Author: World Finance

Chile’s domestic consumption will fuel future growth, says BCI

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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

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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

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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

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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.

Oman LNG documentary – From Strength to Strength – Part Two

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In the second part of our documentary with Oman LNG, we visit the historical town of Sur, where Oman LNG’s liquefaction plant is based.

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 has a burgeoning natural gas sector. And as the country’s primary exporter of liquefied natural gas, Oman LNG is also becoming a reliable supplier of one of the cleanest fossil fuels available.

Here we are in Sur, about 200km east of Muscat, where the Oman LNG gas plant is based.

Here the company employs around 400 members of permanent staff from the area to ensure its uninterrupted supply of liquefied natural gas.

Oman LNG was established by a royal decree in 1994, and now runs at a 34 million cubic metre capacity per day.

Initial investment in the Oman LNG plant, based in Sur, was $2bn. Now, annual revenue from exports exceeds $5bn annually.

Nasser Al Balushi, Technical Operator, Oman LNG: The main aim of Oman LNG is we liquefy the gas that we receive from PDO – Petroleum Development Oman. We receive the gas at the starting point, from the gas metering station. Then it’s processed through three identical liquefaction trains – train one, two, and three. The aim of the process trains is to liquefy the gas that we receive.

So, we switch on the gas, and then the gas is dehydrated and liquefied to a temperature of -162°C. Then this liquefied natural gas is stored – we have two LNG tanks – then it is shipped to LNG tankers and it sails to the customers.

Harib Al Kitani, CEO, Oman LNG: We don’t only sell long-term LNG. We also market spot cargos. And this increases the number of our contacts outside. For instance, we have almost 40, or over 40, master agreements with different buyers. Some of them, they don’t buy; but they are ready to buy, when there’s an opportunity.

So we have a pretty good footing into all markets, west and east. And our location in Oman, we are just in-between, equidistant, from the west and the east.

Oman is friendly to all countries of the world, and we do business to as many as we can.

World Finance: This is the heart of the Oman LNG operation – the control room. Everything from the pressure, temperature, and production rates, to loading and shipbuilding schedules is monitored and controlled from here.

There are usually around six people working in the control room, to prevent any abnormalities, and keep production constant.

Oman’s export of liquefied natural gas has often been described as the game-changer to the country’s economy, because earnings from the sale of LNG cargos have also provided elbow-room for investment in other promising sectors.

Harib Al Kitani, CEO, Oman LNG: So, we have quite a successful Oman shipping company, with a lot of vessels, in all products and crude. But it started initially with LNG.

And also we built capacity, as I said, in SMEs and other industries, with which we share common facilities as well.

World Finance: Oman LNG has really become an integrated part of the Omani economy, and acts as a model for good corporate governance across the country.

Harib Al Kitani, CEO, Oman LNG: We are audited by a number of institutions, by our external auditors or international companies, by our state auditors, by our shareholders. And thus, I think, we are one of the leaders in corporate governance.

Safety is our core focus. We put so much effort on safety, because we want people to come and work, and go back safe. We don’t want people to lose fingers, we don’t want people to get hurt when they work. And we emphasise this in daily meetings, in publications, in promoting safe work and safety culture.

We have even gone down to the staff and made them commit, as we call it in our statement, is changing culture. You have to commit: what are you going to do this year, next year, in making sure that you are doing some safety conducts, safety practices.

And this is a culture – it’s evolving. It’s been successful so far, and it’s being driven from the top to the bottom. And now we’re also engaging our contractors to follow the same thing. And they love it! Because we have big activities like shutdowns in the plant, and we have thousands of people in the plant. And they work, and go home safe.

Mohammed Bin Hamad Al Rumhy, Minister of Oil and Gas, Oman: We take safety extremely seriously. We have very good partners in our industry, whose reputation on safety is extremely important for them, as well as for us. The likes of Shell, Total, our eastern partners like Core Gas.

Oman, I think – without blowing our heads too big – we take environmental and health issues at a very, very high priority in our day-to-day thinking. And I think the company is doing very well.

Harib Al Kitani, CEO, Oman LNG: We have just achieved almost 13 million man-hours without lost-time injury. And this is not a small feat.

World Finance: But Oman LNG’s commitment to ethical practice doesn’t stop at its employees. The company sees its mission as improving the lives of all Omani people.

1.5 percent of Oman LNG’s net income after tax goes into its diverse social investment programmes, benefitting people of all walks of life.

Oman LNG documentary – From Strength to Strength – Part One

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In the first part of our documentary with Oman LNG, we explore the country and its flourishing energy sector.

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.

Mohammed Bin Hamad Al Rumhy, Minister of Oil and Gas, Oman: I think the world is moving back towards relying on fossil fuels. The world will need more gas. Oman will rely on this business, I think, for a little bit longer than we thought.

Harib Al Kitani, CEO, Oman LNG: We are a company that has not left any stone unturned. We’re an example of a successful company in Oman and in the region, and we’ve gone from strength to strength.

I think as a model, it’s just one big success.

World Finance: Oman is the oldest independent state in the Arab world. It has a rich history, culture, and economy. But while its agriculture and tourism sectors are still growing, the backbone of the country has been built on its flourishing energy sector.

The Middle East has met most of the world’s energy needs in recent decades – with Saudi Arabia, Qatar, and the United Arab Emirates very much being seen as the region’s heavyweights. But just south-east of these resource-rich countries lies Oman: the largest oil and natural gas producer in the Middle East that’s not a member of OPEC. And with its new oil discoveries outweighing production, it’s making a name for itself in the region and beyond.

Located on the Arabian peninsular, Oman’s proximity to the Arabian Sea, Gulf of Oman, and Persian Gulf, grant it access to some of the most important energy corridors in the world – enhancing its position in the global supply chain.

Mohammed Bin Hamad Al Rumhy, Minister of Oil and Gas, Oman: Oil and gas is taking more of a role in meeting the world’s energy needs. And with all these new sources of hydrocarbons – shale oil, shale gas – I think the world is moving back towards relying on fossil fuels, hydrocarbons particularly.

Because gas is clean and environmentally acceptable, the world will need more gas. Oman will rely on this business, I think, for a little bit longer than we thought. The business will be more active in the coming years, despite challenges.

World Finance: Like many countries in the region, Oman is highly dependent on its hydrocarbons sector. According to the Oman Ministry of Finance, in 2012, Oman’s hydrocarbons sector accounted for 86 percent of government revenues. The sector also accounted for around 40 percent of Oman’s GDP.

But the government is trying to diversify its economy away from oil. And that, in part, is where liquefied natural gas comes in.

Mohammed Bin Hamad Al Rumhy, Minister of Oil and Gas, Oman: Two things happened when we discovered large quantities of gas. We set goals that we wanted to diversify initially from oil. And we thought gas would play a big role, and we did succeed on that. We’ve been doing very well in making gas in general a serious industry in the country.

Then, the other decision we took was to create LNG business, to export gas. And that has done more than what we expected, because almost 10 percent of our revenue in the country is through the LNG business.

World Finance: The Omani government owns a major stake – 51 percent – in the country’s leading natural gas exporter: Oman LNG. And with notable global backers such as Shell, Total, Korea LNG and Mitsubishi, the company is seen as a rising star in the region’s energy market.

Behind me you can see the headquarters for Oman LNG. Since its inauguration in 2000, the plant has grown to have a three train plant operation, and a 10.4 million ton per annum production capacity.

Harib Al Kitani, CEO, Oman LNG: LNG is an energy or fuel of choice. It’s the first and number one green fuel, if you like. It is flexible in its delivery. It is flexible to go to different destinations. And it’s growing: both supplier-side and consumer-side.

You have countries which are not – traditionally, they are not – LNG consumers. Like our neighbours in Kuwait, Dubai, Bahrain. These countries have got oil, but they still want – and some of them are already importing – LNG.

So, you can see the consumer-side is increasing. A lot of countries like India and China are booming in LNG. In Japan, after the nuclear disaster a few years ago, LNG has been replacing nuclear in that country. And on the supplier side, we have now shale gas in the US. Now the US, instead of importing LNG they’re exporting LNG. And Europe is growing. So, LNG is here to stay.

World Finance: In 2013, Oman LNG and Qalhat LNG were combined, in an effort to streamline the country’s LNG sector. The new company – also called Oman LNG – now controls the country’s export capacity.

Harib Al Kitani, CEO, Oman LNG: Oman LNG started production in the year 2000, but it was formed in 1994.

It has been a huge success. And after the success of Oman LNG, the government decided to build another train, with a new company, called Qalhat LNG, with its capacity half of Oman LNG.

And after a few years of also being successful, then it was decided that we merge these two companies, so we don’t duplicate a lot of work. Because we’re dealing with the same markets, from the same source. And almost the same shareholders.

So, it was obvious that there are synergies between these two companies that we wanted to benefit from.

So far we have already started reaping benefits in terms of value creation and savings from combining the two companies. And also showing one face of Oman to the LNG world.

World Finance: That face is located 200km south-east of Muscat, in the small but vitally important city of Sur.

This city has long been associated with sailing and shipbuilding. And it’s here that Oman LNG has based its plant.

Sur’s heritage of welcoming visitors from across the seas makes it the perfect base for international industry.

Harib Al Kitani, CEO, Oman LNG: Oman is friendly to all countries of the world, and we do business to as many as we can.

Myanmar insurance is a huge opportunity for foreign investors – IKBZ

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Most sectors in Myanmar’s opening economy are growing – and that is certainly true of the insurance industry. Nyo Myint, Vice Chairman of IKBZ Insurance, says insurance has great potential for foreign investors seeking opportunities in Myanmar’s modernised financial services sector.

World Finance: Most sectors in Mynamar’s opening economy are growing – and that is certainly true of the insurance industry. With me to discuss is Nyo Myint, Vice Chairman of IKBZ Insurance.

Well Nyo Myint, I want to start with the financial landscape in Myanmar. How does that stand today in the context of the insurance sector?

Nyo Myint: The country is now on the path of economic development. Big changes have been witnessed in all sectors, including insurance. The insurance market was opened up to domestic private players just two years back.

The insurance sector has great potential. But for the moment there is extremely low insurance penetration.

In 2014, some eminent multinational insurers began establishing domestic offices. There are already about 24 insurance companies that have opened offices in Myanmar. Among those companies that have been in Myanmar over three years were allowed to operate insurance services within the Myanmar special economic zone.

However, the Myanmar insurance industry is still in its infancy, and it has a lot of opportunities for both domestic and foreign insurers.

World Finance: And when did the market open up for private insurers?

Nyo Myint: Under the guidance of the government of Myanmar, the insurance business supervisory board was formed, and launched the licence application process for private insurance companies back in 2012, in order to diversify the provision of insurance services, and to modernise the sector.

The insurance industry in Myanmar began a transition from a centrally planned operation into something closer to a free market in late 2012.

A five decade long monopoly of the state-owned Myanma insurance was ended when the 12 private insurance companies were established, with six life insurers and six composite insurers in 2013.

World Finance: And how is IKBZ positioned in Myanmar’s insurance sector?

Nyo Myint: IKBZ is the first private insurer in Myanmar to be registered as a company. Through a growing network of 14+ branches across Myanmar, and also engaging wider branches of about 360+ of our sister concern Kanbawza Bank as a window to reach out to our customers, ee are within reach of the majority of the population of Myanmar.

Within this short span of time, we have earned a good reputation for our excellent performance in services delivered. We dominate the largest market share with the highest amount of premium income compared to our competitor companies.

World Finance: And how are client needs changing – and how does your company react to this?

Nyo Myint: We believe that the customer is the king. Therefore we put the client’s needs at the centre of everything we do.

We recommend the products and required coverage for them, all based on their changing needs. Amendments are also undertaken and encouraged.

We invest a lot in digital technology and infrastructure, making it easier, better, and faster to do business with us. Whenever a claim arises we make a promise to give compensation as soon as possible.

World Finance: And in the insurance sector, are there opportunities for foreign investors?

Nyo Myint: Myanmar is regarded by the international communities as the last frontier of Asia.

According to the Myanmar investment commission, the oil and gas sector is the main driver of growth. But apart from the oil and gas sector, there are many key areas: agriculture, electric power generation, telecommunications, manufacturing, and infrastructure.

Myanmar Thilawa, a special economic zone near Yangon, was put into operation, signifying the opening of a new chapter of investment in Myanmar.

World Finance: Well finally, what’s in the pipeline for IKBZ, and indeed how do you see the insurance sector in Myanmar evolving in the future?

Nyo Myint: Currently we are working to transform ourselves to be regionally competitive, while maintaining our position with the largest market share in Myanmar.

With the successful completion of the general elections in Myanmar last month, which is anticipated to bring significant development and betterment to the country, we hope that facing the rapid flow of foreign investment under the management of the new government, the insurance business regulatory body will open the market further. And eventually allow domestic private insurers with more premium products and opportunities to work with the multinational insurers at early stages.

Greek banks recovering well after recapitalisation, says Eurobank GM

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How have Greece’s banks been affected by the Troika’s stabilisation programmes and the European Central Bank’s higher capitalisation requirements? Dimosthenis Arhodidis, General Manager of Eurobank Ergasias, says that after a terrible 2015, Greece’s banks are recovering well and are hopeful for 2016.

World Finance: Years of fiscal derailment and chronic competitiveness problems have been at the heart of Greece’s financial crisis, which has seen two successive Troika IMF stabilisation programmes since May 2010. But how has this impacted the country’s banking sector? Here to discuss is Dimosthenis Arhodidis, of Eurobank.

Well Dimosthenis, the face of the banking sector in Greece has been plagued with crisis. So what’s the situation today?

Dimosthenis Arhodidis: The situation today is a lot more stable than it was a few months ago. Greek banks have been recapitalised – all four systemic banks. The last one to be recapitalised was the National Bank of Greece, and the recapitalisation exercise finished a few days ago.

However, we went through a terrible 2015. Supposedly 2015 was going to be the turnaround year. However, the negotiations of the leftist government that took power in January 2015 lasted for about six months. We ended up with capital controls which cost the economy quite a bit.

Also we ended up with another round of stress tests by the European Central Bank, which led to capital needs that banks needed to raise.

Fortunately, all four banks managed to raise the funds needed for the recapitalisation, so hopefully the future will be much better, with a banking system that is sound and totally recapitalised.

World Finance: Well you mentioned stress tests, and they happened in October. So what were the key findings to come out of these?

Dimosthenis Arhodidis: The stress tests actually started in August, and finished sometime in October. They key findings were that there were still capital needs for some of the banks. However the bank that I work for, Eurobank, ended up number one in terms of capital needs: meaning it had the least capital needs of all four banks. And we managed very easily to raise all the capital needed under the adverse scenario using private funds.

World Finance: So how resilient would you say the banking sector is, moving forwards? And where does Eurobank fit into this?

Dimosthenis Arhodidis: The banking system is definitely a lot more resilient. However, its resilience will be proven as we go through 2016 and 2017, hoping for an economy that will grow, instead of still being in recession.

The banking system needs to focus on bringing back deposits. One very important statistic is that about €45bn are kept in cash at homes: this is about 25 percent of the country’s GDP.

The resilience of the banking system will depend on how easy, or how quickly, these funds will come back into the banking system to improve its liquidity, because banks need to provide liquidity to the economy.

Also, the resilience of the banking system will be tested by the way banks will handle all their non-performing loans. As you can imagine, after six years of being in a recession, about 40 percent of the loans portfolio of the banks is non-performing. So banks need to handle this NPL portfolio, try to get the loans back, and stop building provisions, which hurt their profitability.

World Finance: Greek banks are now going through a period of recapitalisation. Talk me through this – how are you feeling the impact?

Dimosthenis Arhodidis: One of the things that the recapitalisation exercises do to banks is, banking employees stop doing their regular work and focus more on what the stress test results will be, and how the bank will be recapitalised.

So for the last two and a half months, we were focusing on that, instead of focusing on our actual job, which is to serve the clients, satisfy their needs, and create value for the clients and the bank.

As I said, this exercise is over now, so hopefully we will go back to our regular work, which is to serve the clients, create value for them, create value for the bank and its shareholders. And we’re ready to go back and support the Greek economy.

World Finance: And what are the remaining challenges for Greece’s financial sector moving forward?

Dimosthenis Arhodidis: The challenges are mostly political. We need to have a long period – I’m not sure how to define long period – but I would say we need to have at least a couple of years without elections. Elections create instability in any country, but more so in Greece right now.

nd we need the political system to move along with the reconstruction of the Greek economy, apply all the necessary changes needed, reduce bureaucracy, fight tax evasion, fight corruption, and give incentives for investments to come back to the country.

Either from Greek individuals and entrepreneurs who hold assets and capital abroad, and could bring it back to the country and make investments. Or attract foreign direct investment, which has been at very low percentages relative to GDP if you look throughout the last 10 years.

World Finance: And finally, how do you see the country’s economy developing: any green shoots?

Dimosthenis Arhodidis: There is a lot of potential for the Greek economy. Asset prices are very low. We are at a point where entry prices are very attractive for investors. Tourism is one sector that attracts a lot of attention from abroad. Also fish farming, energy; there are sectors where an investor could come in, buy very cheaply, make the necessary investments, and make money out of this.

We’re talking about internal rates of return, IRRs of at least 15 percent. So there’s a lot of potential for the Greek economy.

World Finance: Dimosthenis, thank you.

Dimosthenis Arhodidis: Thank you very much.

KBZ Group: Don’t wait too long to invest in Myanmar’s growth

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After 50 years of isolation under military rule, Myanmar’s economy has been slowly opening up in the past few years. That may pick up pace now that Aung San Suu Kyi’s party has won the election. Nyo Myint, Senior Managing Director of KBZ Group, and Zaw Lin Aung, Deputy Managing Director of KBZ Bank, say that now is the time to invest – before Myanmar’s new ASEAN partners take the opportunities for themselves.

World Finance: After 50 years of isolation under military rule, Myanmar’s economy has been slowly opening up in the past few years. That may pick up pace now that Aung San Suu Kyi’s party has won the election. With me to discuss the investment opportunities moving forwards is Nyo Myint, Senior Managing Director of KBZ Group of companies and Zaw Lin Aung, Deputy Managing Director of KBZ Bank.

Well Nyo Myint, if I might start with you: what sort of changes have you seen to Myanmar’s economy recently?

Nyo Myint: Myanmar’s economy has seen significant growth. Every year since 2010 the economy has grown at least eight percent. And in the 2014-15 fiscal year, the country recorded foreign direct investment of $8.1bn. That was more than $300m the country received in 2009-10, before the liberalisation occurred.

There has been the same internal economic growth for the last few years. However, the growth for this year, 2015-16 is projected to moderate to 6.5 percent due to the severe floods that took place in the country.

World Finance: And Zaw Lin Aung, over to you now. So the financial sector: what’s been the knock-on effect for you?

Zaw Lin Aung: In the last four years there have been significant developments in the financial services sector. The major development was the awarding of the authorised dealer licences to four private banks in November 2011. And KBZ Bank is one of the licence holders in the industry, so we can engage in international banking and trade finance business.

In December 2011, ATM machines were allowed to be installed; within four years, over 1,000 ATMs have been deployed across the nation. Our KBZ Bank has the largest ATM network in Myanmar. Now Visa and Mastercard can be used in the country.

The other development was in the last year. Nine foreign banks were awarded banking licences, which encouraged healthy competition and improved our financial sector as a whole.

World Finance: And Nyo Myint, Aung San Suu Kyi has of course recently won the election, so what’s the business sentiment surrounding this?

Nyo Myint: Most of the multinational companies are believed to be prepared to invest in Myanmar. Apart from the financial aids and grants to be contributed by international institutions. So we look forward to moving business more vigorously during the tenure of the new government.

The winning party also said they are committed to financial sector reform, which may lead to a lower inflation rate, steady the local currency, more autonomy to certain banks, greater transparency, and so on.

World Finance: And Zaw Lin Aung, what would you say are the biggest growth opportunities for enterprises today?

Zaw Lin Aung: There’s a huge opportunity in the emerging economy like Myanmar, not just fundamental sectors like infrastructure, but knowledge-based industries, as well as education and hospitality.

In the short term there are many opportunities in the tourism industry. The communications industry is very promising with the loss of potential. The mobile phone industry has seen massive growth, but it’s still in its infancy in Myanmar.

Developments in other forms of communication are needed much more.

I can recommend business opportunities in four key areas: especially in infrastructure, manufacturing, communications and education, for the quick win.

World Finance: And Nyo Myint, how important would you say it is for companies to focus on social development?

Nyo Myint: Of course, social development is central to this transformation that is happening in Myanmar. There is no point in having the economic liberalisation if it doesn’t filter down to all people in the country, and allow everyday people to live better lives.

Formerly I was part of the public sector, and for 15 years now I have been in the private sector. I have now witnessed first-hand the significant contribution of the private sector to social development.

The Brighter Future Foundation, which is the social arm of our Kanbawza Group of Companies, is the biggest private donor to the country, and has been conferred the best philanthropic foundation award in Myanmar for 2015 by the President of Myanmar for our latest contribution to society.

Apart from being the highest taxpayer for four consecutive years in the history of the bank and the group of companies.

World Finance: And Zaw Lin Aung, finally, what sort of trends do you forsee impacting Myanmar’s economy over the next 12 months?

Zaw Lin Aung: Myanmar’s business over the next 12 months will be business as usual. The growth rate for the last five years has been consistently very positive. I can forsee the growth rate continuing even more in the near future. But I understand western countries are taking a wait-and-see approach for the next six months, during the political party handover and the sitting of the next parliament.

But many countries are within our reach, including Japan, China, South Korea, India, as well as our ASEAN countries have been doing business in Myanmar for many years, and will surely increase their operation in the next 12 months.

So I urge western countries not to wait too long and miss out on the first mover advantage.

World Finance: Zaw Lin Aung, Nyo Myint, thank you.

Nyo Myint: Thank you.

Zaw Lin Aung: Thank you so much.

Oman LNG documentary – From Strength to Strength – Trailer

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We’ll be broadcasting our new documentary series on Oman and its liquefied natural gas industry from Monday 25th January. Please subscribe to our channel to get notifications of each new episode as it goes live.

World Finance: Oman is the oldest independent state in the Arab world. It has a rich history, culture, and economy. But while its agriculture and tourism sectors are still growing, the backbone of the country has been built on its flourishing energy sector.

Oman has a burgeoning natural gas sector. And as the country’s primary exporter of liquefied natural gas, Oman LNG now runs at a 34 million cubic metre capacity per day.

Oman’s exports of liquefied natural gas has often been described as the game-changer to the country’s economy. The company sees its mission as improving the lives of all Omani people. 1.5 percent of Oman LNG’s net income after tax goes into its diverse social investment programmes, benefitting people of all walks of life.

Samya Alzadjaln, Teacher, Omar Bin Al Khattab Institute for the Blind: This is the Omar Bin Al Khattab Institute for the Blind. There are almost 150 students here in the institute.

Adel Al-Moslahi, Volunteer, Al Rahman Team Charity: We provide help to families: poor families and orphans, and people in need.

Dr Mohammad Ibrahim Alfarsi, Executive Director, Sur General Hospital: We are proud that Oman LNG has supported this hospital from the beginning. Oman LNG donated a lot of equipment; this is a great benefit to the community.

Mohammed Bin Hamad Al Rumhy, Minister of Oil and Gas, Oman: It’s good business for creating wealth for the country. The standard of living is growing; everybody wants to build homes and live comfortably. That requires energy; that requires gas.

Harib Al Kitani, CEO, Oman LNG: We are a company that has not left any stone unturned. We are an example of a successful company in Oman and in the region; and we have gone from strength to strength.

Mohammed Bin Hamad Al Rumhy, Minister of Oil and Gas, Oman: The world is moving back towards relying on fossil fuels. The world will need more gas. Oman will rely on this business, I think, for a little bit longer than we thought.

Harib Al Kitani, CEO, Oman LNG: I think as a model, it’s just one big success.

Ascott REIT on target for S$6bn assets as Asia’s hospitality market booms

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The real estate market in Asia has been sizzling over the past years. And with the region an important destination for business travel, it’s sparked demand for serviced residences. Ronald Tay, CEO of Ascott Residence Trust Management, talks about the REIT’s growth prospects, Ascott’s latest acquisition in New York’s Times Square, and the differences in hospitality across different regions.

World Finance: The real estate market in Asia has been sizzling over the past years. And with the region an important destination for business travel, it’s sparked demand for serviced residences. With me to discuss is Mr Ronald Tay of Ascott Residence Trust Management.

Mr Tay, it’s been nine years since Ascott REIT launched: what’s been your management strategy, and how do you ensure the stable and growing distribution for unit holders?

Ronald Tay: Today, I’m quite proud to say that Ascott REIT is the largest hospitality REIT that’s listed on the Singapore stock exchange by asset size, as well as by market capitalisation.

We have a three-prong strategy. First, we have been very aggressive and active on the acquisition front. Second is in terms of active asset management: all the assets that we own, all the properties that we own, we ensure that they are up to date. This is obviously to drive the revenue path of the property, and to drive the underlying performance as well.

And the last prong is in terms of prudent capital management – that is in terms of our balance sheet management, how we hedge our interest rate risk and our foreign exchange risk to mitigate the volatility of the earnings of the REIT.

Read more from Ascott Residence Trust ManagementRead more from Ascott Residence Trust Management

World Finance: We have of course been hearing a lot about the Asian growth story, so is Asia a key growth market for you? And why?

Ronald Tay: If you look at our acquisitions over the last 18-24 months, I would say the bulk of them would be from Asia.

Europe obviously is a big market for us; it’s a very important market. But Europe is a more stable market for us. Whereas, if you look at the growth market in Asia, according to some IMF studies, in 2015 and 2016 Asia is looking at GDP growth of about five to six percent.

And that is primarily one of our key growth drivers as well. Because we are focusing on the corporate market, the extended stay market. So key indicators like GDP growth and FDI growth are important factors for us. And that is where I think in the medium to long term, Asia will be the growth market for the REIT.

World Finance: You’ve set a target asset value SGD6bn by 2017 – are you on track?

Ronald Tay: We have been growing very aggressively since our listing in 2006. Today our asset size is about SGD4.7bn, and we will reach about SGD5bn by 2017 with one of the contracts that we have signed. Over the last 18 months we have acquired about 14 properties.

We hope to continue this growth momentum, and I think given that our mandate is a global mandate, we will look at Asia, Europe, and of course most recently we have gone to the US market as well. So these are the markets we will be targeting, and keeping our fingers crossed we should be able to reach our SGD6bn target.

World Finance: Why did you choose to enter the US market? And why Times Square in particular?

Ronald Tay: Obviously it’s a very, very developed, very mature market, the US hospitality market. But to be a global hospitality player, we cannot ignore the US market. And also, over the last two years or so, the US economy has been on the upswing.

Why Times Square? We focus mainly on business cities, so where else to go but the Big Apple, New York City itself. It’s a great location, midtown Manhattan, just five minutes walk from Times Square. But most importantly it is built as an extended stay product, which is very similar to what we do.

So we like the product, we like the location. Obviously the pricing is something that we find attractive as well. So that’s our maiden acquisition in the US: hopefully more to come.

World Finance: And finally, how does the hospitality market differ in different regions, from the Asia-Pacific to Europe, and indeed to the Americas?

Ronald Tay: In the US and Europe, it’s a much more developed market compared to Asia. Asia of course includes some of the emerging markets like the Philippines, Vietnam, and even Indonesia. Because of the difference in developing markets, the average length of stay in Europe and the US tends to be a bit shorter, because there are a lot more accommodation options available in developed markets such as Europe and the US.

The other main difference is that of course, being more developed markets, the capital values of the real estate in Europe and the US tend to be a lot higher, compared to Asia.

It’s important for us to have a good balance between the developed market, where the income is a lot more stable, and the growth market in Asia, which gives us the growth in terms of revenue and income stream over the medium to longer term.

Belfius Bank secures EIB partnership to build Belgium’s smart cities

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In the age of sustainability, smart cities are becoming more important. One bank at the forefront of this is Belgium’s Belfius Bank, which offers specialised financing for such projects. Belfius Bank’s Karmen Wijnant talks about the aims and objectives of its €400m partnership with the European Investment Bank, and the kinds of projects already benefitting from the funding.

World Finance: In the age of sustainability smart cities are becoming more and more important. One bank at the forefront of this is Belgium’s Belfius Bank, which offers specialised financing for such projects. Karmen Wijnant from the bank joins me down the line.

Karmen, firstly: how did the idea for smart cities emerge? Who were the key instigators and founding partners?

Karmen Wijnant: We developed this programme together with the European Investment Bank in order to offer specific financial solutions to local authorities that want to finance smart and sustainable projects in the fields of urban regeneration, energy efficiency and mobility.

These solutions complement other, more classic solutions that have existed for a long time already, such as straight loans, bonds etcetera.

From the beginning, we wanted a programme that was within reach of all cities and municipalities, big or small. The Smart Cities programme needed to be adapted to the Belgian context, with over 98 percent of Belgians living in an urban environment, but only a few Belgian cities having more than 100,000 inhabitants.

As a consequence, cities and municipalities often operate one a small scale and lack the financial means to realise important projects, especially when they should be combined and integrated into a larger urban development plan.

Our programme facilitates the access to funding in order to realise these projects. Besides, almost half of the Belgian local authorities signed the Convention of Mayors and committed themselves to reduce CO2 emissions. We help them meeting that challenge.

World Finance: How did Belfius Bank get involved?

Karmen Wijnant: For over 150 years, we have been the financial partner of local authorities. Sustainability is also part of our own ambition: being a sound bank-insurer with the highest commitment to society. We want to stimulate and support the Belgian cities and municipalities to integrate a holistic approach towards the subject of smart cities. This requires more than just offering the financial solutions you’d expect from your bank.

World Finance: The bank decided to collaborate with the EIB for this programme. What does the partnership consist of?

Karmen Wijnant: We approached the European Investment Bank in 2013 with the proposal to develop a co-financing programme based on very concrete criteria around urban regeneration, energy efficiency and mobility.

It’s the first time in Europe that these domains are being covered in such a programme. In this way, we created a €400m credit line – €200m by the EIB and €200m by Belfius – for projects that match those criteria.

Each project needs a case study of its own, resulting in its own optimised financing solution for the administration and their partners realising the project.

World Finance: Partnerships really seem to be key in the bank’s Smart Cities approach: would you say that’s correct?

Karmen Wijnant: Absolutely. We want to go beyond providing just financial solutions you would expect from any bank. Together with our partners, we play an active role in the exchange of knowledge.

Just to mention a few examples: we are member of BELESCO, the Belgian federation of energy service companies (ESCOs), in order to develop financial solutions to create a take-up of the ESCO-market in Belgium. We are the only commercial bank collaborating in the European Innovation Platform to develop new business models for smart cities.

We also collaborate on the European Horizon 2020 project around deep renovation of social and individual housings. And in Belgium, we are one of the founding partners of the Smart City Institute, hosted in the university of Liège.

And, last but not least, we have a Smart Cities partnership with Agoria, the Belgian federation of technological industry.

World Finance: How important is technological research and development and long-term urban planning to the success of the Smart Cities idea?

Karmen Wijnant: It’s very important: long-term urban planning and technology play a key role in the success of smart cities for many reasons.

For instance, one of the major criteria for all supported projects is that a city or municipality must demonstrate through a pluri-annual plan that they have a long term sustainable strategy and vision that confirms the European 2020 objectives.

Technology and R&D is also key, because innovation in technology, ICT, servicing and governance is one of the criteria we set out with the EIB in our co-financing programme in order to be an eligible project. We also support technological research in the field.

Belfius is the first commercial Belgian bank signing the InnovFin programme for small and medium enterprises and small midcaps with the European Investment Bank. We also work together with Agoria, the Belgian federation of the technical industry. Smart Cities is one of their major transversal business development themes and we are the only bank in the Smart Cities workgroups.

World Finance: Finally could you give us some cases of realised projects in Belgium?

Karmen Wijnant: We recently inaugurated two projects: one of them is the new town hall of the Town of Gembloux, in the Walloon region. The project was based on an integrated, innovative and sustainable approach, with a strong focus on energy performance and accessibility for persons with reduced mobility. And that’s why it became eligible to receive funds through our programme.

The second one is the installation of a plant for compressed natural gas (CNG) by IMOG, an inter-municipality in the Flemish region. IMOG encourages people and businesses to use this cleaner means of transport: a successful approach since several companies already bought trucks and cars running on CNG.

Apart from these two inaugurations, more than 100 projects are under investigation, and plenty of them are already being financed via this programme.

Royal: Execution and liquidity are most important in forex today

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The forex industry has changed dramatically over the past few decades, with technology now pushing the boundaries even further. Andrew Taylor, CEO of Royal Financial Trading, discusses the evolution of liquidity in forex, and explains how Royal has invested heavily to ensure best latency and execution for forex traders.

World Finance: The forex industry has changed dramatically over the past few decades – with technology now pushing the boundaries even further.

With me to discuss how the industry has evolved is Andrew Taylor, CEO of Royal Financial Trading Australia.

Well Andrew, forex trading in Australia: what’s the market like there?

Andrew Taylor: Australia is seen as quite a well-regarded market. And we actually put that down to a strong regulation and quite a sound financial banking system.

What this has actually done over the time is given confidence to the Australian market. And it’s also really put Australia as a financial centre, a hub that has given confidence to the market. So we find a lot of businesses feel comfortable bringing their business to companies in Australia. And for someone like myself and Royal, we see that quite constantly. And I’ve seen quite an increase – or a steady increase, I should say – over the years that doesn’t look like it’s receding.

World Finance: So talk me through the evolution of liquidity, and the current dynamics between banks, traders, and brokers.

Andrew Taylor: It’s been very interesting. I remember 20, 25 years ago when an aggressive price in the market was something like five pips, or points in the market. And the evolution of that – the spreads, the prices are now just razor thin.

And that’s an evolution as far as the pricing goes. But when you look behind that, what’s really important is more about the execution, and the real liquidity behind those prices.

It’s one thing to have tight spreads, but if you can’t actually execute on those prices, it’s a concern.

So the prices are derived from one market, the interbank market, and it’s fed down through the market. So you’ll find that everybody is trying to, in essence, hit the same pricing.

So the real trick, and the real key to longevity and making your clients happy is being able to optimise the liquidity that comes through. And what this actually does is, not just recycling like the rest of the market, where everybody’s trying to hit the same pricing in volatile times; but actually optimising your own liquidity, so you’re providing an environment that has better execution for your clients to trade on.

So that’s really important, and you can see how the evolution of liquidity has come to this point.

World Finance: Technology is of course changing the trading landscape – what innovations do people need to be aware of?

Andrew Taylor: It comes down to a big piece of what this market is all about. There was a time when it was about the individual, and how quickly a phone transaction could occur. And then it jumped online.

The evolution of that part is, as you see now, we actually deal in microseconds. It’s technology that’s brought that on. But what’s also key is the latency. How long a price takes to receive electronically, and how long it takes to actually execute on that trade. So the longer that distance is, the wider the latency, and the less likely you’re going to be hitting the prices you’re wanting.

So the premium brokers, the premium players in the market, invest heavily in technology, to cut down the latency and provide that better execution.

What we’ve done at Royal is exactly that. We’ve invested heavily; we have servers in NY4 and LD4 in London and New York. And we’ve gone even further, to place what’s called a cross-connect. So it’s literally the best you can get from the liquidity provider. For us, it’s our focus on the client and what they need. It’s an expense we’re willing to pay to make sure we have that long-term relationship.

World Finance: And what would you say are the key characteristics of navigating a successful brokerage?

Andrew Taylor: First and foremost, I think everything that you do – if you’re in a client business, you’ve got to have the client in mind. If you build your business strategies around this notion, I believe you’re halfway there.

Understand the market that you’re in, what it is that other people are doing; the more knowledge you have, the more power you have in your decisions.

And the other one that really stands out for me is purpose. So the purpose that you have: why are we here, why are we doing this? Understanding that as a company is really important; it gives you the direction you’re headed, knowing what you’re about.

And last I suppose is to invest. Investing is not just about capital outlay, but really investing in your people. Richard Branson said take care of your clients and your staff, and they’ll take care of your business. And it’s just logical sense, it’s something I really believe in.

World Finance: Well of course keeping clients happy is a priority; how do you approach this?

Andrew Taylor: In essence, you do need to have a good product. There’s a product that’s reliable and sellable, and people can rely on it. And that’s where the investment in those areas come in.

I think the human element comes into that as well. Your engagement with the client, letting them know that they’re a part of your focus; letting them know that they’re supported, if there’s glitches, we’re there for them. I think it’s something that’s said a lot but not actually acted on.

And it’s one of those things that you can tell everybody a million times, but when it’s actually in action, that’s when it really counts.

I believe that if it costs extra resource to have more staff so there’s more time to be able to spend with the client, to interact with and understand them: so be it. To me, that’s a good investment.

World Finance: Finally, how do you see the forex market evolving in the coming years?

Andrew Taylor: I do believe that regulation is always welcome. I do think that there is a strong part that the regulators need to play. Within certain guidelines – they still need to be business-friendly, and we’ve seen in some regions it hasn’t obviously been that, it’s been a different environment altogether.

But for me it’s also seeing these partner businesses that do now sit in between the broker and the client who really do add value to the client’s experience and knowledge. And for me I see that really taking off as well – particularly in the emerging markets that don’t have this quite set up, they’re learning about the markets and building. For me, that’s quite exciting times.

Deep due diligence key to PICTON’s success in Chile, Peru and Colombia

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Latin America’s economic and financial landscape has evolved considerably over the past two decades, resulting in the region becoming an attractive destination for asset managers and investors. Jose Miguel Ureta, founding partner of investment advisory firm PICTON, discusses the competitiveness of the three Latin American countries, and the importance of a strong due diligence process.

World Finance: Latin America’s economic and financial landscape has evolved considerably over the past two decades, resulting in the region becoming an attractive destination for asset managers and investors. Here to discuss the opportunities is Jose Miguel Ureta, founder of PICTON: an independent investment advisory firm serving high net worth individuals and institutional investors throughout Chile, Peru and Colombia.

Jose, could you start by talking me through the different stages of development within the three South American countries?

Jose Miguel Ureta: All three countries have embraced a development model based on a market economy, where the private sector plays a key role in economic growth.

The three countries are a sizeable market of almost 100 million people and $840bn GDP.

Chile started more than 30 years ago, and is the most advanced of the countries. And the success of the Chilean model was key to give Peru and Colombia the political support to implement some unpopular reforms that the embracement of this model requires.

World Finance: And when it comes to investment in this region, what’s your philosophy?

Jose Miguel Ureta: We’re quality investors, and knowing who is who is key. Therefore we only invest in Chilean companies. We don’t have any competitive advantage in other countries. We get the exposure to other Latin American countries through those companies – the Chilean companies that we invest in – and through funds.

We recognise that the management of these companies – and local asset managers, in the case of funds – are better prepared to do deep due diligence and understand the industry.

In fixed income we invest in high quality Latin American names, and all other foreign investments we only invest in diversified funds with low correlation to the Chilean markets, which are mainly developed Europe, Asia, and the US.

World Finance: These are still developing markets; what challenges does this represent, and what should investors really be aware of?

Jose Miguel Ureta: That this is a cyclical region, with heavy dependence on commodities. Metals in Chile and Peru, and oil in Colombia. Investing in the Chilean stock market is pretty much the same as investing in copper.

A big part of the cyclicality is explained by currencies. Since December 2012, Brazil has devaluated the real 45 percent. The Colombian peso: 45 percent. Chile: 32 percent; and the Peruvian sol, 24 percent.

World Finance: How investor-friendly is this region?

Jose Miguel Ureta: It is a very investor-friendly region. If you see the June 2005 World Bank Doing Business rankings, Chile is ranked 48th among 189 countries. Within this ranking I’d like to highlight in the case of Chile, a very high minority shareholder protection, a sound tax scheme, and it’s ranked very well in construction permits.

Peru is ranked 50th. And I would like to highlight the ease of registering property in Peru, and getting credit.

Colombia is ranked 54th, and it’s ranked in the second place in access to credit among all the 189 countries, and in the 14th place in minority shareholder protection.

World Finance: OK, so talk me through your typical investment process.

Jose Miguel Ureta: We’re long-term investors. We focus on quality more than price. We prefer a good asset and an adequate price than a cheap, low quality asset. Bargains have proven to be very lousy investments.

We devote a lot of time to checking the character of the majority shareholder, and the quality and consistency of the management of the company, and the investment management team in the case of the fund. And this approach has allowed us to obtain 35 percent excess return, compared to the Chilean stock market in four years – just focusing on quality.

We have a senior investment team of eight people, and a disciplined investment process. We will never do an investment that we don’t have the time to do a deep due diligence on. And that’s key.

World Finance: What trends are you seeing in the wealth management market in the region?

Jose Miguel Ureta: We see additional liquidity events like the recent sale of Lindley in Peru, and the sale of CGE CFR and Cruz Verde in Chile. And that will create more family offices which are very sophisticated investment offices. And it’s an opportunity for independent investment managers like us.

The movement towards open architectures will continue, and the separation of the buy side from the sell side will continue. We think that it is very healthy for the industry to separate the sell side from the buy side.

World Finance: Finally, what have been the consequences of the business scandals in Chile and Brazil? I’m thinking of Petrobras for example, and the challenges that these scandals have put to your development model?

Jose Miguel Ureta: These cases are definitely ugly events that hurt the essence of capitalism. I hope that we’re mature enough to understand that the market economy model is not immune to events like collusion and corruption. In fact, it’s part of human nature.

However, with good regulation and enforcement, the benefits of the model are much higher than its costs. Corruption and collusion have always been there – it was not very visible, which is not good – but these high profile cases, with billionaires in jail, will probably cause lower corruption in the future, which is good.

MASEN unveils Morocco’s mega plans for solar energy

Posted on by World Finance

Morocco is getting the green stamp of approval on its renewable sector. Dayae Oudhiri, member of the management board of MASEN (the sponsor of Morocco’s energy plans), discusses Morocco’s ambitious strategies. In addition, we look at the combination of photovoltaic and concentrated solar power technologies MASEN is using.

World Finance: Morocco is getting the green stamp of approval on its renewable sector. Here to shed light on the industry’s growth: Dayae Oudhiri.

First, let’s talk about some of the ambitious strategies in your country.

Dayae Oudhiri: Indeed, there are a lot of things happening in the renewable sector in Morocco. And actually, in Morocco the electricity needs have been growing very strongly for many years now. And to face those, Morocco as a country had to actually double its total installed capacity every 10 years for the coming decades.

And it had two options to do that: either remain heavily dependent on imports, and continue to build what I call black plants, or go green.

Bear in mind that we have a very high quality of clean energy, and also that we have a strong belief at the highest level of the state that only sustainable development can take place with environmentally friendly strategies.

We decided to go green: to go for renewables.

And we’re targeting our energy mix to be 42 percent by 2020 from renewable energies.

World Finance: Solar is a thriving industry, but also very expensive. How are you able to make a decision to focus on it?

Dayae Oudhiri: We could maybe go back and understand what solar energy provides to Morocco. There are a lot of things.

First, it gives you the comfort that you will never lack your resource. Because you own it, and you do not depend on others to make it available.

Second, with available technologies of solar, actually you really can have the electricity you need, whenever you need it. Even during night time.

Third, with solar it gives you a fixed price for 25 years. So you’re not dependent on geopolitical issues to secure your price.

Fourth, no more subsidies at the entrance. Because as you know, fossil energies are so heavily subsidised in so many countries in the world.

And fifth, at the end of your 25 years you may end up with free electricity. So I think that when you add up all these advantages, for us it was pretty obvious to go that way, and to choose solar.

World Finance: So tell me about your stance on thermal technologies and photovoltaic in particular.

Dayae Oudhiri: Our stance is that those technologies complement one another very well. PV can answer specific needs, can be pretty modular, and can even be developed without a connection to the grid per se.

CSP though can really provide you dispatchable electricity, with tanks to store it. It can really provide you electricity during your peak hours, which can be during night time.

At MASEN actually we have been very much technology agnostic. So what we have been trying to do is really to find the most suitable solutions for our client, the Moroccan National Electricity Office (ONE), and experience has shown that PV and CSP do very well together, and answer different needs.

And even now we’re working on a new project, which will have hybrid plants using both CSP and PV, and which at the end probably will close this dichotomy we’re seeing between PV and CSP.

World Finance: Tell me about who is behind the Noor projects.

Dayae Oudhiri: Masen is the sponsor. Masen is also selecting the developer that is in charge of the construction and the operation of those plants. And it does select the developers through international bidding processes. So actually, you have a lot of international and local companies that are involved in these processes.

World Finance: So where do you stand on these projects now?

Dayae Oudhiri: Well, Noor I – Noor Ouarzazate I, which is 160MW – we will get into commercial operation this year. And this is going to be the biggest CSP plant on a worldwide basis. Noor II and Noor III have reached financial close and will get into commercial operation in 2017.

And Noor Ouarzazate IV will actually end up the Ouarzazate Complex, will reach 450MW in total. And actually this Noor IV will have PV technology and is being developed in parallel with two other projects in the Saharan south of the country. And we’re also working on Noor Midelt, which will be pretty similar to Noor Ouarzazate. And we have also qualified another site, on which works will accelerate in the coming year.

World Finance: Now of course money is very much a part of this conversation; tell me about how you’re going to structure finances to make sure they build and grow and thrive.

Dayae Oudhiri: You’re right, money does play a very important role in this conversation. And we’ve put a lot of effort into trying to find the most suitable scheme that will lead us to the most optimised financing. And actually, we ended up playing the role of lender.

As you know, MASEN is a publically owned company. Thanks to this, it can benefit from the government support to access concessional financing at very advantageous conditions, very large maturities, very small interest rates. And we have packaged all these loans that we were able to mobilise into one loan that we have on-lended to the project companies that are in charge of the construction.

And with this, actually we have been able to reduce the price per kwh by more than 30 percent.

World Finance: Now, how would you like to see these projects evolve, in terms of renewables, and solar in particular?

Dayae Oudhiri: I want this project to be, and remain, shining. And I think beyond the development of this project – and we have a very clear structure, a very clear schedule – what we would like to see is really to have an ecosystem being developed around these renewables.

We’ve been trying as MASEN to develop integrated projects, meaning that beyond electricity production, we’re really putting a lot of efforts on industrial integration, on R&D, on training, and last but not least also on the local development of this implementation areas that are usually excentered, to make sure that they really benefit from all the positive externalities these huge projects are bringing.