UK adopts new corporate governance code

On the 28 May 2010 the Financial Reporting Council published a new Corporate Governance Code (the “Code”) which replaces the old Combined Code.  On Friday 2 July the Financial Reporting Council (“FRC”) also published “the first of its kind in the whole world” Stewardship Code aimed at institutional investors which is designed to complement and support the Code.

The FRC review had been accelerated as a result of the financial crisis and in particular the commentary made in the Walker report which primarily focused on the governance and risk of financial institutions.  

The Code applies to accounting periods beginning on or after 29 June 2010.  It is in effect an updating of the Combined Code as the FRC found there were no serious failings associated with the current “comply or explain” system.  In effect the Code remained “fit for purpose”.

However there is a real danger of a two tier system being created in that rather than addressing governance issues associated with regulated companies in the financial sector through the Code the approach that is being taken to governance in the financial services sector is to utilise the financial services regulatory and supervisory regime under the auspices of the FSA.  Therefore there is going to be a divergence which in a long term could result in a two tier UK governance regime whereby the “comply or explain” regime of Code applies to non financially regulated companies where as governance in the financial sector will be based on a more prescriptive and regulatory based approach through the FSA or its successor body.  

This article concentrates on the Code and does not go into detail about the FSA approach for example the “approved persons” regime or the approach being taken by the FSA to risk through its “high level systems control source book”.  

The Code, which is very easy to read, fundamentally re-focuses corporate governance back on the key principles that were set out back in the original Cadbury Report. In fact the Code specifically defines corporate governance utilising the original Cadbury definition.  The Code emphasises the need to move away from box ticking which has become the norm with a number of investor related support organisations more towards behavioural activity.  Whether this will actually happen remains to be seen though again the UK Stewardship Code (see below) also focuses on the necessity for engagement rather than box ticking. 

The Code emphasises that compliance with the Code itself is not good governance.  The Code is only a guide to the principles structures processes and values that should be adopted and it is up to individual boards to determine its own effective corporate governance.  There is a strong emphasis around the key leadership role of an effective chairman supported by an effective company secretary.  

The Code is principle based rather than rule based.  This approach allows a board to explain why it does not consider it appropriate to comply with all elements of the Code.  It allows a board to adapt its circumstances to fit to “the glove or the shoe” reflecting the complexity of the company or the nature of risk and challenges a company faces.  Inevitably there will be different governance issues for an oil company compared to a health care sector company, a construction company compared to the more sector regulated company.  However the fundamental principles should apply to all of them.  Companies should “comply or explain”.
 
The Code is split into five areas leadership, effectiveness, accountability, remuneration and relations with shareholders though in the last case this is now replaced already by the Stewardship Code.

Insurance firm in sustainability drive

After the reign of King Rama V, the concept of life insurance was introduced by foreign companies which came to establish representative offices selling life insurance. After World War II,  a group of high–ranking officials and Thai businessmen founded Thai Life Insurance Company Limited in 1942, the first Thai owned life insurance company, with an initial registered capital of 1,000,000 Baht.

Over the years, Thai Life Insurance Company Limited has accumulated experience, expertise and public confidence. The company has become a leading Thai Insurance company with the policy of ‘not aiming to maximise profit, but optimise profit’ together with Corporate Social Responsibility.

Vision
1 Offering excellent benefits and quality services to maximise customer satisfaction on the basis of social connection.
2 Taking care of all Thai lives through frequent development of new products and services.
3 Promoting knowledge, skills, experience and quality of life for employees. The company provides opportunities for permanent employees and sales staff to enhance their career capability, and also encourage them to become CSR volunteers and continuously take part in activities that benefit society.

Currently, Thai Life Insurance still keeps the principles to strengthen the corporate in order to support business development, grow through any changes as well as overcome any obstacles the company may face. In 2008, the company started paving the way to the future with a customer centric approach under the slogan, ‘More Than Just Life Insurance’. The customer centric approach is applied as an array of effective marketing mechanisms to deliver the right offer to the right customer at the right time. This approach inspires the customers to develop brand loyalty, which is why Thai Life Insurance is unique among others in the insurance business.

Five strategies of ‘more than just life insurance’
Continuous branding: Thai Life Insurance keeps producing TV commercials and visual media under the concept ‘the value added of living’ to strengthen Thai Life’s brand.

Signature services: special services beyond expectation of the policyholder: ‘Thai Life Insurance Hotline’ providing the insured with medical care and emergency evacuation assistance 24 hours a day, ‘Thai Life Insurance Care Centre’ providing the insured with full benefits as stipulated in the Insurance policies and consultancy  services, and ‘Thai Life Insurance Medicare’ providing exemption to the policyholder from paying admittance expenses to a hospital. To date, over 190 hospitals have joined this programme.

Human resource efficiency enhancement: educating the human resources is important for Thai Life Insurance Company Limited to keep its status as the leader in the industry. Especially for the sales representative, the company encourages them as ‘Life Planner’ with seven goods and seven smarts:

– Good acting
– Good mind
– Good belief
– Good wish
– Good thought
– Good knowledge
– Good standard
– Smart in insurance
– Smart in finance
– Smart in investment and tax
– Smart in technology
– Smart in education
– Smart in basic public health care
– Smart psychology and service mind

Innovation of Thai Life Insurance policies and services: international standard policies and services, plus special services are provided to meet every individual’s need.

Public contribution: Thai Life Insurance Company Limited is dedicated to improving the quality of life for Thais and keeping continuous connection with other organisations and public sectors to support activities for the benefits of society.

In spite of economic, political and social problems in the last few years, Thai Life Insurance Company Limited has managed to move forward  in the business. The company can continue to operate potently, faithfully and in good governance on the basis of Thai social culture with love, social relationship and good heart. As the first life insurance company run by Thais for Thai people, Thai Life Insurance Company Limited wishes to take care of Thai lives and hopefully to operate our business with stability and integrity in order to reinforce Thai society  to be sustainable and strong.

Jamaican bank targets market share

For a company originally founded in 1837, the National Commercial Bank Jamaica still has the nimbleness to outpace its rivals: not just Best Banking Group, Jamaica and Most Innovative Bank, Jamaica in the 2010 World Finance awards, but the current recipient from the Jamaica Employer’s Federation of the titles Employer of Choice and company with the highest employee satisfaction.

The Employer of Choice survey, says Patrick Hylton, Group Managing Director at National Commercial Bank Jamaica, focuses on areas that include opportunities for training and development, communication, compensation, treatment of workers by management, health, safety and welfare policies and human resource service quality.

“ Our success in the survey is attributed to targeted programmes in each of these areas,” he says. “Learning and development within NCB is supported by our Corporate Learning Campus, accredited by the University Council of Jamaica. We offer a number of courses including our Management Trainee Programme, Branch Manager Development Programme and Institute of Leadership and Organisational Development. Our ‘access-anywhere’ e-campus allows employees to have access to over 140 courses, books and periodicals 24/7 from any location.”

Strong lines of communication between the management team and employees are “deeply embedded within NCB’s DNA”, Mr Hylton says. “We highly value transparent and open dialogue. A major element of our internal communication strategy includes ensuring that employees have direct access to the senior management team. We provide multiple communication channels, including a human resources website, emails, discussion forums and an employee customer relationship management system.

“We ensure that all employees are treated with fairness and the utmost respect at all times. This philosophy of fairness is also embedded in our diversity policy, which recognises the differences among our employees. We have had no industrial action among our clerical staff in the last decade.”

NCB prides itself on offering highly competitive compensation packages to its employees, Mr Hylton says, and at the same time it is keenly interested in its employees’ wellness and work-life balance. “We provide a state-of-the-art Wellness and Recreation Centre to our employees outfitted with gym, basketball, tennis, netball, pool, clubhouse and other facilities. We also provide gym subsidies to employees who are not able to access the Wellness and Recreation Centre. These strategies have engendered a work environment conducive to high levels of worker productivity, engagement and customer service excellence.”

Concentrating efforts on the sorts of measures that gave it the “Employer of Choice” title, Mr Hylton says, has a definite impact on the bottom line. “New research underscores the importance of ‘engaging employees’ in their jobs and companies as a way to foster high productivity, high morale and excellent customer service,” he says. “We believe that there is a strong positive correlation between employee engagement and the bottom line.

When employees are engaged it means that they are aligned with the strategic goals and objectives of our organisation. This has resulted in our sustained profitability.”

At the same time, good employee satisfaction figures have an effect on the customer experience, Mr Hylton says. “There is a direct correlation between employee engagement and the service they provide to customers. Well-trained, engaged employees are those who are driven to create innovative products and services and contribute to the richness of a superior customer experience.”

In the turbulent economic times seen over the past two years, even a committed employer like NCB has had to make cuts. “Communication and transparency are paramount in any changing environment: this has been a key element of our people strategy,” Mr Hylton says. “We communicate the ongoing impact of economic conditions on the company. We outline in great detail the areas and staff that will be impacted. We provide opportunities for staff members and their representatives to engage senior management on these issues through the Managing Director’s Road Show and State of the Business Meetings as well as Divisional meetings. We are keenly aware of the psychological, emotional and economic impact of these separations of our staff, so we provide group and individual counselling, career counselling and resume preparation, mock interviews, entrepreneurship workshops and entrepreneurial grants for approved projects.”

NCB’s chairman, Michael Lee-Chin, is one of the best-known entrepreneurs to have come out of Jamaica. But affection among customers for the chairman’s achievements will only take the bank so far, Mr Hylton says. “Our customer research has indicated that there is a great deal of emotional equity attached to brand NCB, arising from our long history of Jamaican ownership. This, coupled with our Chairman’s unwavering commitment and passion for Jamaica, has certainly inspired confidence in so many of the persons that support our organisation. How we position ourselves in the market does take these factors into account, to some extent.

“However, we have also found that customers, now armed with more exposure to and knowledge of global financial services, are equally demanding of their bank, whether it is local or foreign-owned. The competition to win market share must be fought not only on emotive grounds, but with the product innovations, service expertise and confidence in financial strength that the institution is able to deliver. NCB’s consistently high level of performance, particularly in the past ten years, when local and international financial markets have experienced significant turmoil, demonstrates that our operating fundamentals are sound and there is solid support for our institution.

“The fact is that Jamaicans do have a strong sense of pride for role models of home-grown success and we therefore want to not only do well, but to do good, so that the spirit of Jamaican achievement can be continually nurtured. Our corporate mantra says we are ‘Building A Better Jamaica’, and the extensive work of our philanthropic arm, the NCB Foundation, in the area of education, entrepreneurship and community development gives some indication of the level of commitment we have to nation-building. Our greatest concentration of customers is located in Jamaica, and serving them well remains a core focus for our business, as this ultimately redounds to the wider success of our country.”

As a truly indigenous financial institution, with local decision-making authority, NCB has been able to respond quickly to customers’ needs and as a result has largely led the market in terms of introducing innovative new products and services, Mr Hylton says. For example, NCB was the first financial institution in the Jamaican market to establish a business unit focused on SME customers, in 2003, and since then it has continued to lead the introduction of products and services tailored to this sector. “Over the past year we have introduced several new products and services for our personal and business banking customers, focused on meeting their financial needs and convenience,” Mr Hylton says. These include a multi-currency Visa Classic card that offers the convenience and security of local and international purchases with the ease of repayment in Jamaican dollars.

NCB also led the market by introducing low-rate auto financing for new and used vehicles, at the same time extending the maximum repayment period on new vehicles to 7 ½ years, the longest in the market.

On the business banking side, NCB introduced its “F.A.R.M. loan”, in conjunction with the Jamaican Ministry of Agriculture and Fisheries, providing single digit financing to farmers growing selected crops. NCB also created a J$1bn single-digit loan fund for SMEs, the largest and lowest priced pool of funds in the market.

Funds are available to support capital expansion and working capital for start-up companies, business owned by women and those companies in the agricultural and manufacturing sectors.

No institution could have escaped the effects of the financial turmoil of the past two years, and NCB saw its rate of loan growth slow as Jamaicans adopted a “wait and see” approach to their financial needs. “We have also seen increases in the levels of loan delinquency and bad debts and our non-performing loan portfolio as a percentage of overall loans rose from 2.34 percent in 2008 to 2.64 percent in 2009,” Mr Hylton said.

“Notwithstanding, for the year ended 30 September 2009, NCB recorded NPAT growth of J$1.5bn, or 18 percent over the 2008 financial year.”

Overall, Mr Hylton says, this year’s Best Banking Group, Jamaica “coped well with the crisis, and our goal has been for NCB to emerge a stronger institution after the crisis. Even before the global financial crisis was acknowledged by US and Europe, we had made changes in our business that would enable us to respond to negative changes in the environment.

“As an institution, we recognised that we needed to hold large levels of liquidity to meet any unexpected demands, whether from our customers or from other financial institutions. Therefore, we were able to respond immediately to requests for repayment, enhancing our reputation globally and our business locally.”

Over the next three years, Mr Hylton says, NCB sees itself cementing its position as the premier financial services institution in Jamaica. “There will be a strong focus on the SME sector where the penetration by the banking sector is still moderate.” Economic growth over the short term is expected to be negative to flat, and as a result, growth within the financial services sector will largely be driven by market share gains, Mr Hylton says. But NCB believes itself equal to the challenge: “We are positioning ourselves to gain a disproportionate share of gains by focusing on enhancing how we serve our customers and our ability to identify and respond to their needs. In addition we will continue to ensure that our talented employees are equipped to execute against the organisation’s strategies and continue to invest in our technology, a key enabler for NCB’s innovative spirit.”

Corporates warm to Chile

Chile’s Global Services industry has grown over 86 percent in the last 3 years putting Chile as the regional leader in this industry. More than 60 world-class companies have chosen the country because of the outstanding pro business environment, talent pool and government support.

Given the growing dynamism of this industry and the success stories of countries such as India and Ireland, in 2000 Chile began promoting foreign investment in high technology, highlighting the political and economic stability of the country, its modern telecommunication infrastructure, and the skills of its human resource. As a result, the global services industry (offshoring) quickly developed until it became one of the most competitive ones in the region, gaining the attention of multinational companies such as General Electric, Evalueserve and Equifax.

Those who have settled in the country identify the business environment, the quality of life, the well trained work force and the substantial government support as major factors that make Chile an attractive destination for global services.

Chile’s strengths
Chile stands out as an economically strong country with relatively low inflation.  In addition, it has a regulatory system that results in relatively low costs and a short time-frame to begin a new business.  Likewise, Chile’s infrastructure and quality of life are considered important factors, which are recognised as higher quality than in neighbouring countries.  In fact, the business environment in Chile is often described as similar to the one found in the United States and Western Europe.

Regarding the cost of business, Chile has salary levels in line with the region’s average, and tax rates lower than those in neighbouring countries. Due to strong fundamentals and a well managed public surplus, Chile has shown remarkable resilience during the global financial crisis over the last year.

As regards Chile’s work force, the quality of its professionals and the country’s commitment to promote specialised training stand out. The government has special training programmes focused on English language and information technologies.

The support given by the government, through the InvestChile program, to those companies that settle in the country includes consultancy services and a range of financial incentives oriented to facilitate the investment decision and implementation. Among these incentives are financial support for the pre-investment studies, co-financing of technological assets, and long-term leasing, along with contributions for personnel training.

Global services
Several industries that settled in countries like India have now chosen Chile to open new service centres.  Cases like Equifax, JP Morgan, Capgemini, Evalueserve and General Electric figure among those that discovered the necessary conditions to develop their businesses in Chile.

In August 2009, Equifax opened in Santiago, the capital city, their third technological development centre in the world, from where it develops research and technological solutions for risk evaluation. The Equifax centre in Chile works in collaboration with its centres in the United States and India doing research and developing software used in financial analysis.

“From Chile, we offer international companies technological applications related to risk evaluation by means of advanced tools.  This allows our clients to make wiser decisions regarding new business opportunities.  With this service, we position Chile as a leader in the field”, states Mario Godoy, the general manager of the Chilean branch.

Likewise, another company that chose Chile as a platform is Evalueserve.  This company, one of the biggest KPO players with branches in India and China, came to Chile in 2007, attracted by its infrastructure advantages, well trained work force, and the government incentives, among other reasons.

Located in the Valparaiso Region on the coast just west of Santiago, Evalueserve provides services to its clients in the United States, taking advantage of the similar time zone Chile has with that country.  From here it can work in unison with its centres in India providing 24-hour coverage.

“There were different aspects that influenced the decision of establishing an Evalueserve centre in Chile. 

When we were looking for a Latin American country, we had several options, Argentina, Brazil, Chile, Mexico, and Costa Rica, and analyzed each one of them.  Although we realized that there were cheaper countries than Chile, we chose settling here for various reasons, such as its infrastructure, its low crime rate, its welcoming approach towards foreigners, the government’s excellent economic policy, and the good quality of its labour pool, among others. On the other hand, the support given by the government and InvestChile added an important benefit influencing our decision”, said Mohit Srivastava, Evalueserve Country Manager in Chile.

Srivastava emphasizes the quality of Chilean professionals who work in this industry, who are highly qualified and have undergraduate studies that are in many cases on the same level with master’s degrees in other countries.

Evalueserve hopes to expand the services it provides from Chile to the world.  “Our plan is to focus on a new service strategy, creating an integrated platform among our centres.  Thus, we expect to triple our operations in Chile, generating job positions for 450 people in the next five years”, concludes Mohit Srivastava.

About CORFO
CORFO, the Chilean Economic Development Agency, was founded by the Chilean government in 1939 and aims to foster economic growth by encouraging investment, innovation, business and cluster development.  To date, CORFO has aided more than 57,000 businesses and assisted in 74,000 projects with a goal of encouraging the development of numerous industries throughout Chile.  CORFO contributes an annual average of more than $30 million to SMEs programs and more than $38 million to high technology programs alone. 

About Investchile-CORFO
InvestChile is an investment program created by CORFO (the Chilean Economic Development Agency) in 2000. The program promotes Chile as a business platform to access Latin America and the world and facilitates investment through a series of incentives, services and comprehensive information regarding business opportunities in various sectors of the Chilean economy.  Among the services provided, InvestChile facilitates access to business networks and government institutions, helps investors find service providers and suppliers, and arranges meetings with industry leaders and visits to companies.

For more information www.corfo.cl; www.investchile.com

BVI expands services

Over the last 30 years, the BVI has established itself as a leading offshore financial centre, offering one of the most sophisticated and convenient frameworks for international businesses. The business environment is supported by a sound legal system, efficient and efective regulatory environment, stable government and quality infrastructure. Over the last two decades the BVI has worked to diversify its financial service products and has seen strong growth in the areas of trust and estate planning, mutual funds and captive insurance.

By recent estimates, 50 percent of all currency transactions processed internationally involve offshore financial centres and the BVI is one of the key market players. As recently as 2008 it was estimated that there are 450,000 active companies registered in the BVI for transaction purposes. In spite of its success, the scale of the BVI as an offshore financial centre and its relative importance in the global economy is not widely recognised, as to date the jurisdiction – unlike some of its counterparts – has shied away from publicity.

International Finance Centre
But this could be about to change. Since its foundation in 2002, the BVI’s International Finance Centre (IFC), has played a pivotal role in the promotion and marketing of the BVI as a leading financial centre. The IFC is a testament to the BVI government’s commitment to support the financial services industry and one of the key aims of the IFC is to provide a voice to the BVI’s financial industry.

Sherri Ortiz, director of the IFC, says, ‘The BVI has a sound regulatory framework, an entrepreneurial community and a government that is committed to developing innovative, business-enabling legislation. Such a state has attracted leading law and accountancy firms to its shores. As a body, the IFC is dedicated to fostering a cohesive working relationship with the private sector and the regulatory authority, and to provide assistance and advice to those seeking to use the BVI as a hub for financial services.’

Recent developments that have improved the professional standing of the BVI’s regulatory and legislative structure have helped the IFC in its task.

SIBA
Earlier this year saw the implementation of new mutual funds legislation for the BVI, which has resulted in the bolstering of legal and regulatory support. The Securities and Investment Business Act (SIBA):
– Updates and modernises the regulation of the BVI investment funds industry, by repealing the current 1996 Mutual Funds Act and replaces it with SIBA and the Mutual Funds Regulations 2010;
– Introduces an investment business licensing regime to regulate entities conducting “investment business” in or from within the BVI
– Adopts restrictions on, and regulations for, the making of “public issues of securities” into the BVI and;
– Introduces a market-abuse regime

Importantly, SIBA does not significantly alter the framework for the regulation of BVI funds and most of the popular concepts remain intact, as many of the legislative changes made under SIBA and the Mutual Funds Regulations of 2010 merely codify existing BVI FSC policies which have developed over recent years in line with evolving international standards.

Fund managers already find the legal and regulatory system in the BVI familiar and easy to use as the former Mutual Funds Act of 1996 has been in place for well over ten years. Furthermore, the majority of BVI laws and regulations are derived from English law, so are familiar to the majority of international businesses. The main thrust of the new legislation is to introduce laws that regulate investments, public issues of securities and limit market abuse.
 
Business Companies Act 2004
The BVI Business Companies Act of 2004 has received positive reviews from legal practitioners for its flexibility. Five different types of companies can be incorporated under the Act, and in particular, many investors welcomed the introduction of segregated portfolio companies (SPCs), as these allow umbrella funds to be set up with limited liability between share classes – which was not permitted under the former regime – and so avoids potential cross-class liability issues. The Act also includes statutory merger and consolidation provisions, which make it possible for two entities (only one of which needs to be a BVI entity provided certain conditions exist), to merge with all the assets of both entities consolidated into the surviving entity. This has made the BVI more attractive for joint venture vehicles and for the restructuring of companies and funds.

BVI companies can also list on worldwide stock exchanges including the LSE, AIM, NYSE, NASDAQ, ISE, TSX and BOVESPA.

TIEA’s
Tax Information Exchange Agreements (TIEAs), introduced as a requirement for all offshore financial centres at the 2009 G20 summit, is a bilateral agreement that provides for a full exchange of information on criminal and civil tax matters between all countries party to the agreements. The main principles of the TIEAs are:
– The BVI either approaches a country, or is approached directly by a country, to enter into discussions to conclude a TIEA
– TIEAs are negotiated on the BVI’s behalf by a team of officials from the International Finance Centre, the Ministry of Finance, the Inland Revenue Department and the Attorney General’s Office, with ongoing representation from the Financial Services Commission. Once the agreements are agreed in draft form, they are considered at official level for approval by the BVI Cabinet
– Once the relevant constitutional arrangements and approval processes have taken place in both countries, a ceremony takes place where the formal agreements are signed by representatives of the respective countries.

These agreements, however, must go through the legislative processes of the signing jurisdictions to be brought into effect
– After the legislative processes are complete, the agreements usually come into effect immediately in respect of criminal tax matters and at the beginning of the next taxable period for civil tax matters, which is 1 January of any tax year for the BVI
– In the BVI, a TIEA is brought into effect in accordance with the provisions of the Mutual Legal Assistance (Tax Matters) Act, 2003 by issuing an Order made by the Minister of Finance. Information requests can only be processed once the TIEA comes into force and they cannot be made retroactive.

Within four months of the G20 edict, the BVI had in place 12 TIEAs and today operates a total of 17, with countries including the US, the UK, Australia, The Nordic council (including Denmark, The Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden), New Zealand The Netherlands, The Netherlands Antilles, Aruba, China, Ireland and France.

Financial services (exemptions) regulations
The implementation of the Financial Services (Exemptions) Regulations in August 2007 have clarified the circumstances under which a BVI private trust company must be licensed. The PTC legislation, together with the continued popularity of BVI Special Trust structures (VISTA) ensure that the BVI is able to provide a full suite of trust structures to suit international demand.
 
Anti-money laundering and terrorist financing code of practice
In 2008, the FSC issued the Anti-Money Laundering and Terrorist Financing Code of Practice, together with the Anti-Money Laundering Regulations. These replace the previous antimony laundering code and guidance notes first issued in 1999. The new regulations have been introduced to ensure the BVI keeps in step with the changing global environment and international anti-money laundering standards, thereby protecting its standing as a well-regulated international financial centre.

Recent cases have underlined the fact that the BVI is committed to taking appropriate legal action to maintain the integrity of its offshore operations. In May 2010 a joint BVI-Bermuda investigation (known informally as the ‘IPOC’ case) resulted in convictions of BVI and Bermuda-based corporations leading to fines, costs and confiscation orders totalling over $45m. This investigation cost both territories over $3m and engaged lawyers, investigators and accountants for almost three years. This case followed on the heels of a smaller – but no less significant – prosecution in that it is to date the BVI’s largest civil forfeiture case ($100,000).

Legal framework
Further efforts to bolster the BVI as a top-tier financial services centre have included the addition of a commercial court, which is currently under construction. When introduced, the BVI will become the headquarters of the Eastern Caribbean Supreme Court’s commercial court. Many investors already take comfort from the fact that the BVI has a legal and judicial system based on English common law principles, with ultimate appeal to the Privy Council in England. The BVI legislators continue to work diligently to ensure that the legal and regulatory framework remains flexible whilst meeting international standards. In the current economic climate, the BVI’s proven judicial system and creditor-friendly insolvency legislation will be of increased importance to investors.

Aside from an expertise in financial, legal and regulatory quarters, the BVI also enjoys a Category One shipping status, allowing it to accommodate mega-yachts and large shipping vessels. It is also a member of the ‘Red Ensign’, a distinction that inspires confidence in its high standards. As a member of this exclusive club BVI representatives regularly attend all the major yacht shows; in Abu Dhabi, Monaco and Miami.

The real beauty of the British Virgin Islands is its proven leadership in meeting the needs of international business. The jurisdiction has a proud tradition of achieving balance and transparency in regulation; meeting and in many cases exceeding international best practice standards. It is reviewed annually by SATS and the IMF and is a member of IASCO.

The British Virgin Islands has become a high-quality international finance centre, and is regularly undertaking programmes to expand its financial services offerings to meet the needs of the global markets. Today it could not be easier for a company to benefit from the BVI’s opportunities, as the the IFC’s online registration system allows a company to become part of the BVI’s jurisdiction within 24 hours.

Sherri Ortiz says, ‘Our vision at the IFC is that the British Virgin Islands continues to be recognised as an innovative, efficient and respected international finance centre through the quality of its people, services and regulatory environment.’

Equity manager seeks greater volume

Bradesco Asset Management (BRAM) is proud to receive World Finance’s 2010 award for Best ESG Asset Manager in Brazil. It is the latest in a series of awards BRAM has earned in both its home market of Brazil and internationally for outstanding performance and management.

Standard & Poor’s gave BRAM in April, for the second year in a row, its award for Top Equity Funds Manager in Brazil, in S&P’s annual survey for Brazilian business magazine ValorInveste. Morningstar Japan awarded BRAM’s MUAM Bradesco Government Bond Fund “Fund of the Year 2009” in the High Yield Fixed Income Fund Division, beating out every other high yield fund, Brazilian or not, offered in the Japanese market.

This recognition is the result of years of hard work that Brazilian investors have long known to value. According to the UK magazine The Banker, Bradesco owns the most valuable brand in Brazil, while BRAM’s assets under management in Brazil have grown to over R$183bn ($101bn, as of May 2010).

BRAM is not resting on its laurels. The company is now embarking on an aggressive international campaign. Two offshore funds based in Luxembourg are already open for business, and more are on the way as BRAM expands to let foreign investors take advantage of its expertise in Brazil’s fast-growing and fast-changing economy.

Brazil: Sustainable growth and world class companies
As much of the world struggles with recession and debt, Brazil is growing quickly and reaping the benefits of years of fiscal responsibility. According to BRAM’s macroeconomic department, Brazil’s economy will grow 6.5 percent to 7 percent this year and 4.5 percent in 2011, while the public sector’s net debt will end 2011 at 43 percent of GDP—compared to more than 51 percent at the end of 2002. BRAM’s CEO, Denise Pavarina, says Brazil is on route to 5 percent annual growth over the coming decade. That growth, she says, will be balanced and sustainable, as Brazil is no longer just a commodities story. “Going forward, the drivers of growth will be a wave of investment and the burgeoning middle class, which is creating whole new markets.” Brazil’s entrepreneurs are responding, Pavarina says, as new companies are formed and old ones adapt and consolidate—creating new opportunities for investors. Investments are flowing to upgrade the country’s infrastructure and to develop the pre-salt petroleum reserves, which are among the biggest petroleum discoveries in the world over the past decade.

According to Joaquim Levy, Treasury Secretary of Brazil between 2003 and 2006, and now BRAM’s Chief Strategy Officer, this investment flow will mean a decade of major projects, that will not only turn Brazil into a major petroleum exporter, but include a large range of investments in electricity, ports, roads and railroads, as well as in low-income housing that will create millions of new homes. Major international sport events are also on sight, as Brazil will hold both FIFA World Cup in 2014 and the Summer Olympics in 2016.

“For the last twenty years,” Levy says, “since the economy was opened to foreign competition, Brazilian companies have been competing against the best firms in the world, and they are thriving. There are few if any other emerging markets that can match the diversity and vitality of Brazilian business.” Superior corporate governance is also the norm in Brazil. In June’s meeting of the International Corporate Governance Network, held in Toronto, 71 percent of investors polled chose Brazil as the emerging economy with the best corporate governance.

BRAM is part of this movement, as its parent company, Banco Bradesco—the 19th largest bank in the world—fulfills superior governance requirements in Brazil and internationally: NYSE Level 2, Bovespa Level 1, U.S. GAAP and Sarbanes-Oxley. Banco Bradesco has been a member of the Dow Jones Sustainability Index since 2006, while BRAM adheres to the United Nations’ Principles for Responsible Investment. “BRAM is not about following the latest investment fad,” Levy says, “but about participating in Brazil’s rapid and sustainable growth over the next decade and more.”

Research in all asset classes
Brazil, says Pavarina, offers opportunities in all asset classes. With relatively high interest rates, fixed-income offers excellent opportunities in the short term. “But in the medium and long terms,” she predicts, “interest rates will resume their secular move downward.” That means enormous potential in stocks, real estate, and even corporate debt, still a tiny market in Brazil, but one former Treasury Secretary Levy expects “will be a priority of the next government, whoever wins the upcoming elections.”

BRAM’s research department covers the entire relevant market. Its analysts follow companies responsible for the vast majority of the daily liquidity on the São Paulo Stock Exchange, using a fundamental approach that includes detailed valuation (discounted cash flow method), one-on-one meetings with management, and studying the company’s position in its sector. A key part of this research is also an in-depth analysis of each company’s capital structure.

“We’ve never depended on the ratings agencies,” Pavarina explains. “Doing our own analysis of credit risk is part of our responsibility to our investors and one of our strengths.” This research does not just help avoid negative surprises on equity investments. It also permits BRAM’s fixed-income and hedge fund managers to take advantage of opportunities in corporate debt.

BRAM’s thorough research is especially important in Brazil because of the economy’s dynamism. “The market is well-developed and efficient,” Levy says. “But the economy is changing in so many sectors that, if you’re watching it closely and continuously, you find untapped opportunities.”

BRAM’s edge comes not only from bottom-up company research, but also from top-down macroeconomic analysis. BRAM’s forecasts of inflation and interest rate movements have permitted its managers to successfully time the market.

Research finds its way into the management of the broad spectrum of investment options offered by BRAM, which include government bond funds, short-term bond funds, money market funds, balanced funds, long-short and multistrategy hedge funds, indexed and actively managed equity funds, as well as small cap and sectoral funds. The firm also offers funds of funds, funds focused on asset-backed securities and credit receivables, and private equity funds, as many of Brazil’s most promising companies are not yet public. As part of its ESG responsibilities—and for the potentially superior returns from socially responsible investing—BRAM also offers funds focused on sustainable development and superior corporate governance.

An international performance
The test of any asset manager is in the returns it provides its investors, and here BRAM’s record speaks for itself. In equity, its actively-managed long-only funds beat their benchmarks consistently and significantly. In the five year period ending June 30, 2010, the Bradesco FIA Institutional IBX Ativo fund appreciated 245.6 percent in USD compared to 218.4 percent for its benchmark, the IBrX large cap index. In the same period the Bradesco FIA Selection fund rose 261.2 percent in USD, compared to 215.7 percent for the Ibovespa broad market index.

BRAM’s more conservative fixed-income funds (BRAM FI Renda Fixa and BRAM FI Renda Fixa Bond) have beaten the CDI Brazilian fixed-income benchmark over the past one, three, and five year periods; its more aggressive BRAM FI Renda Fixa Crédito Privato has beaten the CDI every single year from 2006 to the present. Its hedge fund Bradesco FI Multimercado Plus turned in double-digit gains in every one of the last five calendar years, including 2008, when it rose 12 percent.

Following its success in Japan, BRAM is now offering its Brazilian expertise to investors in Europe and the United States, starting with two offshore funds offered through Banco Bradesco’s Luxembourg subsidiary, Bradesco Luxembourg. Both funds are constituted as diversified mutual funds (SICAV) under UCITS III Luxembourg legislation. The Brazilian Equities Fund lets foreign investors take advantage of BRAM’s award-winning equity team to invest in Brazilian companies listed on the São Paulo Stock Exchange. The Brazilian Fixed Income Fund is managed by the same team that won Morningstar Japan’s top award, and it gives BRAM’s managers flexibility to maximize value across Brazil’s debt markets, investing in both sovereign and private-sector real-denominated debt. For investors who wish to avoid currency risk, BRAM will launch later this year a third Luxembourg-based fund to invest in dollar-denominated Brazilian debt.

More Luxembourg-based funds will follow in 2011 and 2012, permitting investors to take advantage of BRAM’s skills across Brazil’s spectrum of investment opportunities. For institutional investors, BRAM already offers separate managed accounts, permitting direct participation in Brazil’s markets. Investors can access these products through Bradesco Luxembourg and Bradesco Securities offices in London and New York. In coming years, BRAM plans to expand further and offer asset management for investments in other Latin American countries.

With its rigorous investment philosophy, top-notch management, adherence to principles of responsible investment, and consistent outperformance, Bradesco Asset Management – BRAM is well-placed to replicate its Brazilian success internationally.

Tel: +55 11 2178 6713; Email: bram@bram.bradesco.com.br

Rio CEO seeking BHP iron ore approval

Global miners BHP and Rio expect
the iron ore joint venture in Western Australia will fail to get
regulatory approval, the Sydney Morning Herald reports.

The joint
venture would generate $5bn in cost savings annually for BHP and comes
as the world’s largest diversified miner launches a $39bn hostile bid
for Potash Corp.

Albanese, speaking to reporters on the sidelines
of an industry conference in Shanghai, said the technical arguments for
the iron ore joint venture remained strong.

“The synergies are worth striving for, we’re going to continue to strive to attain those synergies,” Albanese said.

“We’re going to do everything we can to see if we can attain those synergies through the regulatory process.”

Rio
and BHP officials in Australia declined to comment on the report, which
quoted mining executives saying competition regulators in various
jurisdictions had rejected the two miners’ arguments that the venture
would not have price-setting power.

“It’s dead and the coffin’s
being lowered into the ground. It’s a matter of finding a face-saving
way out in the coming months,” the Sydney Morning Herald quoted one
senior mining executive as saying. The executive was involved in talks
with regulators, it reported.

The newspaper said the regulatory
mood had turned against the joint venture after the world’s top three
iron-ore miners – Rio, BHP and Brazil’s Vale – imposed quarterly iron
ore pricing on their reluctant Asian customers this year.

Rio and
BHP want to combine their iron ore operations in Western Australia,
estimating they will share in $10bn in cost savings. They had hoped to
gain regulatory approval by the end of this year.

But the
venture, unveiled last December, is awaiting approval from regulators in
Australia, Europe, China and elsewhere, and sceptical regulators,
especially in Europe, have indicated their reservations by issuing a
barrage of queries, the paper said.

BHP recently launched a
hostile bid for Canada’s Potash Corp, the biggest takeover deal this
year, and some analysts suggest the deal could take BHP’s resources away
from pushing the iron ore joint venture.

Law firm’s multi-disciplinary approach

Patrikios Pavlou & Associates LLC has close links with reputable law firms worldwide and particularly strong associations in Europe, Middle East, and Asia. The firm has an esteemed network of associates including international law firms such as Freshfields, White & Case, Gibson, Dunn & Crutcher, MacLeod Dixon and many others. Furthermore, the firm is a member of various professional international bodies and in 2007, the firm became a member of Euroadvocaten, an association of law firms in the European Union comprising of offices in 19 countries and totaling in excess of 450 lawyers.

Clients
The favourable investment and tax environment of Cyprus have led to an increase of the international interest in the business services industry and has attracted multinational clients seeking legal and financial services from the Cyprus market. Over the years, Patrikios Pavlou & Associates LLC has carefully expanded their client base to allow them to meet the varied demands of today’s cross-border legal market. The firm’s clients include public and private companies, multinational corporations that have their regional hub in Cyprus, institutions, entrepreneurs as well as a host of individual clients from Cyprus and abroad. In the Banking and Finance sector, the firm represents a number of local and international banks and financial institutions. The aim of the firm is to provide their clients with high-quality professional legal advice and practical guidance covering the full range of their business activities, in respect of both domestic and international transactions.

Awards & recognitions
Patrikios Pavlou & Associates LLC is recognized as a top tier firm from prestigious legal directories globally. The Banking & Finance department along with the Tax, Corporate & Commercial, Mergers & Acquisitions and Litigation & Arbitration departments rank in the first tier of numerous international directories. Furthermore, over the last years, the firm has received several international awards in respect to its distinctive and professional client services and along with other awards in 2010, the firm was named the Best M&A Team in Cyprus by World Finance.

Corporate law and M&A
Patrikios Pavlou & Associates LLC is one of the leading law firms in the corporate law sector. Senior & Managing Partner, Stavros Pavlou and his team handle complicated corporate and M&A matters including large international cross-border, as well as, domestic transactions involving international private and public companies listed on the Cyprus Stock Exchange and other recognised Stock Exchanges like LSE, AIM, the Hong Kong Stock Exchange, etc. During the current year the department handled complicated matters involving acquisitions of Cypriot and other companies and assisted prestigious international law firms on Cyprus Law issues.

Profile
Patrikios Pavlou & Associates LLC is a multi-award winning international law firm based in Cyprus with a 47-year experience in the legal profession. The firm’s highly trained legal team specializes in specific practice areas and with their combined skills and knowledge can provide expert comprehensive legal solutions according to the client’s particular needs and requirements. Founded in 1963 by Patrikios Pavlou, a barrister from Limassol, Cyprus, the firm is now considered as one of the largest and most successful firms in Cyprus.

Practice areas
The increasing internationalization of business requires expertise that transcends individual, national and professional boundaries. Combined with a multi-disciplinary approach to service delivery and through their associated offices worldwide, lawyers at Patrikios Pavlou & Associates LLC are able to provide clients with distinctive advice on national and international law in the following specialized practice areas:
– Corporate Law and Mergers & Acquisitions
– Banking & Finance Law
– Litigation & Dispute Resolution
– Capital Markets
– Tax Law & International Tax Planning
– Real Estate, Trusts & Asset Protection
– Intellectual Property
– IT, Internet & E-Commerce
– Administrative & Constitutional Law
– Shipping & Admiralty Law

Corporate law and M&A legal advisory areas:
– Company formation
– Partnership formation and dissolution
– Corporate management, with full domiciliation services
– Corporate reorganization, reconstruction, and optimization of business structure
– Shareholder agreements and corporate governance
– Loan, agency and distributorship agreements
– Lease, hire-purchase agreements
– Mergers and Acquisitions
– Joint ventures and cross border transactions
– International tax planning
– Legal due diligence
– Management buy-outs and earn-outs
– Corporate finance, with a particular focus on takeovers, mergers and acquisitions
– Inter-company agreements.

Banking & finance law
Despite the negative economic environment due to the financial crisis over the last year, Patrikios Pavlou & Associates LLC has been receiving increasing banking & finance work and this has led to the rapid and continuous expansion of the banking & finance department. The department is mainly involved in challenging and complex corporate finance transactions in Cyprus and abroad and is also handling project and asset finance matters and has extensive experience in securitisation issues. Expert professional legal advice is offered to major national and international banks, industrial organisations, multinationals, financial institutions and other companies in the financial services sector. The recovery section of the firm’s banking practice regularly handles inquiries from various local and international banks on complicated recovery cases.

The extensive expertise of the main partners in banking and finance, in combination with their experience in major international cases, makes the department one of the most competitive in its area. Stavros Pavlou, Senior & Managing Partner, being both an economist (BSc Economics of Industry & Trade, LSE, UK) as well as a Barrister at Law (Gray’s Inn, UK) and Lia Iordanou Theodoulou, Corporate Finance Partner, lead the team for the provision of effective and professional legal advice and guidance to clients including:

banking and finance legal advisory areas:
– Assistance in listing and floatation of securities
– Development financing and security structures for borrowers and lenders
– Acquisition finance
– Corporate finance
– Project finance
– Equity investment
– Financing and management buy-outs
– Risk management
– Capital efficiency
– General banking law
– Recovery of loans
– Lease, hire-purchase agreements
– Letters of Credit and Bank Guarantees

Experience & references
Senior & Managing Partner, Stavros Pavlou is a very experienced litigator in the commercial field including banking and financial law and specializes in cross-border securities. He is a highly regarded legal consultant in this field. He acts for various major European and other international banks as well as other companies and high-end individuals in the financial services sector. Stavros Pavlou also provides high quality legal advice and assistance in the listings of major companies on local and international stock exchanges such as the Cyprus Stock Exchange (CSE), London Stock Exchange (LSE), LSE Alternative Investment Market (LSE AIM), Hong Kong Stock Exchange (HKSE) and others. Furthermore, he possesses extensive expertise in advising and assisting clients in the implementation of effective tax planning structures designed to minimize tax liabilities, improve efficiency of the clients’ international cross-border activities and meet their financial and business objectives.

Beyond Corporate law, m&a and banking…
– Litigation & Dispute Resolution
The department’s legal team has a transnational experience and a proven track record in successfully handling both locally and internationally a wide range of claims and disputes in respect of general civil, corporate and criminal litigation to various international Courts of Arbitration.

– Capital Markets
Professional legal advice and complete assistance is provided on the listing of shares in international stock exchanges such as the LSE, LSE AIM, HKSE and others, and on all relating documentation.

– Tax Law & International Tax Planning
Advising and assisting clients in the implementation of tax planning structures designed to minimise tax liabilities, improve efficiency of the clients’ cross-border activities and meet their financial objectives. Through the association with the PageCorp Group, the firm provides company secretarial, trustee, administration, and management services to individuals and companies.

– Real Estate, Trusts & Asset Protection
The department handles commercial and residential property related matters, asset protection with the use of Cyprus international business companies and also the use of Cyprus International trusts.

– Intellectual Property
The firm provides advice on both contentious and non-contentious intellectual property matters on copyright, patents, licensing, franchising and registration of trademarks.

– IT, Internet & E-Commerce
The department helps clients leverage technology by providing  advice and assistance with explaining new laws and regulations and structuring agreements that work to their best advantage.  

– Administrative & Constitutional Law
The legal team successfully handles administrative disputes relating to taxation, employment, immigration, government projects, land law and other major administrative and constitutional issues.

– Shipping & Admiralty Law
The firm provides advice to resolve commercial and legal problems in Cyprus and abroad on all maritime and admiralty matters such as marine commerce, marine navigation, shipping and others.

Sample of recently handled cases
Banking & finance
– Assisting and acting as an escrow agent in a loan facility granted to an international group of companies by a Russian bank (apparent value of assets secured by the escrow – $3.2bn).

– Advising a Cyprus public company with respect to the listing of its shares on the Hong Kong Stock Exchange (HKSE). The listing in question is the first ever implemented by any Cyprus company. Attended at HKSE and collaborated with other international law firms in the preparation and submission of the appropriate applications, drafting of specialised Articles of Association and supporting documentation in accordance with HKSE requirements, issuing legal opinions to the HKSE and the Underwriters and extensive involvement in coordination and implementation of the Project (amount involved $600m).

– Acting on behalf of a large international group of companies in relation to a credit facility obtained from a Russian bank in the amount of $450m and advising both borrower and the bank and issuing of legal opinions on various matters including enforcement of and validity of security, acquisitions and transfer of shares, restructuring, tax implications and so on.

– Advising both Lender, one of the three largest banks in Russia and Borrowers, a large international group, in a $1.1bn deal including the granting of credit facilities; drafting of Cyprus related documentation, such as share pledge agreements and undertaking the registration of security documents and issuing legal opinions to the Lender from a Cyprus law point of view; following up and advising on amendments to original financing.

– Advising a subsidiary of a Russian bank in relation to the provision of financial and investment services in Cyprus; obtaining of appropriate licenses from Cyprus authorities; providing legal advice in relation to restructuring and management of the subsidiary. It is the first license granted to the bank’s financial services department to carry out activities in the European Union.

Corporate law and mergers & acquisitions
– Assisting and advising on Cyprus law aspects in relation to a PPP Project relating to the development, reconstruction and operation of an international airport in Saint Petersburg, Russia, involving the Russian subsidiary of a Cyprus joint venture company. Drafting amendments and offering advice on the shareholders agreement and specialized legal opinions on fraudulent trading, potential exposure of shareholders etc; drafting JVC articles of association, corporate approvals and so on.

– Opining and assisting on the acquisition of two Cyprus companies, drafting of shareholder agreements and other related contracts and assisting in the structuring of the project, offering tax advice on the resulting structure etc – amount involved $300m.

– Advising the purchaser together with an international law firm in relation to a 75 percent acquisition of two Cyprus companies, including carrying out due diligence, advising on transaction structuring, commenting and/or drafting of SPA, JV agreements, share pledges, call and put options; seeing to and attending closing. The joint venture concerned the construction of a five star hotel in Minsk and the amount involved $60m.

– Advising and assisting a Cyprus company, part of the largest private equity investment management group in the Central Asian region on various aspects on its major reorganisation and restructuring. Drafting and advising on taking out of security, seeing to execution and delivery of security documents – amount involved in excess of $44m.

– Advising on the cross-border merger of a Lithuanian based company valued at €30m with a Cyprus based company, involving drafting of necessary documents, review of Articles of Association, liaising with the Registrar of Companies for publication of terms of merger at the Cyprus Official Gazette and filing of all necessary applications before the Cyprus courts for the sanctioning and approval of the cross-border merger.

Future
Patrikios Pavlou & Associates LLC invests continually in developing their expertise and high quality legal services in order to further expand the firm both locally and internationally. Today, the firm continues the significant expansion it has enjoyed since 1963 and has a team of 30 advocates and legal consultants assisted by a team of 25 paralegal and administrative staff. The aim is to further grow their portfolio of associates through strengthening current collaborations and creating new ones. The participation of the firm in international professional bodies, as well as, the prominent relationships with international law firms seeking a reliable Cyprus partner in their multinational projects, are the cornerstones of the firm’s future plans and strategies.

Patrikios Pavlou & Associates LLC is looking forward to the future and the challenges it will bring, confident that with team spirit and commitment the firm will continue to provide top quality legal services with diligence, integrity and professionalism.

For further information tel: +357 2587 1599; Email: spavlou@pavlaw.com; www.pavlaw.com

FX markets ride recession

When the financial crisis broke in 2008, the waves kicked up by the collapse affected every corner of the global economy – and that included the world’s foreign exchange markets. LiteForex, part of the Straighthold Investment Group, has had a ringside seat on the events in forex markets over the past two years, since hundreds of thousands of forex orders are closed by traders using its systems every month. The picture has not always been pretty for the day trader, tossed about sometimes like a solitary rower in a storm-hit ocean. But the calmer waters of 2010 suggest that life is getting a little more predictable again, and the opportunities for making a living from forex trading are getting less risky than they were just a few months ago.

At the end of 2008, according to LiteForex’s analysts, price movements in the forex market were mainly connected with the decline of stock market indexes. Big falls in the prices of large numbers of stocks resulted in higher demand for the dollar, which saw the currency rise in value between August and October 2008.

Trading overall increased, but the main trading participants were the largest global banks, which were buying up American currency to settle their obligations as the revaluation of tangible assets took place. The decline in world energy prices also contributed to currency movements. The jump in financial market volatility resulted in a considerable rise in the potential risks of short-term trade, and times were hard for day traders. from January 2009 LiteForex says, market responses to fundamentals became more volatile. The intraday movements followed the general trends, but the uncertainty of the situation saw investors’ responses to breaking news become more unpredictable. Misinterpreting the way the markets would react to market news resulted in the ruin of many retail investors, who did not have the deep pockets that would enable them to bear strong countermovements, LiteForex says.

A year to remember
This year, fortunately, general trends of the market are more predictable. The average market volatility has decreased, though traded volumes are also down in comparison with the figures seen before the financial crisis began. However, LiteForex says, this decline has not been caused by the migration of investors to other sectors; instead it is down to a general decline in solvency of the smaller market participants. The company’s analysts also point to a continuing decrease in risk tolerance after the storms of the previous 18 months, and a sheer lack of money on the part of investors which, they say, has resulted in a reduction of investment volumes into speculative operations in general and not only in the forex market. It has certainly seen no evidence of a migration of capital owned by private investors into other market sectors.

Still, according to LiteForex, the “classic” forex day trader remains the same as he always was: even-tempered and emotionally restrained, with a mean age varying from 25 to 40 years old. The company’s clients come from all over the world, and LiteForex says it has noticed that more of them than in the past have had prior trading or investment experience before they sign up. The principles of day trading, it says, remain invariable.

The successful day trader always begins with a preliminary analysis of the situation. The decline in the appetite for risk among private investors has seen the amount of money invested in any one transaction fall, as investors follow the golden rule, “don’t put all your eggs in one basket”. However, the overall number of transactions has been increasing. The result is a rise in the average floating on summarised client positions, while the increased predictability of the market in recent months has seen some increases in profits for both private investors and traders. But overall LiteForex says it has seen no change in tactics by the short-term traders in the forex market and the general techniques for determining the points of market entry and exit remain the same.

LiteForex, which has its head office in the Seychelles, and other offices in Russia, Latvia and Ukraine, has more than done its bit for educating would-be forex traders put off by the potential risks of trading in volatile currencies by introducing its “Lite” trading account, which lets beginners start with a minimum deposit of just $1 (and a maximum of $3,000). Though it can also be used by traders who want to test their mechanical trading systems, it was developed for beginners primarily, the company says, simply because if beginners started out using traditional-style accounts, by the time they had accumulated enough experience to survive, they had generally managed to accumulate an unacceptable level of losses. The forex market is unpredictable and dynamic, and rookie traders have to learn how to take in the latest events in economics, politics and elsewhere and calculate what sort of impact the breaking news is going to have on the prices of different currencies. It takes time to acquire the skill to read the market, and when you’re trading yen, euros, dollars and sterling, time is, literally, money. Beginners who gain confidence and experience using LiteForex can then move on to the company’s “RealForex” accounts, with no limit on the amount of money they can stake. “Lite” traders will not make huge profits under the sort of average yields available today, LiteForex says, but what the system does enable people to do is give individual traders the possibility of becoming an experienced professional. Since the company began in 2005, it says, more than 300,000 people have used its “Lite” accounts to try out their hand at forex trading, and quite a number went on to open professional “RealForex” accounts.

Another advantage to the company itself that has arisen from the LiteForex accounts, it says, is the experience it has given the company’s own staff in dealing with a huge number of clients, problem-solving and offering advice and guidance, and in particular analysis, much of which is geared towards the “classic” day trader.

Substantial investing
LiteForex treats all its clients the same, it says, regardless of the trading systems they use, and tries not to give them any advice about their choice of account type, except to underline to them the need to observe the classic rules of money management. Nevertheless, the company says, the statistics show that the best, or to be more precise, the most stable trading results are more probable using systems based on day trading. The profitability available from using day trading systems, according to LiteForex specialists’ research, ranges from 16 percent to 26 percent a month depending on the state of the market. Naturally, news of those kinds of returns gets around. LiteForex’s research data indicates that the number of professional traders whose primary income is trading has doubled over the past year. All the same, LiteForex says, it never promises potential clients speedy enrichment and easy earnings in its advertising or anywhere else: “The road to becoming a prosperous trader is long and hard, and requires investment of efforts and means.”

More than 200 companies worldwide compete in supplying services to forex traders, but LiteForex has one advantage over many of its rivals in being able to offer the “Lite” account, and thus being “first of all a broker for everybody – from beginners to professionals”, with the availability of different types of accounts that can be used by traders as they accumulate practical experience. Indeed, traders can have any number of accounts of both types, “Lite” and “Real”. Alongside this is what the company calls the “universality” of the services it provides. Regardless of the size of the trader’s deposit and the trading tactic used, staff treat all clients with the same high professionalism and provide the same high quality of analytical material. The interests of the clients, it says, are the cornerstone of the company’s operations.

Unlike some providers of brokerage services for forex traders, who use their own proprietorial trading platforms, LiteForex employs the popular “Metatrader-4” trading platform, designed by the specialists at MetaQuotes Software. According to LiteForex’s estimates, Metatrader is used by at least eight out of ten brokers. An updated version, Metatrader-5, is currently undergoing beta testing, and LiteForex says the interface is similar enough to the existing version that traders should have no problems using it. Trading platforms are important: a short while ago, LiteForex says, it saw a mass transfer of traders from one of the large regional brokers because the traders rejected the inhouse trading platform the broker was using.

For the future in the forex market, LiteForex says, “it is difficult to forecast what is likely to happen in our dynamically developing time.” But LiteForex itself, it says, has huge potential to continue being a stable, dynamically developing company, being respected both by the clients and competitors. The main principles laid down in the project by the company’s founders five years ago will remain constant, it says: attention to the client, democratic character, universality, openness, high professionalism among the team, an a thorough understanding of the requirements of the people who use its services.

Keeping up with the times

Presently, as a stated-owned life insurance company, Jiwasraya has kept up with the times with optimum effort to satisfy its customers’ and business partners’ needs.

Starting with noble intentions to educate the people by making them understand the importance of good future planning, Jiwasraya was established in 1859 under the name of NV Neiderlandsch Indiesche Levensverzekering en Lijfrente Maatschappij (NILLMIJ) van 1859 by Dutch renowned figures in Batavia.

In line with the nationalisation of Dutch companies by the Indonesian government, Jiwasraya has been involved in a number of mergers and name changes.  On March 23rd, 1973, it changed its status to Perusahaan Perseroan (Persero) Asuransi Jiwasraya, now called Jiwasraya.

As a stated-owned life insurance company which does not exercise a monopoly, Jiwasraya undertook fundamental changes. Jiwasraya has not only changed its logo, which has been its image for so long but also launched new corporate values for all employees, namely: integrity, competence, customer and business orientation. The new corporate values are necessary to enable the Company to consistently develop during increasing competition in the insurance industry.

As a life insurance provider, Jiwasraya is greatly dependent on public trust, particularly with its policy holders. Accordingly, with corporate culture based on quality of service, strong discipline and good administration, it has become a foundation in determining the company’s direction, as well as its goals.

Prior to launching its products, Jiwasraya conducted research on market expectations and conditions. The process of product creation was carried out by a team equipped with the expertise and capability in translating market demands which would eventually bring benefits to both the customers and the company. Jiwasraya also conducted periodic evaluations on these products to assess the relevance of product and market demand as well as the level of competitiveness in the market. The product development process will enable the company to create products which will fulfill the customers’ present day and future needs.

Jiwasraya has had over 20 individual products with satisfactory sales results. They are Jiwasraya’s most popular and most wanted products. Amongst the most popular products, which are highly sought after by customers, are education products, unit links, as well as protection and investment products. Jiwasraya is fully aware of the key role of employees in a company. Therefore, Jiwasraya has designed specific products for employee benefits in order that they can contribute maximum productivity to the company. The corporate products are quite varied: including health insurance, term life insurance, endowment and pension products.

Jiwasraya fully believes that human resources play a key role in a company’s progress. Accordingly, the company provides a wide opportunity to all employees to participate in educational and training programs to strengthen their capacity for achieving a higher standard of professionalism. To realise Jiwasraya’s mission to make the company a place for employees to grow and develop, as well as to become professionals with high integrity and competence in life insurance and financial planning, Jiwasraya duly serves its employees well. A number of human resources related work programmes were implemented, such as talent management, competency appraisal, educational and training programmes.

Embarking into a modern era, globalisation demands an increasing need for fast and accurate information. Consequently, the role of information technology and communication has become essential in creating an efficient and effective information system, serving as a primary support and a boost in competitive edge amidst insurance market competition. Jiwasraya has consistently met the demand by implementing technology in the company to support the business process. Furthermore, the company has been conducting innovations in keeping with the implementation of IT developments applied internally with a view to raising its services to policy holders and stake holders.

Jiwasraya, through its Information Technology division, is responsible for maintaining the infrastructure for information technology, application/software developments, hardware/network and other means of communications which are aimed at enhancing operational effectiveness based on work plans set out in the beginning of the year. Jiwasraya through the years has done its utmost to improve services through the application of IT.

As a service provider in life insurance, Jiwasraya is fully committed to continue reorganising itself to raise its service standards to all customers and stakeholders, while strengthening its competitive edge amongst the general public through continuous innovations in business processes, by way of boosting the role and innovations of information technology applied within the company.

Standardised customer service is a key factor for Jiwasraya’s business developments, and the company has been consistently raising these standards year on year to provide customers with the best services. This resulted in the company obtaining the ISO 9000-2000 Certificate in quality management system application from PT Sucofindo International Certifications Services (Persero), the scope of application being Head Office and Branch Office.

Following its achievement as Top Brand 2000-2007 award winner for life insurance category, in 2008 and 2009, Jiwasraya again obtained Top Brand Award from Frontier Consulting Group and Marketing magazine for life insurance category. This award also represented the impressive record performance by all agents throughout Indonesia in presenting a strong brand awareness in the national market. Furthermore, this outstanding achievement strengthened Jiwasraya’s motivation to give greater advantages to the Indonesian people by rendering the best services and product innovations and at the same time contributing to the insurance industry, particularly the life insurance sector.

As mandated by the Government, and in an endeavor to boost economic activity and growth as well as creating equality in development and community empowerment, Jiwasraya has always shown concern towards the community living in Jiwasraya’s surrounding premises by contributing to their wellbeing. The company realises its concerns by providing funds to its business partners through Partnership and Community Development (PKBL), as well as partaking in social activities organised by the local authority.

Indeed, growth takes place every moment of every day. It is by no means a free gift. It is  instead the fruits of serious endeavour and strenuous work of all involved. Intimate communication and partnership remain the foundation for never ending creativity and exchanges of fresh ideas, essentially needed to attain highly praised achievements.

For more information tel: +62 21 384 5031; email: asuransi@jiwasraya.co.id; www.jiwasraya.co.id

Looking after life

For more than 160 years Guardian Life of the Caribbean Limited (GLOC) has been a pioneering leader in the Caribbean insurance industry. During this time it has scored many firsts, but there is one which stands out in the minds of customers and competitors: when the company transformed a large exposed mountain face in the 1980s into an indelible symbol which reads: Guardian Life: solid as a rock.

This statement stands out as a symbol of Guardian Life’s innovation, strength, foresight and creativity and has come to personify its dominant leadership category in the insurance industry. But the Guardian Life story begins much further back in time.

An icon is born
Two centuries ago, in 1847, an intrepid Scot Charles Warner opened the doors of Standard Life of Edinburgh to introduce life insurance to Trinidad and Tobago.

This bold entrepreneurial venture was done against the dark backdrop of a financial crisis in the UK, the abolition of slavery and the collapse of the West Indian Bank. Today, in this fast paced 21st century world, Guardian Life is recognised by industry professionals worldwide as the Caribbean’s most dynamic, successful and stable insurance company.

Performance leads to success
A key landmark date in Guardian Life’s history occurred on June 18, 1996. As part of its progressive restructuring, Guardian Life of the Caribbean formed a holding company called Guardian Holdings Limited (GHL).

The company grew steadily and currently operates across the English and Dutch Caribbean with interests in the UK. It is listed on both the Trinidad and Tobago and Jamaica stock exchanges and is the parent company for an integrated financial services group with a focus on life, health, property and casualty insurance, pensions and asset management.

GHL has earned an admirable reputation among the leading financial institutions in the Caribbean. The Jamaica Gleaner newspaper and Mona School of Business selected GHL as winner of the 2003 Gilt Edged Golden Awards for Jamaica and the Caribbean, Most Admired Company in Trinidad and Tobago in 2003 and the Caribbean Company of the Year in 2000.

The company has captured awards from the Jamaica Stock Exchange for online reporting in 2008 and 2009 and was the proud recipient of the Trinidad and Tobago Energy Chamber 2009 Leadership Award for “Sustaining the Environment: Making the Most of Green Opportunities”.

As the flagship company within the Group, Guardian Life is headquartered in Trinidad and Tobago and engages in the underwriting of all classes of long-term insurance (life, critical illness and pensions), group business (life, pensions, critical illness and health), as well as associated investment activities. It is also one of the largest life insurance providers in the Caribbean with over 150,000 policies and assets in excess of $650m under management.

Growing business in the Caribbean
As a Caribbean based company, it is only natural that this region continues to be one of the company’s primary focal points in its pursuit of new business opportunities.

GLOC’s span of operations currently includes the Southern Caribbean as well as Central and South America.

Through its sister company, Guardian Life Limited in Jamaica, Guardian Life services the needs of the Cayman Islands and Belize, and through Fatum Holding N.V. Limited, it serves the Netherlands Antilles and Aruba.

The company’s expansionism also continues to make strong inroads through its Barbados branch.

“As we continue along our path of controlled expansion, the Caribbean and Latin America continue to be important growth channels for us,” noted Ravi Tewari, Group President – Life, Health and Pensions.

“Despite the financial aridity being experienced in the global economic climate, our aim of becoming the region’s dominant insurance and wealth-creation company remains steadfast and we are well positioned in our pursuit of this goal. To achieve this we are continuously building sound business models in those countries where there are opportunities for growth and we are making notable progress in that regard,” added Tewari.

Strong gains
In 2007, GLOC’s revenue crossed the $150m mark for the first time in its illustrious history, with revenue exceeding $168m, up from $147m in 2006.

In 2008, total revenue grew by 17 percent to $197m. In 2009, despite the fallout experienced as a result of the financial meltdown of two of the Caribbean’s leading financial institutions combined with a wait-and-see approach of cautious clients, the company’s insurance agents outsold their competitors combined to settle $36.2m in new annual premium income, a 28 percent increase over 2008. Total revenue grew by 12 percent to $221m.

“When you consider the financial twists and turns that occurred over the last year, some insurance companies would have been satisfied just to break even. That’s not the Guardian way,” smiled Tewari.

“Our revenue growth and increase in new annual premium income during these challenging times speak volumes about the quality of our sales force and administrative team. It is clear to see that the efforts we have channelled into our sales force training combined with our technological improvements and the advances made in our internal processes are bearing fruit.”

Tewari explains that this growth was a direct result of the company’s continued successful execution of its business strategy of increasing its market share, developing enhanced market-relevant products, aggressive cost containment, finding more meaningful ways to engage its clients and developing its human capital to the benefit all stakeholders.

Recognition
With such a laser-like focus on performance and generating new business, it came as no surprise to the Industry’s insightful observers that Guardian Life was again named the World Finance Caribbean Insurance Company of the Year Award 2010 – the third consecutive year that GLOC has earned this distinguished award.

On achieving this hat-trick of awards, an elated Tewari acknowledges that this is an unequivocal indication that Guardian Life’s business strategy is on the right course for substantial and sustainable growth, and that this prestigious endorsement reinforces confidence in the minds of its stakeholders that the company is moving in the right direction.

This year also marks the eighth year running that the company has achieved ‘excellent’ ratings from world renowned rating institution A.M. Best, with this year’s rating of A-Excellent being reaffirmed.

Looking after life
Over time, Guardian Life has built a trusted reputation for holistically demonstrating its commitment to fulfilling the broader meaning behind its corporate slogan: Looking after life. Through programmes and support initiatives that foster environmental preservation, enhance educational outreach, and nurture sporting development among the youth and sporting organisations, the company has long been an admired Caribbean corporate citizen.

In 2010 Guardian Life continues this thrust with a Guardian Gone Green theme which focuses on health and wellness, the environment, youth, sports and education.

Future
The glare of past success does not blind Guardian Life’s management which has set even more aggressive goals to be achieved this year and in the foreseeable future.

According to Tewari: “We remain vigilant in our pursuit of becoming the region’s foremost insurance company. Our focus continues to be guided by our mission to become a first-world insurance firm that is based in the Caribbean. To achieve this, we continue to calibrate our product and service offerings to meet the needs of a knowledgeable and increasingly sophisticated market.”

Evidence of this thrust towards creating products to meet the needs of their diverse client base is founded in the fact that in 2009 Guardian Life introduced four new products in its Caribbean jurisdictions.

“We are judiciously positioning ourselves for expansion and sustained profitability. Our strategy remains steadily on course as we pursue possible acquisitions and alliances that are prudent strategic fits with GLOC,” added Tewari.

He concluded by saying: “As we continue to further develop our portfolios in the markets where we operate, we will continue to transform our business model to meet new challenges and exploit new opportunities. In the traditional Guardian Way we will pursue this with diligence, prudence and the necessary caution which have come to characterise Guardian Life of the Caribbean Limited as a company that has built its impeccable reputation on being as solid as a rock.”

Food firm commits to sustainability

After consolidating his operations in Mexico and Latin America, and successfully entering the US market, Roberto González Barrera, founder, chairman of the board and CEO of GRUMA (a world leader in the production and distribution of corn flour, corn and wheat tortillas, and an important player in totopos and flat breads), established in 1982 in Edinburg, Texas, his first corn flour processing plant in the US. There, he faced strict environmental regulation, which led him to install dust collectors, reduce emissions into the atmosphere, and build water treatment plants to preserve vital liquids.

Later, in 1989, he built his second plant in Plainview, Texas, for which he introduced more advanced environmental technology, such as air scrubbers, for dust collection and additional energy savings.

Since then, Roberto González Barrera was convinced that protecting the environment could not only constitute more profitability for his companies in the future, but also create business value and allow them to comply with increasingly stringent regulations. “I realised that in the world there was a growing concern to care for the environment, water and energy shortage and environmental pollution. That is why I decided that protecting natural resources was of the highest priority, and that it would help anticipate more stringent regulations I saw coming in every country”, says Barrera.

Therefore, the entrepreneur asked his technology expert Manuel Rubio Portilla, an engineer of Cuban origin, to focus his efforts on technological research and development to accomplish that objective. Manuel Rubio, now recognised as “the father of the GRUMA technology”, had been working for decades to develop cutting edge technology under one slogan: that all GRUMA technology should be 10 years ahead of existing know-how.

Now, his challenge was to focus on developing technology with more environmental advantages, mainly in five areas:
– Gas consumption reduction
– Potable water consumption reduction
– Gas emission reduction
– Solid waste discharge reduction
– Waste water discharge reduction.

With the second generation of the Rubio engineers, Felipe Rubio Lamas, current chief technology officer (Corn Flour and Tortilla Production), an R&D programme was implemented. It has had very impressive results in the five areas mentioned.

For Felipe Rubio, “the challenge of getting better results through the current GRUMA technology is not a utopia. The company’s industrial flour method – compared to the traditional process used by thousands of tortilla microindustrialists – not only allows for less water and gas consumption, but it also makes possible water reuse and recycling and the reduction of emissions into the atmosphere of the group’s flour plants”. Rubio shares some concrete results.

Gas savings
The GRUMA process allows for over 40 percent gas savings, as compared to cook corn in the traditional process. Given such large production volumes, these savings amount to meeting the energy needs of 347,000 households a year.

Less water consumption
The GRUMA corn flour technology allows for 60 percent drinking water consumption savings, which would be sufficient for the annual supply of this liquid to a city of 121,500 inhabitants.

Less gas emissions
GRUMA technology allows for the reduction of greenhouse emissions into the atmosphere – an equivalent of 75 million tons of CO2 a year. This figure amounts to the CO2 emission of 28,000 new model vehicles circulating two hours a day, for one year, at a speed of 80km an hour.

Solid waste discharge reduction
The current GRUMA process drastically reduces domestic drainage and sewerage problems, as a consequence of the elimination of 73 percent of all solid wastes, which amounts to the annual sanitary wastes of a city of 4.8 million inhabitants.

Less waste water discharges
The GRUMA technology reduces 60 percent of all waste water discharges. Only at the Evansville, Indiana plant, waste water discharges are reduced by 85 percent, which amounts to 710 cubic meters a day, a volume that would supply potable water to a town of 5,000 inhabitants.

The years to come
“The interest and care of the environment are not new tasks for GRUMA”, says Sylvia Hernández, chief global marketing officer of the Mexican multinational.  She also remembers that “practically since its origin in 1949, GRUMA has been characterised by its constant investment in the development of leading edge technology for corn milling”.

The most recent GRUMA technological advancements consist of enhancing the corn cooking method, which will allow for even more resource savings, compared to the current GRUMA technology.

About $63m have now been invested in the introduction of the new GRUMA technology, to make it more environmentally friendly. Twenty percent of the company’s corn flour production units have now been converted into the new technology, whereas the rest will be converted in the following years.

The mission foods case
Given the prevailing industrial and market characteristics in the US, GRUMA Corporation, a subsidiary of the Mexican multinational in that country and first source of revenues for GRUMA worldwide, was chosen in 2008 to spearhead an ambitious long term sustainability project called “For a Better Tomorrow”, which will soon reach global levels.

In the future, the company will renew its energy sources to adopt aeolic and solar energy. In this sense, the Los Angeles, California Panorama facility is an outstanding example, for it has solar panels to supply clean energy for the administrative areas, as well as for all the computing equipment used by its personnel.

Sustainable packaging
A novel GRUMA Corp. initiative, for products sold under the Mission brand, is the optimal use of packing and packaging, to protect its products from any type of damage, contamination or mishandling during their transportation and storage, but with a more positive environmental focus. A few simple ideas include eliminating packaging, designing refillable or reusable packages and producing recyclable packages.

On the medium and short term, the company plans to adopt a sustainability philosophy in all its facilities, zero waste, innovation strategies, as well as to be self-sustainable and clearly contribute towards value generation, amongst other goals.

From Juan Fernando Roche’s perspective, president of Mission Foods in the US, “experiences derived from our operations in the United States, might very well be replicable throughout GRUMA’s global operations”.

For González Barrera, the most important criterion is for each one of these efforts to be self-sustainable, profitable and with a visible social impact. As he points out: “The decision to invest in sustainability has given us very positive surprises. At the beginning, because we discovered that it gave a valuable sense of belonging to our collaborators, and because, unlike what some could think, it has become one of the most profitable projects we’ve been able to adopt, which not only allows us to be a better company, but also to contribute to inherit a better tomorrow to generations after us”.

Investors warm to microfinance

You can’t move for ethical investment funds these days. But there are profound differences between how such funds operate in the real world. SNS Asset Management (SNS AM) – a company with €42bn under management – has for some time pioneered an approach that directly invests in themes most important to developing countries.

“As a genuinely responsible investor, we want to take that responsibility further,” says SNS AM director Theo Brouwers. “We invest typically in three main themes – microfinance, water and agriculture – that are important to developing countries. Around these themes we have also developed strong relationships on both the financial and non-financial sides with NGOs and universities to get a very full understanding of the issues involved.”

After SNS AM selects an investment manager, they build the fund structure, being totally responsible for its administration and reporting. “The fund manager will come up with their investment proposals. This then goes back to the investment committee which consists of SNS AM staff. We then look at the proposal strongly from an institutional fund perspective on whether we get paid for the risk we have taken. Then we make our decision, to approve or not.”

The price is right
It’s all very well having a good investment idea. Putting it into practice, then buying into it at the right price is a different thing again. Typically investment managers will inevitably buy into a deal if they’ve spent two or three months working on the proposal – especially if they already have a mandate from the pension fund.

“But is the price right? Sometimes it isn’t,” says Theo Brouwers. “It might happen that the investment manager is eager to do the deal despite the price. Then we say: well, we understand why you like this company, but the world has changed and we now think the price is too high. If the deal is proposed as a local currency loan, that local currency may have appreciated. So it’s a matter of a second opinion, often, as well as a sanity check.”

Also, because of the infancy of a project – developments within the microfinance industry are often hindered by a general lack of liquidity – it might make it difficult to disperse investor cash. “In rare cases this means we will give the institutional investor back their cash,” says Brouwers. “That seldom happens. Often if you have a mandate, you execute whether the price is right or not. So we try to add a layer on, though without adding costs, where investors get an extra layer of security so that they know a deal done was the right thing at the time.”
 
Microfinancing boom
SNS is one of the leading players in microfinance institutional investment. Just a few years ago it was all about loans. Now it’s also about investment. The microfinance sector has grown fast and become significantly more professional – a positive step. “Increasingly the industry has a licence to attract savings. That means they’re no longer dependent on funding from foreign investors.”

However because the industry has boomed comparatively quickly, there is now a risk that the microfinance segment is at risk of over-heating. “That’s a matter of concern for us,” acknowledges Brouwers. “That too could bring with it the risk of weak governance, fraud, poor collection policies plus all the usual pressures of commercialisation. The social impact could also be affected.”

That means SNS is paying even closer attention to issues like social performance and social objectives to make sure all the investment metrics align.

How microfinance works
– The SNS’ Institutional Microfinance Fund works by lending cash to microfinance institutions and investing in their share capital. Money is made available through loans and equity shareholdings
– Convertible loans or subordinated loans with warrants are also offered
– Increasingly a holistic approach is used combining medical treatment, access to clean water and sanitation – something that SNS Asset Management is doing more often. This means that medical treatment and education is available at source, typically when a client goes to repay an instalment of a loan
– Microfinance has grown up. It is now a respected brand. It has also seen its fair share of failures and successes. Many lessons have been learnt. But there are concerns the industry may overheat
– Main ratings agencies are now rating microfinance transactions. For example, Morgan Stanley now issues a microfinance backed bond
– Microfinance is a response to third world poverty, helping people break out of their cycle of poverty.

Real ownership, real performance security
A good example of responsible investing tied to performance is the SNS’ African Agricultural Fund. It’s a fund that invests in equity related to farmland, agribusiness and agric-infrastructure. “It’s a fund that has exposure to around 40 agricultural assets related to real estate with corporation partners from the agri industry,” says Brouwers. “With this we invest in farmland that’s also combined to educate black farmers and communities so that they are ready to manage the farm themselves after 10 years.”

This is an arrangement facilitated by the South African government, which currently has the goal of ensuring that black farmers will own and manage at least 30 percent of the farmland by 2025. That percentage is currently less than five percent – so there’s a lot of work to do. “Many white farmers are now selling their land to the government or to the black community. We have introduced a training program developed with a specialised training company called the Open Learning Group. Next to that we co-operate with Care Cross, an organisation that gives education on health and also advises on health issues like HIV,” says Brouwers.

All these arrangements might sound well-meaning and positive. But there’s also a strong financial return integrated at the heart of it. The assets have a fixed inflation-linked return to them after 10 years. “This means, for institutional investors SNS has secured its exit for these kind of investments. The actual total net return for this fund is 12-21 percent net. That’s a very strong investment proposition. We expect to see a scarcity of both food and land during the next decade so we are expecting prices to go up.”

Share the knowledge
Meanwhile Brouwers says SNS is increasingly looking to attract US and South African investors, as well as widen its base of European investors. True to their democratic, egalitarian principles, SNS also regularly widens its knowledge base with other investors and NGOs. “We think it’s important for an asset manager to share their knowledge and experience about themes that aren’t yet that common. Hardly any portfolio managers heard about microfinance, so there’s a process of education to get to grips with too.”

Part of this education process is about inviting specialists to open investor meetings, paying for more university and think tank research. “Recently we went to Azerbaijan with some investors to look at the investing conditions there. In November we are making a trip to Kenya where we will have a programme to see what the difficulties and challenges are there – as well as the business opportunities.”

It’s all part and parcel of being an asset manager in an industry yet to mature; it’s part of the professionalisation process. “It also needs to be made stronger,” says Brouwers. “And this is also how we interact with clients.

There’s a lack of common experience about much of where and how we invest. Some people are experienced in these issues, but amongst institutional investors there’s a lack of experience and knowledge. We want to change that. We think we can do that by example, showing the way.”

SNS asset management – a brief history
SNS Asset Management (SNS AM) is a responsible asset manager, managing a total of €42bn (as of April 2010).

SNS Asset Management manages the assets of a range of institutional investors. These include pension funds, insurers, banks, social organisations, foundations, charities and religious institutions. It also manages SNS REAAL’s considerable portfolios (SNS REAAL, REAAL Insurances, SNS Bank, ASN Bank and Zwitserleven).

SNS Asset Management is a pioneer in the area of responsible institutional asset management of which investing in developing countries through microfinance is an important part.  SNS Asset Management was founded in 1997 following a merger between De Hollandse Koopmansbank and SNS Bank. As a manager of union funds, De Hollandse Koopmansbank had a long history in responsible global investment.

SNS principles
– Respect for basic human rights;
– No involvement in the most serious forms of child labour
– Abstaining from involvement in forced labour
– Abstaining from serious forms of corruption
– Abstaining from serious forms of environmental contamination
– No involvement in the production of weapon systems of which the effects are disproportionate and do not distinguish between military and civilian targets
– Respect for generally-accepted ethical principles that apply in a humane civilisation.

For further information: www.snsam.nl

Facing up to future liabilities

For decades, western companies have sought to export products to the developing world that either are no longer used in their own domestic markets, or have simply been banned outright. Though prohibited in the developed world, such hazardous materials can still be shipped to countries in regions like Latin America and Asia – seemingly without impunity – as companies cash in on the back of large consumer markets, lax regulatory enforcement, and a customer base that is unaware of the risks inherent in the goods they are buying.

Mass sales of pesticides are a case in point. Since many countries in Asia, Africa, and Latin America do not have the necessary capabilities to mass produce widely-used pesticides without infringing patent rights in their manufacture, they import cheaper or older variants that are no longer used in more developed countries. For example, as part of its long bid for EU membership, Turkey announced in August 2009 that 74 pesticides are off limits because they are poisonous and feature on an EU list of 135 illegal chemicals. Another six will get the axe this year.

While Turkish agricultural officials say that the first 74 chemicals are relatively unimportant and are not often used in Turkish agriculture, the government admits that the remaining 55 will be harder to eliminate because they are some of the most crucial pesticides to local farmers. A board member of the country’s Adana Chamber of Agriculture believes that the European demands may be unrealistic: “Some of these pesticides are not needed in the EU as the products for which they are used are not widespread or there are other alternatives.

However, Turkey has continued to sell them because it could not develop any alternatives,” he said.

The grim and perverse reality of western corporate marketing practices has not been lost on campaign groups. Zeina Al-hajj, head of campaign group Greenpeace’s agriculture and toxics unit, says that the organisation has been working to expose what it calls companies’ “double standards” for some time. “We are sure that companies have double standards with regards to their production and marketing practices,” says Al-hajj.

“Legal duties and enforcement action in developing countries is often not as stringent as in the European Union and the US, which means that companies can legally market products that are less safe – or unsafe – in some places that would be unthinkable in developed countries,” she says.

Perhaps one of the most controversial exports is that of chrysotile (white) asbestos. Exposure to blue, brown and white asbestos has been linked with lung and other cancers for over a hundred years and an estimated 90,000 people die from asbestos-related illnesses every year, according the World Health Organization. While Russia and countries from the former Soviet Union are among the chief exporters of this carcinogenic substance, Canada is also a key culprit in its continued sale.

The country is the world’s fifth largest exporter of chrysotile asbestos. Two mines in the province of Quebec account for all its production. In 2009 Canada produced 180,000 tonnes of asbestos, 96 percent of which was exported to 80 countries around the world, with Asia being the primary market, according to the US Geological Survey. However, asbestos is strictly regulated in Canada under the Hazardous Products Act and the Environmental Protection Act.

But campaigners in Canada are becoming more vociferous about the continued mining and sale of the substance. On 30 June this year the Canadian Medical Association (CMA), the Canadian Public Health Association and the National Specialty Society for Community Medicine demanded that provincial and federal governments stop funding the asbestos industry and promoting Canadian asbestos abroad.

Jeffrey Turnbull, president-elect of the CMA, says that the Canadian government does not require exported asbestos to bear a hazardous material label. “It’s a challenge to understand why in Canada we restrict asbestos as a hazardous product,” says Turnbull. “Yet we then will export asbestos to other settings across the world where there is not the same degree of health protections in place.”

In response to such criticisms, the Canadian government, in a legal document on the website of the auditor general, says that it “encouraged” countries that import Canadian asbestos to follow the 1986 Geneva conventions on asbestos use and regulation.

The government also shows no signs of changing its stance. Asbestos, Quebec is awaiting the provincial government’s approval of a C$58m ($54.7m) loan guarantee to revive the privately owned Jeffrey Asbestos mine, one of the world’s largest open-pit asbestos operations. The loan, combined with a labour deal to establish a C$10 million reserve fund from workers salaries, will provide cash to expand underground operations at the 130-year-old mine. The expansion will create an estimated 400 direct jobs in Asbestos, a town of 6,800 located 150 km east of Montreal, and will enable the mine to produce enough asbestos to keep Canada in the market for the next 25 years. How many deaths it will cause worldwide over the following century has not been established.

Most of this asbestos will head to Asia. India is one of the world’s major users of chrysotile and knowledge of how the material should be used and what health and safety precautions should be undertaken is alarmingly low. Nearly all of the country’s asbestos is mixed with cement to form roofing sheets, which is often easily damaged. Once broken, the substance is no longer safe and potentially lethal fibres are released into the atmosphere.

According to a report published this February in leading international medical journal The Lancet, between 2000 – 2007 India’s asbestos usage rose from roughly 125,000 metric tonnes to about 300,000. Bolstered by asbestos import tariffs that have been reduced from 78 percent in the mid-1990s to 15 percent by 2004, the country’s asbestos-cement industry is increasing by roughly 10 percent every year, employing in excess of 100,000 people. Furthermore, since 2003, companies no longer require a special licence to import chrysotile asbestos. It is estimated that since 1960, India has incorporated about seven million tonnes of asbestos into its buildings.

Asbestos cement is even used to make moulds of Indian gods for parades and festivals. Last year I photographed children making statues of Ganesh – the elephant-headed deity – with sacks of the stuff. None wore safety masks. None were aware of the associated health risks. More astonishing still, an Indian news channel reported that in 2007 that asbestos was being used in parts of the country to help bleach rice to make it more “attractive” as “extra white” basmati, and charging a premium for it.

Yet despite such reporting, the overall impression among Indians is that asbestos usage is safe. Late last year, the Times of India ran an advertorial on behalf of the asbestos industry. Entitled “Blast those Myths about Asbestos”, readers were assured that “only safe white fibre is used in manufacturing of asbestos cement products in India” and that the “problems” other countries have encountered “are not relevant in the Indian context”. Yet the World Health Organisation’s (WHO) position is very clear – “all types of asbestos are carcinogenic,” says its director of public health and environment Maria Neira.

There are no official figures for the number of people killed in India due to asbestos-related diseases. This is because there is no centralised system to record industrial accidents or deaths, and there are very few physicians with any training in occupational health.

Dr Sudhakar Ramchandra Kamat, formerly head of the department of pulmonary medicine at the King Edward Memorial Hospital in Mumbai, says that he saw his first Indian asbestosis patient back in 1968 – a 35-year old railway engineering factory worker from Madras (now Chennai). But he warns that there has been little effort to change the working conditions that have caused such diseases, with no effective enforcement of health and safety legislation to protect workers, and no real recognition of the scale of the health risks surrounding the use of asbestos since then. Worse still, he says, companies and health officials simply lie and mis-report the actual numbers of people affected by asbestos use.

“Medical tests on sick employees are usually carried out by the employers’ own medical staff. It is in the best interests of the company for the doctor to find that the employee’s breathlessness is due to tuberculosis or smoking, rather than any work-related cause. As a result, there are very few formally recognised asbestosis sufferers in India, and hardly any recorded mesothelioma cases, though there is no doubt that thousands exist,” he says.

In the past decade there have been international attempts to limit the practice of selling potentially lethal products to the developing and underdeveloped worlds. For example, the United Nations’ (UN) Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, agreed in 1998 and which came into force in 2004, is a multilateral treaty to promote shared responsibilities in relation to importation of hazardous chemicals.

Under the Convention, extremely hazardous chemicals and pesticides that have already been banned or severely restricted in various parts of the world are put on a special list. Countries must then first obtain “Prior Informed Consent” before they can export these hazardous products to another country. In other words, the Convention requires that intended recipient countries be informed of the hazards and have the right to refuse entry of the hazardous chemical, if they believe they are not able to handle it safely.

However, not all dangerous substances have been added to the list. Kathleen Ruff, senior adviser in human rights at the Rideau Institute, a Canadian foreign policy research consultancy, says that Canada has “consistently stalled” the inclusion of chrysotile (white) asbestos from being added to the list (which it still mines, exports and terms “safe”) despite a review by the UN’s own clinical review committee which recommended that it should have been included. Ruff says that under the terms of the Convention, there needs to be the universal consensus of all members before a substance can be banned, “so it is easy for countries that have a vested interest against hindering the activities of its own industries to thwart the entire process”. She adds: “Such actions are grossly irresponsible and should amount to criminal negligence.”

The Canadian government states that it has had “A Memorandum of Understanding” between it and the country’s asbestos producers since 1997. It insists that to this day, the chrysotile industry still does not export to companies that do not use chrysotile in a manner that is consistent with Canada’s controlled-use approach.”

But Ruff says that “in actual fact, this Memorandum of Understanding is meaningless, because the government and the industry do nothing to enforce it. In the face of indisputable evidence that asbestos use in the developing world is uncontrolled, the Memorandum of Understanding lacks credibility”. Other experts are equally damning. “Anyone who says there’s controlled use of asbestos in the Third World is either a liar or a fool,” says Dr. Barry Castleman, an independent consultant and asbestos expert.

Anti-asbestos campaigners in India are exploring ways of bringing a case against Canada and its asbestos producers for deaths caused by its usage throughout India. Anthony Menezes, an asbestos victims support campaigner based in Mumbai, says that “we are finding new cases of people suffering from asbestosis and breathing difficulties nearly every week because they were working with asbestos directly or in factories where it was used to lag pipes and boilers. Not one of them was ever given any kind of instruction about the dangers of the substances they were handling, or even provided with dust masks. Now most of these factories have closed down and there is no possibility to try to bring a case against them. Since Canada exported these chemicals, it can take responsibility for the deaths that they have caused.”

Raghunath Manwar, general secretary of the Occupational Health and Safety Association in Ahmedabad, India, says that “if you look around you, almost everything in this city is made from asbestos cement, and dangerous fibres are released if the material is cracked, which most of it is. It is shameful that a product whose dangers were known over 100 years ago in the west is still being exported to poorer countries. The only ways to stop this are to get the substance banned internationally, and to try to take legal action against the Canadian government and the asbestos producers that are based there.”

Similar cases have been successful in the past, though the number is low. In February 1992, twenty South African workers who had contracted mercury poisoning at mercury-based chemicals manufacturer Thor brought compensation claims against the parent company and its chairman in the English High Court. The claims alleged that the English parent company was liable because of its negligent design, transfer, set-up, operation, supervision, and monitoring of an intrinsically hazardous process, particularly since the company’s UK operations had been criticised for its poor health and safety standards prior to establishing the factory in South Africa. In 1997 the claim was settled for £1.3m.

In December 2001 a £21m settlement was signed for around 7,500 South African claimants who were suffering – or had died from – asbestos-related diseases while working for asbestos mining company Cape Plc in South Africa. This came about following a landmark decision in July 2000 when all five Law Lords held that the case should be allowed to continue in the English High Court and that a case of such magnitude required expert legal representation and experts on technical and medical issues, none of which could be funded in South Africa.

John Sherman, senior fellow at the Harvard Kennedy School in Boston, Massachusetts, says that companies can – and should – be held liable for dangerous products that they market to countries that either are not aware of the dangers inherent in the product, or which have low levels of health and safety legislation and enforcement to protect those people that may come into contact with it. He says that a key way to do this is to make organisations more accountable for the actions of their supply chains.

In June 2008, the UN Human Rights Council welcomed the “Protect, Respect, Remedy” (PRR) policy framework put forward by the UN Secretary-General’s Special Representative on Business and Human Rights (SRSG), Professor John Ruggie. While not legally binding, the Council underlined the state’s duty to protect people from abuses by or involving non-state actors, including business. It also affirmed that business has a responsibility to respect all human rights. Furthermore, it stressed the need for access to appropriate and effective judicial and non-judicial remedies for those whose human rights are impacted by corporate activities.

In a UN report put before the UN General Assembly on 22 April 2009, the special rapporteur said that “the State duty to protect is a standard of conduct, and not a standard of result. That is, States are not held responsible for corporate-related human rights abuse per se, but may be considered in breach of their obligations where they fail to take appropriate steps to prevent it and to investigate, punish and redress it when it occurs”.

Yet some companies have been applauded for their efforts in trying to keep tighter control on the use and sale of their products. One example is General Electric (GE) which changed the way its GE ultrasound machines are sold, marketed and distributed to urban and rural customers in India after allegations surfaced that its ultrasound technology was being misused to facilitate female sex-selective abortions.

India’s Pre-Natal Diagnostic Techniques (PNDT) Act of 1994 prohibits the use of equipment or techniques for the purpose of detecting the sex of an unborn child. The Act was amended in 2003 to explicitly recognise the responsibility of manufacturers and distributors to protect against female feticide. Under the legislation, manufacturers must confirm that their customers have valid PNDT certificates and have signed affidavits stating that the equipment shall not be used for sex determination. They must also provide the government with a quarterly report disclosing to whom the equipment has been sold.

Since 2000, GE Healthcare India has worked to increase the stringency of the sales review process through a combination of training programmes, amendments to legal contracts, regular auditing, and rigorous sales screening and tracking. At present, a single sale of GE ultrasound equipment goes through up to five internal checks — from the initial sales contact to equipment installation — to verify that the customer has a valid PNDT registration certificate. Machines are also labelled with a sticker that warns that “fetal sex determination is illegal and punishable by law.”

Sales people are trained on how to advise end users of the equipment on the implications of the PNDT Act and to escalate any concerns about observed or suspected non-compliance to their managers. They are also encouraged to prevent sales if they suspect that the equipment may end up in the hands of unscrupulous or unlicensed practitioners. This screening process does not end after the equipment’s sale. A practitioner must also present a valid PNDT registration certificate before having the equipment serviced by GE Healthcare India or purchasing updated accessories.

“There should be more scrutiny surrounding the business activities of those companies that produce dangerous products,” says Sherman. “They should be held more accountable for how their products are sold, where they are sold, and how they are used. I can see no reason why such concepts are not extended to companies producing and selling substances that are clearly known to be hazardous to health and I think that this is an area that is ripe for negligence claims.”

Let’s get digital

FDI can present companies with great opportunities, but can also bring risks. While a location may seem popular or have potential, it is difficult for a firm to acquire all the knowledge necessary to make their investment a success. Lack of expertise or insufficient resources to carry out a full scale assessment of the area can lead to missed opportunities and failed ventures. However, there is a service that helps companies to find a location that matches their needs and provides an opportunity for growth. Founded in 2008, Global Arena provides business locations and potential investors an online platform where they can find each other and offers all the information necessary for making an informed and strategic decision.

The company is the brainchild of Peter Storm, who developed a scientific model for determining good location for FDI while working for HP, “there are many issues confronting an executive management team when they look at their location footprint,” he says, “firstly there is the danger of missing a competitor entering a market you had not considered and creating a competitive advantage over your business. There is also the problem of not knowing about risk in terms of trends and forecasting – where is the market likely to be in three to five years time? Will it still be possible to successfully do business there?” When trying to answer these questions, there are various obstacles standing in the way; companies rarely have the data, manpower and financial means to take a holistic view of the market as it stands now, how it is likely to evolve and how compatible it is with the business. The bits of data available may also be unwieldy and unintegrated, and in an attempt to overcome these problems, a dependency on consultants may develop, which is often expensive and can be inadequate.

It was these factors that pushed HP to move Storm from its consultancy department into helping to choose successful locations for investment in Europe, the Middle East and Africa. “Site selection in these areas is a significantly more complex process to what the company was used to in the Americas,” explains Storm, “the firm had experienced some disappointing project outcomes previously here, so moved responsibility for investment in these markets to the European HQ in Zurich.” HP worked with the University of Ghent in Belgium to develop an algorithm that would determine the international allocation of workforce and capital.

This system analysed external factors, such as economic, geopolitical stability and market forces in a country, and combined them with internal data to provide the company with a clear picture of where was best to invest.

The algorithm was very successful, and soon attracted the attention of other technology companies. However, as good as the system was, it didn’t complement the HP product portfolio, so in 2008 Storm arranged with HP to take the intellectual property with him to form a new company, Global Arena.

Globalisation
“Our vision is to create a marketplace that helps to increase the competitiveness of countries, economies and locations, but that also helps to increase the transparency of the foreign direct investment market,” says Storm, “at the same time, we also wanted to create a platform that would help encourage fairness in globalisation, giving undeveloped and developing countries the chance to get as much positive exposure as possible.” One of the ways that the company is helping to ensure it fulfils this aim is to start working with the United Nations Conference on Trade and Development (UNCTAD) to create a free platform for these states to promote themselves and integrate into the global economy.

One of the things that Storm considers of utmost importance for FDI and for his own business is the internet, “we are a web-based company ourselves, and we work like some of the best online entities such as Google or eBay, in that we use intelligent matching technology to find the answers to a customer’s search criteria,” says Storm, “globalisation has caused an explosion of opportunities, which are available not just to large multinationals but also to SMEs. However these opportunities need refining, we don’t want to be like some giant virtual yellow pages, making businesses flip through thousands of irrelevant entries to find the one they want. We want to deliver optimal solutions directly and efficiently.” The company’s database currently holds 500 locations over 40 countries, but is engaged with Credit Suisse to rapidly accelerate growth to one hundred times the number of resource allocation opportunities.

Africa holds opportunity
According to Storm, Africa holds strong opportunities for attractive markets and talent supply, although investment there isn’t entirely straightforward either. The skills shortage that is present even in countries that are higher up the development scale, such as South Africa, can present a problem.

The future of FDI is about talent
While companies’ FDI drives may have slowed or stopped during the recession, Storm is convinced that as the world begins to pull out of this crisis talent will become the major determining factor as to where companies choose to invest. However, talent supply can be a problem for companies, even in their home countries, “almost all Western economies are struggling with demographics. The population is aging as people live longer and fewer children are born and the situation as it stands is only going to get worse over the next ten to twenty years,” explains Storm, “Businesses are increasingly having to import their top talent from the global arena.

Even China will begin to have this problem over the same time period due to the one child policy and its rate of growth.” With this in mind, FDI in non-traditional countries, ie not China or India, is increasingly appealing to companies, and increasingly important.

Search versus create talent
However, increasingly companies are looking not for an existing talent pool, but for an environment where they can create a fully integrated talent ecosystem, “I recently spoke to both Nokia and General Electric at a conference event, and both told me that the potential to create a sustainable supply of talent for their companies was what they are looking for when choosing a business location,” says Storm. In order to do this, businesses are at first bringing in some of their own skilled and experienced workers while they train up local people through on the job skills acquisition and post-graduate development programmes for students in the area, “this is one of two major shifts in attitude, the other being the importance of Corporate and Social Responsibility.

Right up to the millennium the top and indeed only factor for consideration when looking at where to invest was cost. Now there are other factors that top that.”

CSR and Green – sustainable business are of increasing importance to all companies. When looking for a strategic matching for FDI, companies want to engage in business in a way that will communicate the sustainability and responsibility values they want their brands associated with, “Currently, we only have social and political sustainability as a criteria on our website in this area, but as there is such increased interest in this area, we are looking to expand it,” says Storm, “we are looking to include many other factors such as the target country’s performance of things such as carbon emissions and the work/life balance of the people – things that are increasingly important to companies and to talent.”

Another change that Global Arena is seeing is in terms of what companies are seeking to achieve once they have established a presence in a new market, “previously large multinationals would look at these countries as an opportunity to establish their existing products in new markets. What we see now is that they are looking to develop new products that are tailored to these markets,” explains Storm, “businesses are adapting themselves to local customs and, importantly, local buying power. It is a model that Nestlé and Phillips have been using very successfully for some time now, but that others are seeking to follow.”

Identifying solutions
So what does Storm consider to be the most important factors today for successful foreign direct investment, and how can Global-Arena.com help companies to achieve this? “In the past, companies would approach a government agency, buy some land or a building and set up a call centre or production facility, but for the most successful companies this is not the case. FDI strategies need to be focussed around fostering an environment of entrepreneurship, innovation and supporting knowledge transfer amongst young talented people. For example, many biotech, nanotech and other high tech industries are following small companies in the area they are intending to invest in. They snap up the ones that are producing unique products and patents, integrating them into their own portfolio and creating a presence in the country at the same time. Such an approach, as well as being good for the business, acts as a catalyst for development and strengthening the local economy. At Global-Arena.com we can help companies identify the best area for them without their first having to establish a pied-à-terre there to see if it is suitable. Our online presence means our total capabilities are available to anyone anywhere, bringing locations and businesses together.”

Global Arena is a company that enables all parties to maximise the benefits of globalisation through the internet. It helps businesses to navigate the global business location marketplace, avoiding the pitfalls that can hinder or completely put paid to ventures abroad. It is an invaluable tool and one that, like FDI itself, is only bound to grow in importance and prosperity.