeguard your loans.
Also what it does is, you start to look for other parts of the economies that are doing well. And that’s why I just spoke to you about SMEs, retail, food, garment. So we’ve become a little more cautious with loans in the upstream, in the corporate sector. But we’ve become a lot more bullish about our retail and SME business.
World Finance: Well as you mentioned, SMEs are really driving economies in Africa. Do you think the banking sector’s doing enough to support them?
Segun Agbaje: Well, we didn’t start out by doing that. I think most of us functioned as high-end wholesale banks; we liked all the corporates. Then we started to do retail. And now we’ve seen that you need to do SMEs.
The truth about Africa is that probably one-in-three or one-in-two people is an SME. It’s a huge growth segment.
It has a lot of risk – so traditionally banks have run away from it – but we’re beginning to dimension the risk. We’re attacking it very differently; we’re doing things like market hubs for them, we’re doing payment engines for them, we’re giving them capacity in terms of accounting and understanding finance. I think in the next three to four years, that’s again one of the big growth sectors you’ll see in Africa.
World Finance: Now, mobile banking is becoming the norm in many parts of the world. How is the African banking sector responding?
Segun Agbaje: You know, I actually think the African banking sector’s ahead in terms of mobile banking. The test case everybody refers to is M-Pesa in Kenya, which is one of the most successful mobile engines. In Nigeria as well, mobile’s a really, really big thing. When I look at our mobile technology compared to a lot of developed economies, I think we’re a lot further ahead.
And there is a difference. A lot of it is localised. Because when you go to developed economies, you’re doing a lot of internet-type banking on smartphones. But in Africa there is still a lot of poverty, and most people don’t have smartphones. So we’re using what is called USSD technology, and we’re really doing big things in that mobile space for financial inclusion, and not just building a bricks-and-mortar branch network. I think it’s critical, and I think Africa will remain at the forefront of mobile banking technology.
World Finance: Well finally, what trends do you foresee impacting the sector in the coming 12 months?
Segun Agbaje: I think mobile is going to be very, very big. I think you’re going to see people doing a lot in terms of SME-type business. I think payment hubs, and I think payments is going to be a very, very big thing, all revolving around mobile technology.
And I think African banks are probably embracing disruptive technologies a lot quicker, because we don’t have as many legacies.
Jordan’s banks are a haven of stability in the Middle East
The banking sector in Jordan is one of the drivers behind the country’s developing economy, but comes with its challenges. World Finance spoke to Musa Shihadeh, CEO and GM of Jordan Islamic Bank. He talks about the growth of Jordan’s banking sector, the central bank’s adoption of international regulations, Jordan Islamic Bank’s adherence to Sharia principles and its social responsibility.
World Finance: The banking sector in Jordan is one of the drivers behind the country’s developing economy, but comes with its challenges. With me to discuss is Mr Musa Shihadeh, CEO and GM of Jordan Islamic Bank.
Well Mr Shihadeh, if we might start with the banking sector in Jordan. How does it stand today, and since its implementation in 1978 how is Islamic finance growing?
Musa Shihadeh: Jordan banking is a stable sector, they are growing. Last year growth was in assets, almost five percent and in investments about seven percent and deposits about four percent. And they are sound, profitable and doing fine and keeping up with the international standards. Islamic banking started in 1978, my bank was the start. Now they have 15 percent of the assets of the Islamic countries banking sector; 22 percent of the investment, facilities and lending and about 16 percent of the deposits. So they are doing fine, all of them are controlled very well according to the Central Bank of Jordan regulations and applications.
World Finance: Well obviously there’s been a lot of unrest in the region, how is this impacting Jordan’s banking sector?
Musa Shihadeh: Of course first of all it’s impacting the industry. We used to export to Iraq, Syria, Libya and Yemen. Now with the unrest there, trade and exports have turned down; and it’s affected the bank’s activities – supporting, helping and lending for these sectors. The banks turned to invest through the individuals, small projects, SMEs, in the country in order to enhance and develop their business. And the banks are still making a profit and doing fine.
World Finance: Well considering the instability nearby, Jordan actually acts as a peaceful hub for foreign investors, so what does the banking sector offer?
Musa Shihadeh: The banking sector is well-equipped, applying international standards. The staff in the banking sector is very educated and they service local and foreign investors. They welcome them, we keep up with all international standards and therefore foreign investors are welcome and will be serviced as if they are in any country outside Jordan.
World Finance: And in terms of regulation, how developed is the banking sector?
Musa Shihadeh: The banking sector is very developed, because Central Bank of Jordan applies international regulations. They keep up with the banking sector in order to make training for all to comply with these international applications.
World Finance: And how have you incorporated corporate social responsibility into your long-term plans?
Musa Shihadeh: Being an Islamic bank we have to apply the Sharia application in order to service the community in using our funds and money and services. The bank offers free loans for people to use in education, medicine, or sometimes any other needs.
There are two committees in the bank for social responsibility. One for the management and the other for the board of directors, to direct our business. And we have a plan to get social responsibility agreements; we were granted that for our ISO2600 applications. And that helps us a lot in our plans in order to further our business, help SMEs, help the unemployment and our investment and so on.
World Finance: And finally, what’s next for the bank; talk me through your future plans?
Musa Shihadeh: We concentrate on our customers. We try always to be trusted by our customer and ask our customer to be loyal to us by the services we give them. We always find new services or financing or tools in order to service them. We try to apply the latest technology in our services to let the banker feel and the customer feel, that we are a bank as if he is in Europe or any place. Because we feel that trust services and loyalty and products that help the customer, make him continue with us.
Is the fed set to raise rates again?
World Finance spoke with Joseph Gagnon, from the Peterson Institute for International Economics, on whether the US will be seeing rates rise again sooner rather than later.
Come back later for a full transcript of this video.
Middle East paves the way for a diverse real estate market
Real estate, although it comes with its challenges, is a sizzling market practically worldwide and the Middle East is no exception. United Real Estate Company CEO Ahmad Kasem discusses the Middle East’s diversification in the wake of declining oil prices, government strategies to make the region highly attractive to developers from overseas, and his company’s latest luxury golf course development in Morocco.
World Finance: Real estate, although it comes with its challenges, it’s a sizzling market practically worldwide and the Middle East is no exception. With me to discuss is Ahmad Kasem from United Real Estate Company.
Ahmed, how developed is the Middle Eastern real estate market, where’s the highest amount, talk me through the sector?
Ahmad Kasem: The Middle East real estate market is the fastest growing market in the world today. It has grown from being a pure developers’ and real estate entity to become multi-national, and today we have countless real estate developers. If we take, for example, the United Arab Emirates, it has paved the way of diversification of its portfolio.
Whereas a lot of real estate developers were attracted to build and do business in their country, the United Arab Emirates have really focused on providing the state of the art infrastructure system to include bridges, roadways, ports, airports, etc. And that has helped and assisted all the real estate developers to focus and to come into the country, be attracted to the business opportunities, and together as a tax free country it has been a tax haven to those investors as well.
World Finance: This must represent huge opportunities but I also imagine challenges, what were you looking at exactly?
Ahmad Kasem: The biggest challenge that the Middle East has is the price of oil. The decline of the price of oil has prompted the governments together with all businesses to start taking a different look and become more efficient, more strategic and to diversify.
If we talk about the opportunities in the Middle East for the real estate sector, there’s the availability of land and the infrastructure. You have about 365 days a year of sunshine, which provides a good culture for clean energy, if you will, and the use of solar energy.
The government regulations have been in support of bringing investors into the real estate market. That provided a good climate for the real estate investors to come in and develop and succeed. And everybody has been really looking at the Middle East for that opportunity.
World Finance: How difficult is it to invest in this market for foreigners, what are the hurdles?
Ahmad Kasem: The Middle East governments for the past two decades have been really pushing to eliminate all barriers for all investors to come in and be able to invest in the real estate sector. And if we look at Oman, together with the United Arab Emirates, they have paved the way for such an opportunity by providing the ability to any foreign, non-national to be able to come in and purchase a freehold property and own a title to it. That has provided the environment for all investors and people who want to come and live in the Middle East the ability to do so.
World Finance: And what role did developers play in developing the market?
Ahmad Kasem: The developers play a major role in the real estate development market. As in the private sector they bring new projects, they have the responsibility of bringing new projects into it. They normally have to abide and comply with all the government and the local authority’s regulations and requirements.
By doing so all the new projects, whether it’s a design, whether it’s a zoning requirement, they have actually worked together and influenced those governments to adapt and make modifications and revisions to their requirement and regulations, to be in line with the international requirement for real estate developers.
World Finance: So with this in mind, talk me through your latest project in Morocco?
Ahmad Kasem: It’s an 18-hole golf course resort designed by the golf player Niall Cameron to be a desert like golf course, integrated into the natural landscape and that overlooks the Atlas Mountains. We are right now in a process of finishing the master plan to provide a resort which shall include themed villas, together with five star hospitality hotel, resort and a wellness centre, some small retail component, and some staff accommodation. All of this together is going to provide a development that is one of a kind and unique in its type and it will be a destination to a lot of people.
World Finance: Finally, corporate governance is developing rapidly alongside most sectors, so how do you approach this?
Ahmad Kasem: We established two entities, two departments. One is a compliance department and the other is risk management. Both of those look for any compliance issues and to ascertain that every deal, whether with our shareholders, with our management, with our customers, has to comply accordingly. We work very closely with the CMA, which is the Capital Market Authority in Kuwait and we make sure that we are compliant with their requirement and we actually work together and co-ordinate to benchmark. Corporate governance is very important and we ascertain, we ensure, we are compliant 100 percent in our daily work.
Major inflows now come from individual investors, says Eurizon CEO
Markets have been up and down off the back of weak commodity prices and uncertainty. What is the best strategy for investors to weather the storm? Tommaso Corcos, CEO and GM of Eurizon Capital, discusses.
World Finance: Markets have been up and down off the back of weak commodity prices and uncertainty. Here to discuss what’s been happening in Europe is Tommaso Corcos, CEO and GM of Eurizon Capital. Well Tommaso, let’s start with European economies, now they were off to a rocky start for 2016. So what would you say is the investor sentiment on the ground today?
Tommaso Corcos: Well the investors’ sentiment is very conservative at this moment. Not too much given that a lot is already happening in terms of correction, but certainly the speed of the correction of the market, I think that took everyone by surprise in terms of the entity of the correction.
So now a lot of people are really questioning, or which is really a half of the economy, so probably many investors are waiting to be reassured in terms of the capability of certain engines to give support to the world economy.
So, I think that there is a lot of interest in the price of a lot of shares that are reaching interesting targets, but notwithstanding that, there’s still investors that are moving very cautiously, just for the reason that I mentioned.
World Finance: So this sort of investor sentiment, what kind of impact has this had on the asset management industries?
Tommaso Corcos: Starting from the last quarter of the past year and also in the first few months of 2016, we face a slow-down of inflows. But this is pretty normal, I mean you just read every day in the newspapers that the stock markets are going down, that you see a lot of volatility. And so I think that there is a feeling of being more conservative.
So if you have too much invested on the equities, you scale down your risk. Or if you want to invest you take more time to do it and so you wait for better times. I think this is pretty understandable and this is the reason why companies like us must support our distributors in giving the right advice to the savers.
World Finance: Well your company has certainly been bucking the trend with success after success. So what’s been your strategy?
Tommaso Corcos: The strategy is to combine, not only the importance of the performance of the product, but also the capability of giving the right advice, giving the right service to the customer. And this is our mantra, it’s something that we strongly believe, this double combination that is not only performance driven but service driven. Because in the past years the major inflows came from individual investors and not from institutional ones.
Because if you think about what’s happening to the sovereign wealth funds, they really reduced their investment on financial markets. So just being more focused on individual investors means that you must be capable of giving them a lot of service, because they’re not sophisticated like institutional ones.
World Finance: And your principles for responsible investment, talk me through those?
Tommaso Corcos: This is very important. You try to promote the best practice in corporate governance, respecting the environment and taking social responsibility. It’s a win-win situation, because it’s a positive for the final investor that you represent. It is positive for the companies in which you invest, because it’s pretty proven that the companies who practise in terms of corporate governance, have the better performance related to others who do not care for this principle.
Also, it’s very good and positive for the capital in the markets in general, just because a more sophisticated market where all the companies practise this principle is able to lure more investment from institutional investors. And this is very positive, that is why it’s a win-win situation.
World Finance: Now with so much uncertainty in today’s climate, how do you approach risk management?
Tommaso Corcos: In the past few months we scaled down on the risk, waiting for better times and more clarification, first on the economic scenario and second on the profit environment in which we are now. When the market will discount is a factor, we will again raise the level of risk and the fund manager will again increase their position. So risk management in moments like this are important to reduce the volatility of the product performance.
World Finance: So bearing this in mind, what investment trends are you looking towards in the coming 12 months?
Tommaso Corcos: We are still focusing our attention, and the attention of our investors, to move the asset product. What I mean by multi-asset product is an investment solution, an outcome oriented product, giving the possibility to the single customer to enter in a well-diversified solution. So with a single investment they can access the equity market or the bond market.
I think that in an environment like this, where the volatility is still very strong, it must be really clear for the investor what type of product he’s buying, what type of volatility he’s bearing and what type of targets he’s trying to pursue. So that the combination of all these situations can give a product that really feeds the needs of this customer.
How PPP is transforming Turkey
With Turkey now the 18th largest economy in the world, it’s fast becoming a significant market for investors. Thomas Maier and Şule Topçu Kılıç discuss how the Turkish government is fostering this environment by promoting PPP as the model to deliver much-needed infrastructure. They also talk about EBRD’s successes in developing the country’s transport, and its recent programme to provide quality healthcare services that will also be bankable.
World Finance: Investment in infrastructure is fundamental to the development of any country. And this is a sector that’s burgeoning in Turkey, off the back of its buoyant economy. With me to discuss are Thomas Maier and Şule Topçu Kılıç from EBRD.
So Thomas, if I might start with you. Turkey today: how well developed is it in terms of infrastructure, and where are the challenges?
Thomas Maier: Turkey is a significant market for us, and for many investors. Because let’s remember: it’s the 18th largest economy in the world; the GDP per capita is now above $20,000. It has a lot of connections, both regionally and globally. And at the same time it has a lot of infrastructure needs.
For example, in the next 15 years, the government plans to triple the length of its high-speed rail network, double the motorway network, and increase the capacity of its container ports by about 20-25 percent.
So there are lots of opportunities there. And in addition, what encourages us very much is that the Turkish government promotes the PPP model as the key delivery tool to actually bring infrastructure to the people, and to those who require the service.
World Finance: OK, so talk me through your investment strategy in Turkey’s infrastructure, and your implementation in the PPP model in Turkey.
Thomas Maier: When we look at EBRD as a whole, about 20 percent of the business we do there is in transportation and utilities. About $1.5bn, supporting another $8bn or so of investments coming from our private partners and banks.
So it’s a very big segment of our business. And in the past we have concentrated initially on transportation infrastructure, for example: we did the first PPP in the Bosphorus tunnel, a tunnel that connects the east and west side of Istanbul.
We have also supported Mersin, which is the joint venture between Akfen, a very well renowned Turkish company; and PSA, the port authorities of Singapore. And we have recently done a number of transactions in what I would call social infrastructure: hospital facilities management.
We have, together with our partners in the Turkish government, created a programme that will eventually be around $18-20bn, and will supply 15,000 quality hospital beds that are urgently needed in the economy.
World Finance: And how have you measured this success?
Thomas Maier: I would measure the success in two ways. The first one is: does this programme attract international sponsors? Companies that are willing to put money and resources down. And the emphatic answer is yes, because we now have European, American, and global health investors that are coming to Turkey, and are running this programme.
The second one is that we have attracted institutional investors into this programme. And there are quite a number of institutional investors from Europe that are now actively looking and investing in the Turkish health sector. And that’s a great achievement, because it shows that bankable projects in emerging markets are attractive for European institutional investors.
World Finance: And Şule, talk me through your role in the PPP model in Turkey. How have you made it bankable?
Şule Topçu Kılıç: It was a long journey. It started back in 2008, and the Turkish minister of health took the UK PFI model as the basis for the development of the Turkish model.
But because of the differences between the legal framework in Turkey versus the UK, of course, it was not so easy to implement all the model structure of UK PFI to Turkey. And then we, as EBRD, played a very critical role in conveying the important bankability issues to the Minister of Health.
Thanks to the Minister of Health, they were very committed, very patient, listening to us on all the bankability issues such as forex mitigation, which is very important for Turkey because of the Turkish lira; termination and compensation mechanisms; and direct implementation and arbitration.
And certain measures were not really defined in the Turkish legislation, and the Minister of Health made some PPP law changes, in order to make it implemented. And we as EBRD played a very critical role in supporting the Minister of Health to make those bankability issues sorted out.
World Finance: What have been the challenges, and how have you overcome them?
Şule Topçu Kılıç: In a PPP programme which is newly developed in a country like Turkey, bankability issues and solving those bankability issues is one part of the challenges, which was sorted out successfully with the commitment we received from the Minister of Health.
The second challenge, which was very important, was the acceptance of the PPP programme by the public. And political acceptance as well was very important.
So with the technical support we have provided to the Minister of Health, value for money methodology is being developed at the moment, which we will show what the project, if it is done with the PPP model, will be providing in cost and benefit versus if it is done by the public.
Of course another challenge is, the Minister of Health needs to have the full infrastructure to monitor during the construction and operation period. And that’s another technical support we are currently providing.
World Finance: Şule, Thomas: thank you.
Thomas Maier, Şule Topçu Kılıç: Thank you.
Sunway Group commits to lifelong community development in Malaysia
Malaysia has played a key role in the rise of Asia as a global economic powerhouse. One of the foundations of its growth: the country’s robust property and construction sectors. Tan Sri Dr Jeffrey Cheah, founder and chairman of property and construction developer Sunway Group, explains his vision of Sunway as a developer of communities – not just townships.
World Finance: Malaysia has played a key role in the rise of Asia as a global economic powerhouse. One of the foundations of its growth: the country’s robust property and construction sectors. I’m here with Tan Sri Dr Jeffrey Cheah to discuss how the industry is moving forward.
Tan Sri, first: Malaysia’s set an ambition of becoming a developed nation by 2020: how are the property and construction sectors supporting this?
Tan Sri Dr Jeffrey Cheah: As a fast developing economy, the construction and property sectors contribute significantly to Malaysia’s GDP which is set to grow four to five percent this year, and create millions of jobs that support the socio-economic development of Malaysia.
Last year I believe we will grow about five percent. And the construction and property sectors also have strong multiplier effects that cut across many industries in the country.
Our construction arm, for instance, contributes to nation building through infrastructure projects including the light rail transit (LRT), the mass rail transit (MRT), and the bus rapid transit (BRT) that help promote connectivity and accessibility in the country.
Our property arm continues to build communities that enable people to live, learn, work and play in a healthy, safe and connected environment.
Both sectors work hand-in-hand to promote better living and support the country’s vision of becoming a developed nation by 2020.
World Finance: And what makes Malaysia a particularly attractive destination for foreign investment compared with your ASEAN neighbours?
Tan Sri Dr Jeffrey Cheah: Malaysia is a multicultural, multi-ethnic nation with a relatively young population. Malaysia is also the gateway to ASEAN due to our participation in the ASEAN community, and in the Regional Comprehensive Economic Partnership Agreement.
We have competitive tax rates at only 25 percent. We have a wealth of natural resources from palm oil, to rubber, to oil and gas industries; a flourishing domestic market, and a globally competitive workforce.
We are the world’s top location for manufacturing, and we are listed in the top 20 for competitiveness by the World Economic Forum.
Despite a temporary slowdown in the global economy, I am confident that Malaysia remains as an attractive investment destination within the region.
World Finance: Tell me about Sunway Group then; what makes you stand out from the other property and construction developers in Malaysia?
Tan Sri Dr Jeffrey Cheah: It is our unique business model, Build-Own-Operate. And because we operate on the full real estate value chain, this diversifies our earnings base for our shareholders from our construction, property development, property investment and REIT divisions.
At the same time, this translates into a lifelong commitment to communities in our townships and sustainable growth for the Malaysian society. We are hoping to reach out to international communities in this part of the world as we expand our presence across Asia.
World Finance: You style Sunway Group as a Master Community Developer: what do you mean by this?
Tan Sri Dr Jeffrey Cheah: We build communities and relationships by creating jobs and opportunities, while fostering affordable and healthy lifestyles throughout the country.
In each of our flagship townships we remain the largest stakeholder. This way our communities are ensured a lifelong commitment from Sunway to continue growing and developing the townships.
Sunway Resort City is our first flagship township in Central Malaysia, where we have transformed 800 acres of wasteland into a wonderland that attracts some 42 million visitations every year. It is also the country’s first fully integrated green township as recognised by Malaysia’s Green Building Index.
World Finance: You’re not just building Malaysia’s communities, you’re also committed to building Malaysia’s education system. Why is this important to you?
Tan Sri Dr Jeffrey Cheah: My life’s philosophy is “I aspire to inspire before I expire,” and I believe that an investment in knowledge and education, in any society, always is the most powerful weapon to change the world, as Nelson Mandela says.
This is why I decided to set-up the Jeffrey Cheah Foundation: in perpetuity transferring the ownership and equity rights of Sunway Education Group’s 12 learning institutions into the foundation. This makes it the largest education-focused social enterprise in Malaysia to bring quality education to all.
We have forged academic ties with some of the world’s most renowned institutions. These partnerships allow a two-way flow of scholars and researchers between world-class institutions and the Sunway Education Group, to develop and elevate the standards of teaching and research in Malaysia.
As of 2015, the JCF has disbursed in excess of MYR 210m in scholarships to thousands of high-achieving and deserving students. We have also donated more than MYR 15m towards upgrading the learning environment of six of our adopted schools nationwide.
Is the Taiwanese insurance industry set to dominate Asia?
According to government statistics, Taiwan’s insurance penetration of 18.9 percent ranks number one in the world. Tsai-Ling Chao, Executive Vice President of Fubon Life Insurance, explains why insurance products are so popular, and discusses how the sector will continue to develop and grow.
World Finance: According to government statistics, Taiwan’s insurance penetration of 18.9 percent ranks number one in the world, showing insurance products’ great popularity among the public. Joining me to discuss how the sector is developing is Tsai-Ling Chao, Executive Vice President of Fubon Life Insurance.
Tsai-Ling, Taiwan’s insurance sector has developed hugely of late; why is this, and why is the penetration rate so high?
Tsai-Ling Chao: Taiwan is a mature market: most people are aware of the importance of life insurance. The acceptance of reinsurance products is very high – especially Taiwan is aging, so it’s a priority. The pensions provided by government and employers are not sufficient, and people have to save for their own retirement – which creates high demand for savings and annuity products.
The other reason is that liquidity in Taiwan is very high. The bank deposit rate is so low that people are willing to transfer their savings to higher return insurance products.
Banks are also waiting to sell insurance in order to earn commission income. That’s why the bancassurance channel grew substantially in recent years.
World Finance: What would you say are the challenges of Taiwan’s insurance sector currently?
Tsai-Ling Chao: The main challenge is regulation change. During the fast growth of bancassurance in the past few years, the FSC changed the regulations to force insurance companies to offer longer duration products, in order to differentiate it from bank deposits. Which makes new business sales more difficult.
The other one is the consumer-privacy protector act, which restricts insurance companies’ ability to acquire leads – and the telemarketing channel suffered the most.
The other challenge is on the investment side. It is very difficult for an insurance company’s investment team to manage risk – and in the mean time generate a decent return under the low interest rate environment.
World Finance: Taiwan’s government does have some policies in the works aimed at building up competitiveness in the insurance sector to expand business in Asia – how are you responding to this?
Tsai-Ling Chao: We feel very positive about the policy. Taiwan’s market is very mature, and we have to go abroad to pursue growth opportunities.
There are many countries in Asia still in the developing stage. They have pretty big and young populations, just like Taiwan many years ago.
Fubon has a lot of insurance management experience, and is keen to expand into other countries. We have been reviewing many cases, and are open to all possible investment opportunities.
World Finance: Fubon Life has been one of the leaders among Taiwanese life insurers – so what are your plans for future growth, and how are these responding to the sector’s needs?
Tsai-Ling Chao: Fubon’s strategy is focusing more on value than volume growth. We feel that there is huge demand for retirement products in Taiwan, and we are trying to meet customers’ needs.
In order to do that, we have to grow our agency force more aggressively. Fubon’s agency force is mostly concentrated in the north and the metropolitan areas. Our focus for the next few years is expanding into the south and rural areas.
Also, recruitment for the total industry has been pretty challenging in recent years. Fubon’s agency force is still growing at 10 percent per year for the past six years. We usually recruit new agents directly from campus, and have built up a reputation as the most desirable insurance company among young people. We try to keep them by providing good training and competitive products.
The back office support is also very important, to make sure we provide a good service to our clients.
World Finance: And finally, how do you ensure your clients receive the appropriate cover they need – and do you review existing policies for clients?
Tsai-Ling Chao: We have built up a needs-based sales process and trained our agents to identify clients’ needs before selling the right products.
We also have a call-out system from home office to make sure the customer understands the products they have bought.
For existing customers, we use our CRM to identify their needs and send the information to our agents, in order to approach them. We invite them to attend seminars or other activities to help them review their needs.
We also allow them to convert their policies to other products if they don’t fit their current needs any more.
Chile’s domestic consumption will fuel future growth, says BCI
The mutual fund industry in Chile now represents approximately 20 percent of its GDP, illustrating the country’s potential for investment. But is this growth set to continue in the coming 12 months? Rene Peragallo, Head of Institutional Equity Funds with BCI Asset Management, discusses the current situation in Latin America, and how the country’s future growth will be fuelled by domestic consumption.
World Finance: The mutual fund industry in Chile now represents approximately 20 percent of its GDP, illustrating the country’s evolution in the sector and potential for investment in the country. But is this growth set to continue in the coming 12 months? Joining me down the line to discuss is Rene Peragallo.
Will Rene, let’s start with Latin America. What’s the current situation in local markets and the economy?
Rene Peragallo: The economic situation in Latin America is quite challenging right now. The region as a whole is not growing. The fall in the commodity prices and the slowdown in China are affecting our terms of trade, and are putting pressure on fiscal balances.
It’s going to be a long recovery process. But having said that, you should consider some differences among countries; and I personally think that investors are not.
Brazil is not Latin America. It’s the biggest and most important country, but there is a huge political and economic crisis over there. You have a GDP contraction of 3.5 percent this year. On the other hand, you have in the region countries such as Chile, Peru, Colombia and Mexico. They are still growing – at low, single digit rates, but they are growing.
So you have a different context. And the authorities are taking actions to put these economies back on track.
World Finance: Looking at Chile a little bit closer now, and how has it performed over the last 12 months?
Rene Peragallo: Well, the performance of the local stock market is bad this year. The main index is around eight to nine percent down in local currency, and more than 20 percent in dollar terms.
And probably that doesn’t make sense if you compare the performance of the Chilean index with the performance of the Brazilian index. They are showing the same return in local currency, and from our perspective that shouldn’t happen.
World Finance: Where are the opportunities, would you say? And what trends do you forecast in the coming year?
Rene Peragallo: Now we are analysing all the Latin American region, we see many opportunities. Especially in Chile, where the stock market is more than 50 percent down from its peak in 2010.
The economy is growing at a low rate – around two percent – and we used to grow more than five percent during the previous years. So we think that two percent is pretty decent, even in this context. And we believe that the economy will continue growing at a low pace. We’re trying to avoid the commodity exposure, and we are trying to put our focus on domestic consumption, healthcare, utilities, and banks.
I think these services will drive the recovery of the stock market in the next years.
World Finance: And the small cap Chilean investment strategy? Talk me through this.
We think that the small cap companies can over-perform the market in the next three years. We adopted a very fundamental strategy. We hired six analysts to analyse the local market. And from that perspective we see that these companies, which now are trading with a high discount over the stock market, can perform really well in the next three to five years.
This approach is a long-term approach, and we are focusing to bring AUMs from pension funds and other institutional investors in Chile and Latin America.
World Finance: So when it comes to new investments and strategies, what do you focus on?
Rene Peragallo: I would say that we basically focus on consistency with our investment process. We look for strategies we think we can develop in a competitive way. So we start analysing our capabilities, and which one we need to enhance.
We also look for strategies that can complement our clients’ asset allocation. So we are always studying their portfolios, trying to match what they are doing with what we can develop in a competitive way, and from a long-term perspective.
We’re bringing talents to our investment teams – not only in the research area, but also we’re bringing PMs with excellent track records, and exclusively dedicated to our LatAm strategies.
World Finance: How do you go about developing institutional market strategies?
Rene Peragallo: We have two different models. We have our own funds, and I’m in charge of developing the equity strategies for institutional clients. And we also are looking for partnerships with global investment funds and global asset managers.
And we also are enhancing our capabilities in all the alternative funds. We want to go and to improve our capabilities in those asset classes that are very appealing right now, because they can offer our clients a more diversified asset class exposure and better returns.
World Finance: Finally, how do you see the current political climate in the region impacting the future of the equity market?
Rene Peragallo: There is a big change here. In December the opposition in Venezuela won the national assembly, so now they’re going to rule the congress. Argentina, two weeks ago we had a new government – the opposition won the election – and they can make a big, big difference for the next years.
And we are going to see what’s going to happen in Brazil. You know this impeachment situation… the government is in a crisis, they have less approval than the inflation rate. And that means that in the future we believe that there’s going to be a more rational approach to the private sector, and you will see less intervention in the markets. And that’s good, because the environment for the investor is going to be better than in the past.
Oman LNG documentary – From Strength to Strength – Part Four
In the final part of our documentary with Oman LNG we travel back to Muscat and the Ministry of Oil and Gas, where we learn about the growing demand for gas and electricity.
Thanks for watching! You can now watch the full Oman LNG documentary on the World Finance Youtube channel.
World Finance: Oman LNG’s social investments in Sur have had a clear impact on improving the quality of life for local people. From constructing a walkway over one of the main – and very busy – roads in the city, to building a promenade along the Albarr beach, to vocational training for residents in Qalhat village: the oldest village in Sur, and a close neighbour of the Oman LNG gas plant.
Qalhat village is the closest village to Oman LNG, situated around five kilometres west of the gas plant. And it’s developed considerably since 2000, with the company supplying a desalination plant, and also distribution systems to the households.
Over the years, Oman’s corporates have realised that backing social causes, small business initiatives, and NGOs, does not make them stand out. Companies like Oman LNG want to showcase a more active role in society: such as by creating jobs.
This has led to initiatives such as this: teaching Qalhat village women a trade.
This programme teaches women tailoring, providing a vital income for families, and supplying rent for housing so that women, once trained, can start their own businesses.
Oman LNG has also built and supplied equipment for a local kindergarten, offering a start in education to local children up to the age of five.
Social investment really is one of the ways the company contributes to Oman’s national development. Even before the company liquefied its first volumes of natural gas in 2000, it invested OMR20m to help establish Sur General Hospital.
Dr Mohammad Ibrahim Alfarsi, Executive Director, Sur General Hospital: We are proud of Oman LNG for supporting this hospital from the beginning.
Oman LNG donated a lot of equipment, like a CT scan, another CCU, and BICU. This is of great benefit to the community. And this has serviced all of the patients – not certain types of people, but all of the patients get the benefits. And in the future we will continue our co-operation between Oman LNG and Sur Hospital for better health services to our community.
World Finance: LNG is a growing energy market; and with more and more consumers turning to non-oil based energy sources, it’s likely to sustain itself as a forerunner in energy development for years to come.
Mohammed Bin Hamad Al Rumhy, Minister of Oil and Gas, Oman: We are facing challenges. Now, everybody wants gas in the country. The local entrepreneurs want gas. I want gas so that I can export more: I think it’s good business for creating wealth for the country. Heavy industry that we need in the country wants gas.
The standard of living in the country, I think, is growing: everybody wants to build homes, everybody wants to live comfortably. And all that requires energy – which is electricity here – and water: that requires gas. So gas demand is a major challenge in this Ministry, in the government. How can we meet the ever-growing opportunities in LNG business, while at the same time meeting the local requirement of gas?
So, we are doing our bit. Sometimes you need a bit of luck to find more gas, both off-shore and on-shore. More exploration, to revisit our old fields, to see if we can produce more gas so these requirements are met and balanced. Including the future of Oman LNG.
The life of Oman LNG was assigned to be 25 years. We are almost 15 years into that, so we have 10 more years. But I think in the next 10 years a lot of opportunities exist in finding more gas, and keeping the industry going.
These are exciting times for the gas industry. So I think Oman will continue to play its little, important role in the world. To add a little bit more, a few more drops, of that requirement.
Oman LNG is small, in terms of number of people. Its setup is smallish. But it has created huge wealth as a source of income, of foreign earnings. So all in all, it’s a major contributor of economic growth.
World Finance: In the near future, it’s unlikely that Oman will challenge the likes of neighbouring Saudi Arabia and the UAE in terms of oil and gas output. But the contribution that Oman LNG can make to the region is not to be ignored: both in growing Oman’s wealth, and improving its quality of life.
Myanmar’s new government will spur even faster growth – KBZ Bank
Myanmar was closed off from the global economy only a matter of years ago. Yet today the country is starting to be seen as Asia’s last frontier. Zaw Lin Aung, Deputy Managing Director of KBZ Bank, discusses the progress Myanmar’s banking sector has made since 2010, and recommends four key industries for investment as Myanmar’s new government settles into power.
World Finance: Myanmar was closed off from the global economy only a matter of years ago. Yet today the country is starting to be seen as Asia’s last frontier. With me to discuss is U Zaw Lin Aung, Deputy Managing Director of KBZ Bank.
Well U Zaw Lin Aung, if I might start with Myanmar: this has opened dramatically in the past few years, so what sort of changes have you witnessed?
U Zaw Lin Aung: A new chapter in Myanmar history started in November 2010. Since then many developments have taken place in political governance and economic reform, aiming at increasing openness, empowerment, and inclusion after decades of authoritarian regime. And the foundations of open market economies are being laid after years of isolation.
World Finance: And what would you say have been the major milestones in Myanmar’s banking sector over the last few years?
U Zaw Lin Aung: The authority of the state has revised the legal framework and the various requirements for the financial sector in order to modernise the infrastructure, the institutional framework, to liberalise it for the Asian market, and release some administrative control.
The Central Bank of Myanmar – the major development was the awarding of the authorised dealer licenses, money changer licensing to private commercial banks.
The Central Bank of Myanmar implemented the banking network, the automatic clearing system house, and established the Myanmar payment unions for the first national payment gateway. And nine foreign banks were awarded branch licences for their corporate customers.
World Finance: And the rate of growth in the banking sector; what’s that dependent on?
U Zaw Lin Aung: The rate of growth in the banking sector is particularly dependent on the sound continuation of the regulatory reforms, the development of human resources, and especially, gaining public trust.
The rate of growth in the banking sector is tied to the economic growth of the country. The rate at which the Myanmar economy grows particularly depends on how attractive Myanmar is perceived by foreign investors.
I can particularly recommend business investments in four key areas: infrastructure, manufacturing, communication and education.
Investment in Myanmar has risen from $200m in 1989, when the country first opened, to approximately $8.5bn in 2014-15.
World Finance: And the challenges?
U Zaw Lin Aung: The Myanmar banking sector is facing challenges particularly in the pace and nature of the regulatory reform process, in developing human resources and re-establishing public trust.
These challenges are even more important when taking into consideration nine foreign banks have already entered Myanmar; and Myanmar is going to join the single market of the ASEAN economic community by the end of 2015.
As Myanmar’s banking sector grows in terms of size and complexity, so will the demand on the human resources of the banks. About 15,000 new staff are joining the banking industry every year, but there’s only about 300 graduates who can be trained in the sector.
So the demanded skills are always changing, and there is currently no specialised training offered in the industry.
World Finance: So overall, how has Myanmar’s economy faired over the past financial year?
U Zaw Lin Aung: Myanmar’s economy grew 8.5 percent in real terms in 2014-15. But the growth is projected to moderate to 6.5 percent in 2015-16, due to the floods and slowing investments.
The rapidly increasing demands for investment-related imports has widened our current account deficit. This together with the general strengthening of the US dollar has put pressure on Myanmar’s exchange rate. So rapid growth in credit to the private sector has fuelled monetary expansion.
Inflation is estimated to reach over 10 percent in the year up to July. Our fiscal policies and expanded credit are contributing to the growth of the economy, but both fiscal policy and monetary policy need to be tightened in the forecast period to dampen inflationary pressures and to stabilise the exchange rate system.
World Finance: And finally, looking toward the future now: do you see this growth continuing, and why?
U Zaw Lin Aung: Yes of course! The growth will continue in the future. The trend for the past five years since political and economic reforms occurred in 2010, Myanmar has been consistently experiencing a growth rate of around eight percent.
Now that Myanmar has concluded our general election in November 2015, with Daw Aung San Suu Kyi’s party, the major opposition party, winning a landslide victory and gaining a supermajority, and it will be forming the new government. That’s why the growth rate will increase even more.
This political development is pretty much welcomed by western international investors. So I expect western multinational corporations which have thus far maintained a ‘wait-and-see’ attitude to finally enter Myanmar like many companies from our region have been entering in the last few years.
Oman LNG documentary – From Strength to Strength – Part Three
In the third part of our documentary with Oman LNG, we learn how Oman LNG gives back to the Omani people through its wide range of corporate social responsibility projects.
We are serialising our new documentary series on Oman and its liquefied natural gas industry throughout this week. Please subscribe to our channel to get notifications of each new episode as it goes live.
World Finance: Oman LNG is a vital company for Oman. The liquefied natural gas sector creates wealth, employment, and is helping to diversify the economy.
But what really embeds the company in the heart and soul of the country is its social investment programme – an integral part of Oman LNG, and Oman.
Beyond its direct contribution to government coffers, Oman LNG dedicates 1.5 percent of its income after tax to a number of CSR initiatives: such as this, the Institute for the Blind, where the company supplies learning equipment such as brail typewriters and computers.
The school, based in Seeb, Muscat, is run by the education ministry, and looks after more than 150 children, ranging from six to 16 years old. It also offers education for adults.
Oman LNG started working with the institute in 2007, as part of the company’s efforts to improve the quality of life for people in the Sultanate.
Over the last seven years, the company has donated over $100,000 in equipment and education software to help with language skills.
Another beneficiary of Oman LNG’s social investment is the Al-Rahma team charity in Muscat.
The team distributes emergency aid and everyday necessities such as medical supplies, food, blankets and clothing to Oman’s poor and needy.
The charity’s new van is thanks to Oman LNG.
Adel Al-Moslahi, Volunteer, Al Rahman Team Charity: It started in 2007 – this cyclone hit Oman, its name was Gonu. In that time it was about four or five people. But after the cyclone, many volunteers came to help. So from that time it’s become bigger and bigger until now: now we’ve been operating about seven years, and we have more than 1,000 people who help here.
The truck helps us to give clothes, and also to provide furniture, and everything we do to help people, to their houses. So this truck will help us to provide these things to the door of poor people.
World Finance: Oman LNG’s social investment covers a broad range of projects, including conservation, preservation of historic buildings, and charities of all descriptions.
As well as supporting projects in Muscat, Oman LNG invests heavily in Sur, where its gas plant is based.
The Sunaysilah Castle is just one example of the company’s work in historical preservation. The 300 year old stone and sarooj structure is being renovated, thanks to Oman LNG.
The impressive four-towered castle overlooks most of the city, including the marina, where another initiative is funded.
The Oman Sail School gives local children the opportunity to enjoy Oman’s beautiful coastline. Although Sur is traditionally a fishing town, many children would not have the chance to sail without Oman LNG’s donations of boats, safety equipment, and training courses for the school’s instructors.
Nawal Alghadan, Chief Instructor, Oman Sail School: Oman LNG, they make a lot of things that are good for us. So this is like a new sport in Oman, and they help us to show everybody here what sailing is. And it’s going to be more important for them to know, because their fathers and grandfathers were sailors before them. So it’s to keep this sport in Oman.
World Finance: For centuries, people in Sur built their lives around the location’s coastal waters, with fishing the main industry in the city.
This is the old fish market. Every morning, fishermen from the region and beyond come to sell their catch of the day. Fishermen, locals, and restaurant owners have been trading like this for decades – if not centuries.
Preserving this kind of cultural heritage can be just as important as preserving ancient architecture.
Sur’s shipbuilding industry is another way that Oman’s history meets the modern day.The sambuk and ghanjah – types of dhow that sailed as far as China – have been built in this city for over 1,000 years.
Today the city has retained its reputation as a major shipbuilding town. The very same vessels that were used for trade so long ago are now sold to Qatar for the tourism industry.
Although the city is relatively small, with a population of just over 71,000 people, the effect of Oman LNG’s CSR initiatives are big.
The company even promotes entrepreneurship, and has partnered with the Ministry of Manpower to support training for employment in other sectors – which has provided long-term employment for more than 1,400 people.
Abdullah Al Sinani, Lead HR Officer, Oman LNG: This is the learning and development centre, and we are proud to be one of the best employers in Oman, in terms of learning and development.
The company allocated a budget of around $6m for learning and development this year. Our Omanisation reached more than 90 percent, and this ensures that proper learning and development is in place.
World Finance: Omanisation – the practice of training Omani people to take on the roles traditionally dominated by ex-pats – is another example of how working for the good of the nation is at the heart of Oman LNG.
Mohammed Bin Hamad Al Rumhy, Minister of Oil and Gas, Oman: LNG has contributed more than we expected to the country. The social contribution, human resource development… Oman LNG is a very well-respected organisation by the public, by our foreign partners, all stakeholders to be honest with you. And within the oil and gas industry in the country it’s playing a huge, huge contribution to the development of Oman.
World Finance: And one of Oman LNG’s largest social investments has been improving the health of the nation.
Dr Mohammad Ibrahim Alfarsi, Executive Director, Sur General Hospital: We are proud of Oman LNG for supporting this hospital from the beginning. It’s of great benefit to the community.
