2013 | World Finance

Misreading Chinese rebalancing

Posted on September 12, 2013August 6, 2019 by

The punditocracy has once again succumbed to the ‘China Crash’ syndrome – a malady that seems to afflict economic and political commentators every few years. Never mind the recurring false alarms over the past couple of decades. This time is different, argues the chorus of China sceptics.

Yes, China’s economy has slowed. While the crisis-battered West could only dream of matching the 7.5 percent annual GDP growth rate that China’s National Bureau of Statistics reported for the second quarter of 2013, it certainly does represent an appreciable slowdown from the 10 percent growth trend recorded from 1980 to 2010.

But it is not just the slowdown that has the sceptics worked up: there are also concerns over excessive debt and related fears of a fragile banking system; worries about the ever-present property bubble collapsing; and, most importantly, the presumed lack of meaningful progress on economic rebalancing – the long-awaited shift from a lopsided export- and investment-led growth model to one driven by internal private consumption.

With respect to the last point, recent shifts in the composition of Chinese GDP appear disconcerting at first glance. Consumption (private as well as public) contributed only 3.4 percent to economic growth in the first half of this year, and an estimated 2.5 percent in the April-June period – a deceleration on a sequential quarterly basis that underscores a cyclical, or temporary, weakening in Chinese consumer demand.

At the same time, the contribution from investment surged from 2.3 percent of GDP growth in the first quarter of 2013 to 5.9 percent in the second quarter. In other words, rather than shifting from investment-led to consumer-led growth, China appears to be continuing along its investment-led growth track.

Structural transformation
For an unbalanced economy that has under-consumed and over-invested for the better part of three decades, this is unnerving. After all, China’s leadership has been talking about rebalancing for years – especially since the enactment of the pro-consumption 12th Five-Year Plan in March 2011. It was one thing when rebalancing failed to occur as the economy was growing rapidly; for the sceptics, it is another matter altogether when rebalancing is stymied in a ‘slow-growth’ climate.

This is superficial thinking, at best. The rebalancing of any economy – a major structural transformation in the sources of output growth – can hardly be expected to occur overnight. It takes strategy, time, and determination to pull it off. China has an ample supply of all three.

The composition of GDP is probably the worst metric to use in assessing early-stage progress on economic rebalancing. Eventually, of course, GDP composition will provide the acid test of whether China has succeeded. But the key word here is ‘eventually’. It is far too early to expect significant shifts in the major sources of aggregate demand. For now, it is much more important to examine trends in the potential determinants of Chinese consumption.

From this perspective, there is good reason for optimism, especially given accelerated growth in China’s services sector – one of the key building blocks of a consumer-led rebalancing. In the first half of 2013, services output (the tertiary sector) expanded by 8.3 percent year on year – markedly faster than the combined 7.6 percent growth of manufacturing and construction (the secondary sector).

Moreover, the gap between growth in services and growth in manufacturing and construction widened over the first two quarters of 2013, following annual gains of 8.1 percent in both sectors in 2012. These developments – first convergence, and now faster services growth – stand in sharp contrast to earlier trends.

Indeed, from 1980 to 2011, growth in services output averaged 8.9 percent per year, fully 2.7 percent less than the combined growth of 11.6 percent in manufacturing and construction over the same period. The recent inversion of this relationship suggests that the structure of Chinese growth is starting to tilt toward services.

Tertiary sector
Why are services so important for China’s rebalancing? For starters, services are far more labour-intensive than the country’s traditional growth sectors. In 2011, Chinese services generated 30 percent more jobs per unit of output than did manufacturing and construction. This means the Chinese economy can achieve its all-important labour-absorption objectives – employment, urbanisation, and poverty reduction – with much slower GDP growth than in the past. In other words, a 7-8 percent growth trajectory in an increasingly services-led economy can hit the same labour-absorption targets that required 10 percent growth under China’s previous model.That is good news for three reasons. First, services growth is beginning to tap a new source of labour-income generation, the mainstay of consumer demand. Second, greater reliance on services allows China to settle into a lower and more sustainable growth trajectory, tempering the excessive resource- and pollution-intensive activities driven by the hyper-growth of manufacturing and construction. And, third, growth in the embryonic services sector, which currently accounts for just 43 percent of the country’s GDP, broadens China’s economic base, creating a significant opportunity to reduce income inequality.

Far from crashing, the Chinese economy is at a pivotal point. The wheels of rebalancing are turning. While that is not showing up in the composition of final demand (at least not yet), the shift from manufacturing and construction toward services is a far more meaningful indicator at this stage in the transformation. So, too, are signs of newfound policy discipline – such as a central bank that seems determined to wean China off excessive credit creation and fiscal authorities that have resisted the timeworn temptation of yet another massive round of spending initiatives to counter a slowdown. Early steps toward interest-rate liberalisation and hints of reform of the antiquated hukou (residential permit) system are also encouraging.

Slowly but surely, the next China is coming into focus. China doubters in the West have misread the Chinese economy’s vital signs once again.

(c) Project Syndicate, 2013

Dennis Uy on Philippines oil | Phoenix Petroleum | Video

Posted on September 12, 2013April 13, 2016 by World Finance

Dennis Uy founded Phoenix Petroleum in 2002. Since then, it’s grown to be the number one independent oil company in the Philippines – and one of he nation’s leading brands. He talks about the business opportunities presented by the Philippines’ 1998 Oil Deregulation Law, the development of Phoenix Petroleum, and the future opportunities for the oil industry in the Philippines.

World Finance: Let’s start with that initial decision to establish Phoenix Petroleum: how important was the oil deregulation law, passed in 1998, in convincing you there was a real business opportunity?

Dennis Uy: Well, the oil deregulation law paved the way for the birth of Phoenix. Without it we wouldn’t be here! The decision was very simple. The industry used to be dominated by three companies, and when you open up an industry where it was dominated by only three companies, there’s really a big chance for us to get market share.

“It’s always our service and our people that are a distinct advantage”

World Finance: Phoenix Petroleum began life in the southern island of Mindanao, not like many other companies here in the capital Manila. So what challenges has that presented for you, and how have you overcome those challenges?

Dennis Uy: For us to start in the southern part of the Philippines was not by choice, it was by chance. It was just that I do my business there, I was born there.

We started there, and luckily we were able to expand nationwide. It’s always a challenge, even until now, to gain brand acceptability. For the past five years, since we expanded outside Davao, our brand and our stations have been gaining acceptability, and we thank our consumers – our customers – for that.

But every day is a challenge, to improve our brand and our service. It should be acceptable to all.

World Finance: So what have been the core products and services that have set you apart from other companies, other competitors, as you’ve grown?

Dennis Uy: The petroleum industry that we’re in, it’s a commodity. That makes our products no different from our competitors: it’s always our service and our people that are a distinct advantage. As the saying goes, our people are our greatest advantage. The people and the culture of the company is what sets us apart from all the others.

World Finance: Looking ahead, what are your future plans for Phoenix Petroleum?

We hope to sustain the growth that we’ve been experiencing in the past five years, of at least 15 percent per year. The next five years should be a period of growth – maybe a bigger market share, more stations: going from 300 to at least 500. And of course, having a more established brand, and a stronger company, balance-sheet wise.

“Other Asian countries have three or five times more stations per capita: there’s a lot of room for growth”

World Finance: Let’s look at the wider picture: what are the opportunities for the oil sector here in the Philippines?

Dennis Uy: We are into retail and commercial distribution, so in terms of retail there’s a lot of potential. In the industry there’s only 4,600 stations, compared to other Asian countries who have three or five times more stations per capita. So, there’s a lot of room for growth.

We’ve been regulated for the past 25 years, and as you said, in 1998 the industry was opened to everybody. So it’s only 15 years since it was deregulated, and close to 2,000 stations were opened during those 15 years. So the next 15 years should see more stations opened, to the convenience of motorists.

World Finance: Finally, what’s your assessment of the Philippines as a destination for global investors? What should people be looking for here?

Dennis Uy: As the saying goes, it’s more fun here in the Philippines to invest. The country has been upgraded to investment grade, and I think our president has done a good job in promoting and laying the groundwork for at least a level playing-field for all investors. We have a population of 100 million, and growing: a big market. So, it’s time for people to invest and companies to invest here.

World Finance: Dennis Uy, thank you

Dennis Uy: Thank you.

Olumide Oyetan on Africa’s potential | Stanbic IBTC | Video

Posted on September 11, 2013October 8, 2013 by Ashton Wenborn

Stanbic IBTC Asset Management, a member of the Standard Bank Group, is a leading provider of integrated financial services based in Nigeria. Discussing some of the opportunities for investment in the region is Olumide Oyetan, CEO of Stanbic IBTC Asset Management.

World Finance: First, introduce us to Stanbic IBTC: what do you offer your clients, and what makes your services unique?

Olumide Oyetan: Stanbic IBTC is an integrated financial services group, so what we try to do is to offer end-to-end financial services.

I work in the asset management business, so what we focus on is managing monies on behalf of retail clients and institutional clients. For the retail clients what we do is we try to manage them through the collection of mutual funds that we have – and we have about 7 mutual funds, we are the largest provider of mutual funds in Nigeria currently.

And then for the institutional clients, what we try to do is to understand what they are trying to achieve, and then we create a segregated portfolio, understand their risk tolerance, and try to ensure that we educate them on what we are doing.

With respect to what makes us unique, I think as a group, to my mind, we are the only group in Nigeria that offers end-to-end financial services currently in Nigeria. So for instance, from banking services, to wealth management businesses, to trustees, to custody of assets, we do it all. And so a client with us can have their whole financial or investment needs or requirement fully handled.

“The thing about frontier markets in Africa is that the sort of investors it attracts are people that know what they’re looking for”

World Finance: Now some countries in Africa are still considered fragile states: where do you see the safer opportunities to invest on the continent?

Olumide Oyetan: I think that generally – apart from say, South Africa, which has fairly mature and deep financial markets – most markets on the African continent are considered frontier.

I think the bigger stock exchanges are in South Africa, then Egypt, Nigeria… and of course because of what’s happened in Egypt in the last couple of years, so Nigeria’s about par. But I think the thing about frontier markets in Africa is that, first of all the sort of investors it attracts are people that know what they’re looking for. So they are sophisticated. They also understand that the markets are not as deep, so it takes time to build a sizeable investment, and once you do that, you have to wait for a long time.

Unlike in Europe or in the US where you can build sizeable positions within minutes and online almost instantaneously, there is a bit of a challenge doing that in Africa. I think with respect to investing, what people have to consider is that Africa has changed, and it’s offering very high returns, so for investors that are comfortable taking the risk, they usually make a lot: a disproportionate amount of returns over the long to the medium term. But you have to be in there for the medium to long term.

World Finance: Nigeria plans to reposition itself as a market leader in the cocoa industry, what has been done to achieve this and what does it mean for investors?

Olumide Oyetan: Cocoa used to be one of our major exports in the 60s and early 70s until we discovered crude oil in commercial quantity. What that has done is that it has relegated every other sector, especially the agricultural sector which constitutes about 40 percent of GDP. So what we’ve seen is that now the agricultural minister – who is seen as a reformist and a progressive thinker – is trying to fix the whole value chain for agriculture and has identified that within the northern parts of Africa, cocoa can still be produced and exported in commercial quantity.

I think the challenge that we’ve also noticed is that there are very few large scale farmers in the country and, you know, what the ministers tried to fix is access to credit, access to agriculture input such as fertilisers, and just to ensure that the yields are attractive and that the farmers are incentivised to actually produce this commodity, and they ensure that storage and route to market is also made accessible.

“I think the major challenge, has been infrastructure”

World Finance: So optimism for investors, but what do you see as the challenges to growth in Africa?

Olumide Oyetan: I think the challenge, the major challenge, has been infrastructure. What you find is that it’s difficult to move goods or services within countries or regions. I think breaking those barriers would make everybody better off, because trade actually makes people richer.

I think other challenges that you have in Africa is that we have a few countries that have newly elected democratic governments, and there is that danger of them slipping back just because some people do not like the outcomes of election. But what we have seen is that most of the pair countries are now coming and saying, no, people should have the right to choose, and when you then choose, hopefully the government is a lot more responsible.

I think other challenges you have in Africa is just recent quality of education, access to basic school education is actually important. The final challenge that comes to mind about Africa or doing business in Africa is just policy consistency. Sometimes from government what we now see – and if we take Nigeria as an example – is that we try to break down as many barriers for people when they come to invest with us. And you know, in the financial markets or where there is foreign direct investment, you do even give tax holidays for FDIs, and I think that’s why you are beginning to see a lot of interest and a lot of money come into Africa, in the form of foreign direct investment.

World Finance: And so what is Stanbic, and your own business line, doing to accommodate these challenges?

Olumide Oyetan: We see ourself as a gateway to the African markets, and what we try to do to resolve some of the challenges is to work with the governments or the regulators, policy-makers, and try to tell them what they can do to impact society or for the country as well.

So we see ourselves as… you know, our roots are in Africa and our prosperity is in Africa, so as much as possible we try to ensure that we are partnering with the critical stakeholders. So it could be trying to project manage a port, a railway facility, advising on a privatisation mandate, so things will that will make meaningful impact and we can only be as successful as our clients or as the society we are in.

World Finance: Olumide, thank you.

Olumide Oyetan: Thank you very much.

Philippe Wallez on private banking | ING Belgium | Video

Posted on September 10, 2013April 6, 2016 by World Finance

ING Belgium was formed when Banque de Bruxells and Banque Lambert, both founded in the 1800s, merged in 1972. Philippe Wallez, CEO of Private Banking at ING Belgium, talks about ING’s success in the country, the latest trends in private banking and wealth management, and its dedicated service for family business owners.

World Finance: Tell us why you think ING has been so successful in Belgium?

Philippe Wallez: It’s mainly due to one key element, which is the fact that we are the number three private bank in Belgium, but we are integrated within a universal direct bank: ING Belgium. So, we can take full opportunity of all synergies to offer to our clients a fully fledged financial service offer.

And especially we have the synergy with the retail banking, where we can detect opportunities to provide the best advice for our clients. The fact also that the 250 bankers in my team are spread over the territory: they are in the regions. So your banker is never far from you, they are always close to you.

Also we have a synergy with the small and medium sized enterprise department, where we can have a common approach towards owners of companies and top executives, in order to really give global wealth advice for private and company purpose.

These are the main reasons, and of course the last reasons are the fact that within ING Belgium we can offer all types of product. Cash solutions, not only investment solutions; lending and credit solutions, not only investment solutions. So we can offer all type of solutions.

“In private banking, we see a strong development of digital, online services”

World Finance: And it’s a competitive market; how are you different from the other private banks?

Philippe Wallez: The most important part is probably our approach towards companies, called the family business approach, where we detect that there is a special need for owners of family-owned companies towards the business cycle of their company, to have special advice in wealth.

We also have, through this approach, a specific partnership with the successor. So, for when you need to give your company, or to sell your company, we call that the Successor Academy, where we have a special training programme for the successors. So that’s one key aspect.

A second, totally different aspect, is the fact that we have been the founder of the Art Society. And the Art Society, simply said, is a network for wealthy people, passionate about contemporary art.

And I would add a third element, which is quite important as well, is the fact that we recognised that within private banking, wealthy people also have special needs towards financing for real estate. And we developed a special mortgage centre, dedicated for private banking, where actually we can give advice for mortgage by phone, which is unique in Belgium for private banking, and highly successful. These are, for example, three aspects where we are different.

World Finance: Now, you offer specific advice to family business owners; tell us more about this.

Philippe Wallez: Yeah, you have to know that 70 percent of companies in Belgium are family-owned, representing about half of the riches produced in Belgium. So the family network of business is extremely important in Belgium.

So, we recognised that, and what we decided to do is, hand in hand with the mid-corporates departments, look to all the needs of the owners, from the start of the company until the end. And from a private banking perspective.

So we offer wealth management advice, for personal, private wealth, as well as for company wealth. And another element which is quite important for the owners of these family-owned companies is that we are also the exclusive partner of the family business network, which is a platform network for successful family business companies, so they can meet each other, exchange ideas, exchange information, exchange advice; this is really the way we are working with them.

“70 percent of companies in Belgium are family-owned, representing about half of the riches”

World Finance: If we turn to the wealth management sector in Belgium in general, what are the trends we’re seeing at the moment?

Philippe Wallez: There is one key trend that we observed in Belgium, but also in other markets. This is the move from cash to investment. So, there is a move to investment, there is a renewed interest of clients to invest in equities. Of course, we have to respect risk profile of clients, and it’s a question of good asset allocation. There is a need for reallocate assets.

Another trend which is probably particular to Belgium, is what we call the wealth repatriation. So, there are more and more clients willing to repatriate their wealth in Belgium. This is of course stimulated by government rules.

Another aspect which is probably also more particular in Belgium is the fact that real estate stays very attractive as investment. And the last one is perhaps more surprising, but we clearly see clients willing to invest in what we call real assets. Real assets being, for example, arts, cars, houses… it can even be land. The price of land has been increasing due to that move to real investment in real assets.

World Finance: So finally, tell us about your future vision, and the planned developments at ING.

Philippe Wallez: Oh, there are many projects and plans in the pipe, but I would certainly stress one very important one within the strategy of ING Belgium. We want to be the best direct bank, and also in private banking, we see a strong development of digital, online services. So, we already have a very an app for daily banking, and we are developing an app for private banking, specially focused on reporting.

But we clearly see more investment in the future, because of the need for clients to do for themselves, whatever they want. Online, through smartphones and tablets. So, we are heavily investing in this direction.

World Finance: Philippe, thank you.

Philippe Wallez: Thank you.

Emilio Ilac on success in Latin America | Puente | Video

Posted on September 9, 2013April 4, 2016 by Ashton Wenborn

Puente is an Argentinian investment banking firm that has been offering integral services within the financial and capital markets since 1915. With plans to expand into other areas of LatAm, Emilio Ilac, Managing Director of Institutional Clients at Puente talks about what makes Puente so successful in the region.

World Finance: Puente has a long history in Argentina, what can you tell us about the bank today?

Emilio Ilac: Puente is a leading investment bank in Argentina. We’ve been around since 1915, that makes it 98 years of experience in capital markets. Today we’re based in Argentina, Uruguay, Panama, and we just bought an operation in Peru, so that probably makes us one of the experts in Latin American markets since we’re a specialised investment bank. Our three core businesses are investment banking, wealth management, and sales and trading. Regarding investment banking, last year we’ve issued more than $1.1bn. Regarding sub-sovereign credits, that’s provincial and municipalities and corporate credits, top leading corporate credits. Regarding wealth management, we have $2bn approximately of assets under management, and regarding sales and trading, last year we’ve traded more than $5bn.

World Finance: So what are the key factors that make Puente an award winning bank?

Emilio Ilac: As I said before Nick, we have 98 years just in Argentina, so that probably assures all our clients that we’re a solid company. In today’s markets, I think that’s probably a great asset. Another key factor of Puente is that Puente is a detail orientated bank, so it’s always solving the necessities of their clients. Regarding access to capital markets, investing, any type of situation or problem that needs an efficient process in the middle, Puente is probably your solution.

“Puente helps you through the whole process, you don’t have to have knowledge in investment banking”

World Finance: Talking of solutions then, so why is it a good choice for investment banking?

Emilio Ilac: Well Puente helps probably in a different way than most of the other big investment banks, Puente helps you through the whole process since the beginning to the end, and you don’t have to have knowledge in investment banking or DCM, debt capital markets, to do any type of process with Puente. Puente last year issued more than $1.1bn in local markets for sub-sovereign credits, that’s all the provinces and municipalities, and are the corporate leaders in the country. So I would say today, Puente as an investment bank is the go-to investment bank to make new issuances in our country. We have approximately 90 percent of the market share in 2012 for sub-sovereign credits, the whole team of Puente we have over 20, 000 clients, can vow for our experience in that.

World Finance: How can an institution get finance through the capital markets?

Emilio Ilac: Well the first thing Puente does usually when a company needs access or an institution needs access to capital markets is it evaluates its needs. If it truly needs to go to the capital markets. Sometimes a company with a private placement is enough, sometimes when an IPO it’s enough, so Puente I would say from the beginning helps them to find exactly the specialised situation to solve that need they have.

“Puente has been around for 98 years, and I would say the two key underlining factors would be of course trust and professionalism”

World Finance: We talked about the solutions for investment banking, so why do your clients choose Puente for wealth management?

Emilio Ilac: Well Nick, as I told you before, Puente has been around for 98 years, and I would say the two key underlining factors would be of course trust and professionalism of our team. Puente is completely integrated into the markets, so our clients can basically do anything they want in investment. We have specialised teams that are focussed on each region in the world, and are focussed on each credit they go on and invest. So I would say Puente solves on a 100 percent basis, all the client’s needs regarding investments, and that’s why most of our clients, our over 20,000 clients, trust Puente on a daily basis.

World Finance: Emilio, thank you

Emilio Ilac: Thank you Nick

Professor Daniel Tsiddon on Israel | Bank Leumi | Video

Posted on September 6, 2013September 6, 2013 by Ashton Wenborn

Bank Leumi is the oldest banking corporation in Israel and has played a pivotal role in the economic development of the State of Israel. Discussing some of the challenges that they have faced is Professor Daniel Tsiddon, Deputy CEO and Head of the Capital Markets Division at Bank Leumi.

World Finance: Can you start off with the history of Bank Leumi and your current position in the Israeli banking sector

Prof. Daniel Tsiddon: Bank Leumi is the oldest bank in Israel, it’s more than 110 years old. Actually, it started before Israel in Palestine, and it was part of the vehicle for the Zionist movement to establish Israel. As of now, we’re one of the two largest banks in Israel and our share in the market, which is ranging depending on how you look at it between 25 and 30 percent of the Israeli market.

“We try to learn the needs of our customers, and to fit them”

World Finance: And how do you position yourself, what are the cornerstones of your business policy?

Prof. Daniel Tsiddon: As a universal bank, we try to fit the needs of all types of customers within the universe of Israel. That means that we have a big retail chain, we have middle market, and we have corporate to the level that corporates are sitting in Israel. Of course, we have a quite large capital market unit or division, because that has to bring everything together and shift resources across the different segments of the market. We try to learn the needs of our customers, and to fit them. And that’s not an easy job anymore because their needs and desires are changing quite quickly. We’re trying to update ourselves and to move ahead, and to understand what customer needs are, and to fit our product into that. Of course, a bank is a little bit of a fortress, it has very high walls and to make it fit to the customer, you have to work very hard. There are regulations, there are habits, it’s a big institution and when you try to move in a moving environment, it’s not an easy job.

World Finance: You say it’s a big institution but compared with international conglomerates, you’re quite a small operation, is that an advantage when it comes to keeping track of the changing needs of your customers?

Prof. Daniel Tsiddon: It’s an advantage and it’s a disadvantage. It’s a disadvantage because the costs are high, the costs of moving and changing are high. It’s an advantage because if you’re regional and universal, you learn the needs of your customer in a better way, and you can fit yourself with the customer, which you cannot make if you are a universal bank that tries to fit all types of all populations around the world. Being close to the client we can ask what is needed, we know what is needed, we know what to search around, we have better information and a better picture of the client’s risk and returns when we design the product than a big international bank.

“We use our knowledge about the customers to try to do better”

World Finance: Give me an example then of how you use that more detailed understanding of the customer to tailor your products to them.

Prof. Daniel Tsiddon: Let’s take mortgages for example. Mortgages sounds like one word, and they sound like they are always the same. Actually, they are very different. Mortgages in Israel are designed to fit the Israeli, they are designed to fit the intergenerational transfer from parents to children, which is very different. The growth of population which is different than the European one. So we use our knowledge about the customers to try to do better.

World Finance: Tell me about the Israeli banking sector, what challenges are you facing? Are they different from the rest of the world?

Prof. Daniel Tsiddon: If you compare ourselves, or if you compare the Israeli banking system to tier-two banks across the world, the challenges are very much the same. I think the challenges come from two major sources, one is the fact that following 2008, there is a big change in the regulatory system. Not only change, not only direction, but a lot of volatility in the regulatory requirements, and we have to try to fit them all- and that’s an extremely hard and costly challenge. The other one is that the customers are changing. It’s not that their needs are so much different, but the way they want to get it is extremely different, and the power shifted from the banking system to the customers- and we have to adjust, we have to learn to work in a different way. A lot of things that we considered efficient before were really trying to use the power we had on the customer, so we saved money by making you stand on line. You make the customer stand on line today, five minutes after he’s moving to another branch, he’s moving to another bank. So this change is dramatic and this challenge is the major challenge of retail and middle market, and everywhere you look in the banking sector across the world I think it’s a very similar.

World Finance: How is Bank Leumi delivering that change for your customers then, are you embracing new technologies, online banking…?

Prof. Daniel Tsiddon: It’s not only technology, I mean technology is a tool that you have to use which as I said it’s not easy, because the banks who built this fortress and the world is moved aside, and to move the fortress is not easy. So basically it’s a cultural change, you have to make people at the bank, the workers of the bank, understand to work in a different way. And to approach a customer in a different way, you have to reach a client and see what his problems are or what his desires are, try to find a solution. Of course, the banker at the front is the person that knows some of the solutions, he doesn’t know everything, so you have to find a way very quickly to climb up the ladder of authority and knowledge to derive the necessary information, or the necessary solution back to the client. This is a change in culture, a change in mode of operation, change in understanding the client, and change the IT system. It all must come together, it’s a big challenge. I’m not saying we are there, but we are heading there and we are moving, but it takes time.

World Finance: Professor Tsiddon, thank you very much

Prof. Daniel Tsiddon: Thank you

Bernd van Linder on Basel III | Saudi Hollandi Bank | Video

Posted on September 4, 2013September 10, 2013 by Ashton Wenborn

Saudi Hollandi Bank, the first operating bank in the Kingdom of Saudi Arabia, was founded in 1926 under the name ‘The Netherlands Trading Society’. Since then it has expanded dramatically, and as of March 2012 its paid-up capital has reached SAR 3,969 million. Discussing the evolving economy of Saudi Arabia and some key developments in the region is Dr Bernd van Linder, Managing Director of Saudi Hollandi Bank.

World Finance: How has the economic growth impacted the Saudi banking landscape?

Dr Bernd van Linder: The Kingdom of Saudi Arabia has seen some very strong economic growth over the last couple of years. Non-oil GDP growth has ranged from 5-7 percent, and is forecasted to grow at least at the pace of 7 percent in the coming years as well. This GDP growth is evenly spread across many sectors. We’ve seen growth driven by investments made by the government in all kinds of projects. As well as the private sector, we’ve seen corporates expanding their production capabilities, but we’ve also seen very good growth in the retail sector. The Saudi middle class is expanding, Saudi employment is expanding, and this has resulted in a demand for all kinds of products on the retail side. Last but not least, the government as well as the private sector, including Saudi Hollandi Bank, has a very strong focus on the development on the SME sector. Small-Medium Enterprises are seen as a main creator of jobs, as a main engine of economic growth, and as a great focus from all parties involved in further developing the sector.

“The competition between the 12 domestic banks has always been very fierce”

World Finance: With per capita income on the rise, will the retail sector dominate the competition between banks?

Dr Bernd van Linder: The competition between the 12 domestic banks has always been very fierce, especially on the retail side. With an increased per capita income as you said, with an expansion of the Saudi middle class, that competition will only increase. Ultimately competition will be decided on the basis of who is able to provide best customer service, across all the channels. My firm belief is that the bank that’s able to serve its customer best across all channels, branches, mobile banking, internet banking, is the one that will do best amidst this fierce competition.

World Finance: So, to what extent do Saudi corporations understand the benefits of issuing debt versus equity, and how can the uptake of these instruments be developed?

Dr Bernd van Linder: When you look at debt capital markets, there are three elements that need to be in place for these markets to grow; you need good issuers, you need interest and investors, and you need strong support of regulation and legislation. Over the last years we have seen a good increase in the number of blue chip Saudi corporates that have been issuing debt, ranging from Olayan the big conglomerate, to Tasnee one of the top petrochemical companies in the world, all of them have accessed the debt capital market in a Shariah compliant form. On the investor side, the growth of the insurance industry and the growth of specialised funds, mutual funds, has helped create a good investment base as well. The last element has been in place for a number of years in the Kingdom of Saudi Arabia, we have a very supportive regulator in the central bank, SAMA the Saudi Monetary Agency, as well as the capital markets authority, both of them are very supportive of further growth in the capital markets. So as of today, all of the elements are in place, investors, issuers, as well as strong support of regulation for further growth of the debt capital markets in the Kingdom of Saudi Arabia.

“The effect of Basel III should be minimal on the Saudi Banks”

World Finance: Now looking at the Basel III accords, how will they affect the ability of banks to offer new products and services?

Dr Bernd van Linder: The effect should be minimal on the Saudi Banks. When you look at a regulation that has been put in place by SAMA, the Saudi Monetary Agency, in principal it’s very similar to what Basel III is trying to achieve. So SAMA has always had a strong focus on high levels of capital, good quality capital, and good liquidity positions. When you look at the Saudi banks, all of them without exception have high capital ratios, very low leverage ratios, very strong liquidity positions, so in essence the Saudi banks are used to operating under a regulatory regime which is very similar to Basel III already.

World Finance: In the context of the international Islamic finance sector, how do you assess the role of Saudi banks when compared to your Asian counterparts?

Dr Bernd van Linder: Some of the world’s biggest Islamic institutions are headquartered in the Kingdom of Saudi Arabia, the biggest Islamic bank is a bank headquartered in Riyadh. In the Kingdom of Saudi Arabia, Islamic finance has developed as a result of customer demand. Our customers demand us to provide fully Shariah compliant solutions. Both on the retail as well as on the corporate side. As it is driven by customer demand, and as banks are ultimately in the business of meeting the demands of their customers, this development will only continue.

“All of the banks have invested in their product development capabilities”

World Finance: And finally, how are banks responding to growth in Islamic banking in terms of product development?

Dr Bernd van Linder: Islamic banking in The Kingdom of Saudi Arabia is driven by customer demands, so if customers demand certain products to be available in a Shariah compliant form, banks will make sure that they are available. All of the banks have invested in their product development capabilities, and their structuring capabilities, and what we have today is essentially a full range a complete range, of Shariah compliant products. Whatever product is available in a conventional product form is now available in a Shariah compliant form as well, all driven by customer demand.

World Finance: Bernd, thank you

Dr Bernd van Linder: Thank you Nick.

John Bahnken on wealth management | Bank of the West

Posted on September 2, 2013September 2, 2013 by Ashton Wenborn

Bank of the West Wealth Management provides wealth planning, investment management, personal banking, and trust services. The group is part of BNP Paribas, one of the six highest-rated banks in the world. Telling us more about wealth management is John Bahnken, Senior Executive Vice President at Bank of the West.

World Finance: Tell us about the dynamics of wealth management in the US

John Bahnken: So the wealth management business is I think quite different in the US to other parts of the world, certainly here in Europe and probably Asia as well. The primary reason for that is history, so if you think back to the early 1930s, Glass Steagall for 60 or 70 years did a very effective job at splitting the banking and investing businesses and it was really only until the late 90s when the industry began to come back together again. So the way clients are served in the US continues to be very segregated between investing and banking and the larger institutions today are beginning to bring the value proposition back together which is proving to be very very popular with people, but it’s created a very fragmented environment.

“It’s very much a universal style, this 360 view to clients”

World Finance: So how today do you approach wealth management with your clients?

John Bahnken: So at Bank of the West, Bank of the West Wealth Management, we are part of BNP Paribas. BNP Paribas basically began wealth management here in Europe so it’s very much a universal style, this 360 view to clients delivering integrated banking and investing, and when we launched our new model for serving clients at Bank of the West, we drew a lot of inspiration from BNP Paribas. But obviously we tailored it to the regulatory environment, the cultural environment, in the United States and so we deliver a 360 value proposition to clients helping them serve all of their financial needs.

World Finance: I’m interested in what you say about the 360 approach, a holistic understanding of people’s wealth management needs, tell us more about that

John Bahnken: Well yeah, that gets back to what I was saying where the industry has been separated, we tend not to think of our clients financial lives as being investments or banking, we tend to think of them much more- to use your word, and I think it’s a good one- holistically. So we don’t push products on clients, we work hard to make sure that we understand what clients need and then develop the solutions that they require. Sometimes they might be investment solutions, and other times they could be wealth strategies, estate planning strategies or things like that, so we tend to think we work very closely with clients to help them solve all of their financial needs.

“We’re actually quite small so we can traverse the organisation to the benefit of our clients very effectively”

World Finance: And in this way you’re very different from a standard private banking or brokerage operation?

John Bahnken: Yeah I think there are a few, some of the more progressive wealth managers in the United States are moving more in that direction but, candidly, in the large companies it’s much much harder to deliver the full 360 value proposition. They’re very fine competitors but it’s hard to work across some of those organisations, an advantage that we have at Bank of the West is that we’re actually quite small so we can traverse the organisation to the benefit of our clients very effectively.

World Finance: You’ve experienced an 80 percent growth in your client base since your re-envisioning in 2011 that you mentioned, what’s been driving that growth?

John Bahnken: Yeah, it’s actually now over 100 percent in just about 2 years time, so we’ve been pretty happy with that. I think the reason for that is that since the financial crisis in the United States, having trust and confidence in long term relationships with your providers are increasingly important. And the way we have been building our business at Bank of the West is based on building on existing customers, so we’re not trying to bring clients in from other competitors at the moment, we’re identifying clients who have been doing business with us for many years and making them aware of this broader value proposition that we can offer to them. And so client advocacy is very high, their trust in our institution is very high, and a very high percentage of the time we offer them the value proposition they step in and say sure, we’d like to do that. That’s the beginning of the relationship though, not the end. The beginning of that relationship is to identify the profile of the client to understand what the client need is and then work hard on solving that client’s problems. So not only have we doubled the size of the client base, but the depth of the relationship with clients has grown typically 70 or 80 percent in the first year, so we really substantially increase the overall size of the relationship. And that’s based on the trust and confidence that they have in us.

“Not only have we doubled the size of the client base, but the depth of the relationship with clients has grown typically 70 or 80 percent”

World Finance: And finally, how do your wealth management services fit into the overall banking picture?

John Bahnken: Well I think they fit in quite naturally, Bank of the West prides itself on being a relationship organisation and so we’re very much clients that start as retail clients and as their wealth grows and evolves, we welcome them into the affluent and higher net-worth segments of how we serve clients. But equally important, one of the things that’s different about the western part of the United States from other parts of the world is many people make their wealth as private business owners, and so we have the good fortune of being able to work with them as they’re building their business from a commercial perspective and then as they become older and monetise the value of their businesses we step in as their wealth manager. So it fits very naturally and logically into how we serve clients.

World Finance: John, thank you.

John Bahnken: Thank you very much.

The irreversibility theory of expansionary monetary policies is gaining credibility

Posted on September 2, 2013August 6, 2019 by

Considering the positive effects seen in the US, UK and Japan following the implementation of their highly expansionary policies, criticism has often been levelled at the ECB for not executing a more authoritative strategy – such as intervening more directly in the eurozone bond markets.

Indeed, the Federal Reserve’s expansionary monetary policy – which has been in place since the beginning of the financial crisis – has arguably put the US economy on the road to recovery. Focused on low interest rates and massive purchases of mortgage-backed securities and treasuries, the strategy has led to a noticeable increase in domestic demand from 2010, concurrent with a rise in household deleveraging and asset prices.

But the ECB is perhaps right to be cautious. Markets are increasingly showing signs of reliance on central bank liquidity supply – lending credence to the theory of these policies’ irreversibility. Indeed, each announcement of a switch to a less expansionary monetary policy (ie the Fed’s statement in May that it may consider tapering QE3 later in the year) has led to a marked deterioration in financial markets. As a result, these announcements have been followed by a counteractive statement emphasising that expansionary monetary policies will actually remain in place – in the Fed’s case, linking tapering to economic conditions.

Likewise, the Bank of England recently announced its intention to tie interest rates – which for the past four years have rested at an historic low – to employment figures.
This is concerning, particularly considering the disadvantages when these levers are in place for an extended period.

A highly-expansionary monetary policy
Certainly, the initial returns of a highly expansionary monetary policy are the main appeal. Theoretically, these advantages include the effects on economic conditions, such as an upturn in household consumption and residential investment, a depreciation of the exchange rate and a speeding up in household deleveraging. Moreover, a resurgence of expected inflation can usually be seen – making it possible to avoid deflation while encouraging consumption in the short-term.

When considering these positive effects, it’s surprising that the eurozone hasn’t undertaken a more drastic position in favour of unconventional methods – particularly as the region is characterised by stationary asset prices and declining domestic demand. Moreover, household indebtedness is not being reduced and the region is battling with declining expected inflation.

In fact, the recent improvement in the eurozone financial markets is – to a large extent – the result of a spreading conviction that the ECB will soon follow in the Fed’s footsteps. Many believe that a rapid increase in liquidity and a decline in long-term rates will – as in the US – generate an improvement in the economy.

But analysts cannot extrapolate the US situation to that of the eurozone. Given the low level of potential long-term growth in the eurozone, it will prove difficult to drive interest rates below the growth rate. Even if asset prices increased, the impact on demand would be limited as wealth effects remain weak.

Another important aspect to remember is that there are significant risks to these unconventional methods.

Certainly, as a result of rapid increases in global liquidity, there is a heightened possibility that international capital flows could become unsustainable, potentially resulting in drastic exchange-rate fluctuations that could distort competitiveness. Meanwhile, thanks to massive asset purchases being carried out by central banks, risk premia could tighten to no longer reflect reality – giving rise to economic bubbles. Several government bonds, for instance, are currently enjoying low levels of interest rates despite high levels of debt ratios.

Further to these dangers, central banks run the risk of inflation returning in the long-term by not correcting the excess liquidity appearing in the capital markets – and low interest rates could lead to a new financial crisis as debt ratios continue to rise.

Policy irreversibility
Beyond these theoretical disadvantages, there of course remains further disagreement over the ‘irreversibility’ factor – which is increasingly becoming a real concern.

The Federal Reserve’s announcement in May that it would slow the pace of its purchases of treasuries and asset-based securities later in the year triggered a rise in long-term interest rates and deterioration in the financial markets. So much so that by mid-July the Fed was pressured to emphasise that it would remain cautious about tapering QE3 – only reducing its asset purchases if several economic indicators improved.

In almost-parallel circumstances, when the ECB extended its optimism about developments in the eurozone economy at the beginning of July 2013 – implying that it would reassess its monetary policy stance – there was a similarly negative effect in the markets. The ECB then sought to make assurances, easing the eligibility rules for the use of asset-backed securities as repo collateral.

Reasons for this irreversibility factor
The longer these central banks maintain their expansionary policies, the more difficult it becomes to make an exit – and this is predominantly due to the expected rise in long-term interest rates when such an exit is made. Indeed, there are three important reasons that reinforce this school of thought.

The first is the fear that indebted economies with lower potential growth cannot shoulder higher long-term interest rates. When private sector debt ratios remain high – and public debt ratios continue to rise – a climb in long-term interest rates would likely lead to another economic downturn for these countries. This is especially so as productivity gains become lower.

In the eurozone, business investment is declining and residential construction is currently stagnant. Meanwhile in the US, growth in productive investment remains weak and the rise in long-term interest rates has been accompanied by a downturn in residential construction. As a result, it seems that further time and additional deleveraging is required before economies can accept higher long-term interest rates.

The second reason for irreversibility is related to the wealth effects on equities and real estate. As these are crucial in terms of jump-starting demand and therefore economic recovery, it’s necessary that they do not disappear. But a rise in long-term interest rates due to a less expansionary monetary policy would push down share and real estate prices – therefore jeopardising the upturn in domestic demand.

And finally, a rise in long-term interest rates would generate unbearable losses for those institutional investors and banks who – for the past four years – have bought a vast amount of bond portfolios at abnormally high prices (due to very low long-term interest rates), and have renewed these with very low-coupon bonds.

Clearly, the irreversible factor is an important one to consider when it comes to weighing up the pros and cons of unconventional tools at a central bank’s disposal – not just on the part of the ECB but also other leading central banks. And this theory is underpinned by the series of indecisive statements from central banks this year. Indeed, these banks now seem to be in a position where they hardly dare announce a slackening of their monetary policy for fear of market reaction. But the longer these policies stay in place the greater the ramifications, which in part explains the Fed’s possible tapering down of QE3.

Dr Mohammed Haider Ali Miah on banking | EXIM Bank

Posted on August 30, 2013January 30, 2014 by World Finance

EXIM Bank – the Export-Import Bank of Bangladesh – was created in 1999 with the aim of contributing to the country’s social and economic development. Dr Mohammed Haider Ali Miah, Managing Director and CEO of EXIM Bank, talks about the bank’s transition from a conventional commercial bank into a fully-fledged Islamic bank in 2004, and how EXIM Bank gives back to the Bangladeshi community through its many CSR projects.

World Finance: Tell us about EXIM Bank’s operation – the services you offer and the clients you work with.

Dr Mohammed Haider Ali Miah: EXIM Bank is one of the best third generation banks in our country. EXIM Bank is a customer-friendly bank, and EXIM Bank is a religious-friendly bank, and also a CSR-friendly bank. We are mostly an export-import service oriented bank. We are offering a good number of services to the people of the country, such as online banking services, credit card and debit card facilities, and ATM service. Electronic clearing house also we are offering, with a remittance service, swift service and locker service. And also we have our Hajj service.

“EXIM Bank is a customer-friendly, religious-friendly, and CSR-friendly bank”

World Finance: And your services are being well received, with a 35 percent growth in profits last year; tell us about your position in the Bangladeshi market.

Dr Mohammed Haider Ali Miah: We achieved a 35 percent growth in operating profit last year, because our bank’s total investment – that is $1,650bn, our total investment – out of this, 46 percent we are investing in government industry. From here we earn a handsome amount of profit.

Another point, our non-performing loan is less than two percent. So, we have the greater opportunity to earn more profit. In our country, out of 47 banks, we are the highest profit earner bank.

World Finance: EXIM Bank used to be a conventional commercial bank, but you transformed your operation into an Islamic bank in 2004. What impact has this transition had on your returns, the products you offer, and the relationship you have with your customers?

Dr Mohammed Haider Ali Miah: EXIM Bank has 57 deposit products and 21 investment products. Out of these, the products that are very important, one is the Mudarabbah cash deposit account. And then the medicine deposit account for medicine purpsoes.

Another account is the senior citizen account, for citizens aged 55 years and above. He or she is entitled to open this type of account and with this account we are offering highest weightage and highest profit, for their living standards.

And another one is the Hajj deposit account, for performing holy Hajj. So, these are the most important products out of 57.

“We achieved a 35 percent growth in operating profit last year”

World Finance: Finally, you touched earlier on your CSR activities, tell us more about these projects, and how you make the business case for giving back to the community.

Dr Mohammed Haider Ali Miah: EXIM Bank is a CSR-friendly bank. EXIM Bank has already formed different projects for CSR purposes. We have a scholarship programme, for scholarship purposes from school level to university level. Another is our donation project: we have charity or donation projects, in our country that is, for example, educating and nursing autistic children. Another project is the hospital, EXIM Bank Hospital. All class of peoples can use the services of this hospital, with a minimum service charge. These are the major projects of our EXIM Bank CSR activities.

World Finance: Dr Haider, thank you.

Dr Mohammed Haider Ali Miah: You’re welcome. Thank you very much and thanks to all.

Mohammed Al Saqqaf and Renimah Al Mattar | United Real Estate Company | Video

Posted on August 28, 2013August 28, 2013 by Ashton Wenborn

United Real Estate Company is a Kuwait-based real estate developer that spearheads a markedly different approach to development. Discussing some of their award-winning projects are Mohammed Al Saqqaf, CEO, and Renimah Al Mattar, Executive Vice President of United Real Estate Company.

World Finance: Mohammed, United Real Estate’s approach to property development contrasts from others in the MENA region, so what sets you apart?

Mohammed Al Saqqaf: Well actually I think what sets any company apart from it’s competitors is the quality of the people, the quality of the management. Anybody in a leadership position has the option either to be surrounded by executors or contributors. Personally, I prefer the latter. So this is important in order to get all the bright ideas out, and you therefore examine all the opportunities that you have in any development. Furthermore, one last thing, in our process we always integrate all of the disciplines of the development cycle from the get go, and this way, we have the buy in of all of our teams into what we are developing.

“As a developer, we make sure that we are very conscious about what we contribute to the built environment”

World Finance: Renimah, do you feel you’ve had to sacrifice design or revenue or in the process of increasing sustainability?

Renimah Al Mattar: Absolutely not. I think what we’ve realised is the challenge is trying to make sure that people understand what sustainability is all about. So as a developer, we make sure that we are very conscious about what we contribute to the built environment. But some of the things that we know that are demand-drivers, which then equates into revenue, is making sure that you have a market for your developments. So we make sure that we look at things like energy utilisation, energy conservation which is more important, looking at building materials, looking at what we’re using and making sure they have a low impact on the environment, and we believe that all of those things actually contribute to a better development, so they don’t impede on your design aesthetically at all.

World Finance: Mohammed, tell us about Salalah Gardens Mall in Oman, what made this an award-winning project?

Mohammed Al Saqqaf: Well, I have to give credit to those who had the vision to develop such a project in Salalah. It is a first-time development in this region, in that particular region in Salalah, and what sets this project aside is the fact that it’s a shopping mall with a hospitality component in it as well. We have managed to lease it out very quickly and bringing in home-grown, if you will, businesses into the mall and that has created the foot traffic that we needed and impacted the community in a very positive way.

“Our project is sort of the iconic project within that master development”

World Finance: And Renimah, you also won an award for the Abdali Mall project in Jordan, why do you think this was recognised in this way?

Renimah Al Mattar: Well I think the Abdali Mall project is first and foremost in a new area in Amman called Abdali, and that’s meant to be the new downtown of Amman and if you look at our project, it’s sort of the iconic project within that master development. So, we looked at everything differently, starting with the design approach, so we’ve integrated local materials like stone, but the design is very contemporary. And we’re able to sort of offer a new retail experience that we think is going to also become a very interesting public space, because the design features like the open air features, the water features, are going to be things that people are drawn to.

World Finance: You’re currently in the development stages of the Junoot eco-resort, where is it and what can people expect upon completion?

Renimah Al Mattar: The Junoot project is located in an area known as Shuwaimiya, which is currently a three hour drive from Salalah, and we’re currently exploring the number of ways that you can actually get to the site, so that actually becomes part of the experience. And the master development will include a number of components, one will be chalets that will be able to be sold to the end users, and that includes expats, so you don’t have to be a gulf national. And one of the hotel components that we’ve just announced will be operated by Aman resorts, and that will be the first Aman resort in the Gulf region. A couple of different approaches that we took in terms of the design and development approach have been to integrate construction methodologies from institutions like the Cal-Earth Institute of Earth Art and Architecture, and we’ve received considerable recognition from different groups for the design approach that these chalets have taken, and we hope to see that throughout the rest of the development approach.

“As a development company, we are always on the look out for new investments and new opportunities”

World Finance: And Mohammed, finally, what opportunities are you hoping to take advantage of in the future?

Mohammad Al Saqqaf: Well obviously as a development company, we are always on the look out for new investments and new opportunities. However, we are a MENA focussed developer, so these opportunities are, if you will, confined in that region that we concentrate on. Out of the current geographies that we’re in, we’re looking at several opportunities in the Sultanate of Oman, and Jordan. Obviously there are some other geographies that we haven’t penetrated yet, but out of what is available again in the MENA region, we feel that Saudi Arabia is a country and a region that we should be able to go into and create some solid investment returns.

World Finance: Mohammed, Renimah, thank you.

Mohammed and Renimah: You’re welcome, thank you.

Magdalene Apenteng | Ghana Ministry of Finance | Video

Posted on August 26, 2013August 28, 2013 by Ashton Wenborn

Earlier this year we reported on Ghana’s PPP project pipeline, after the World Bank pledged $30m to help the country develop its infrastructure. Public Investment Division Director Magdalene Apenteng talks to World Finance to give an update on their progress.

World Finance: First, remind us why infrastructure investment is so important for Ghana?

Magdalene Apenteng: Ghana is a lower-middle income country, having achieved that very recently. It has a population of about 25 million, and a population growth rate of about 2.5 percent, and as of last year 2012 its GDP growth was 7.1 percent. This is quite phenomenal, looking at the entire world where the growth rates were below 2 percent. What this means is that there’s a lot of activity taking place, and infrastructure is one of the key things that a country needs, to propel growth and also to alleviate poverty. Assess the full cost, and with the intent of moving forward to become a full-fledged middle income country, we want to develop our infrastructure, make sure we have adequate services, and make sure there’s a lack of congestion, and also improve maintenance in all the facilities that we have.

“Between Accra and Takoradi there are about 4 million inhabitants”

World Finance: Let’s talk about some of your projects; one of the primary projects is the Accra-Takoradi road, what’s the aim here?

Magdalene Apenteng: The Accra-Takoradi road is one of the projects that we have identified for developing infrastructure. Accra is the capital of Ghana, and Takoradi is the hub of the oil centre, having discovered oil in 2007, and therefore the linkage between the two roads is of prime importance and significance. Between Accra and Takoradi there are about 4 million inhabitants, and once you open up this road, you’re going to provide enough services and activities, especially for production, for inhabitants of this area. Secondly, the Accra-Takoradi road is part of the original corridor that links Togo on the East with La Cote D’Ivoire on the West, so it’s part of the trans-West African highway. Again, the Takoradi Port is also a very significant place, a very significant role, in this. When we open up this corridor, then other products in terms of exports can get to the port for it to be exported, quite easily. Again we have- Takoradi being the hub for the oil centre, for ease of business, you have people moving from the capital to Takoradi quite easily. These are some of the few reasons why we would like to open up and dualise the road.

World Finance: So, tell us about the timeline, there are obviously many milestones, where are we at the moment?

Magdalene Apenteng: The project is being prepared effectively. We started off with identifying a consultant to undertake pre-feasibility studies on the road. We have identified, shortlisted, some few consultants, and they are supposed to have submitted their requests for proposals, and these will be reviewed by the end of this month, and a consultant will actually be selected to undertake the pre-feasibility studies. This will be done in a period of about 5-6months, after which will determine whether we go straight to procure and structure the project, in terms of getting a private partner to look at the design, the finance, and the construction of the road, perhaps including maintenance and operations of the road as well. If it is necessary that we do a full feasibility, then we will go ahead and actually do a full feasibility to actually ascertain the kind of structuring that we want to take place, after which procurement and negotiations of contract off the road project will take place.

“We have about 62 percent of our exports going through that port”

World Finance: As well as connecting Accra to Takoradi, you’re developing the port as well, tell us about that

Magdalene Apenteng: Yes, we have expansion and rehabilitation of the Takoradi port. The Takoradi port actually takes about 35 percent of all sea-freight that comes into the country, with the remaining 65 percent being taken by the Tema port which is the biggest of the ports in Ghana. The port in Takoradi is under utilised as you can see, however, we have about 62 percent of our exports going through that port, that is, for cocoa, for manganese, for bauxite and other products going through the Takoradi port. With the oil discovery there is a very good need to develop the facilities at the port, to take over for oil and gas processing, and therefore we need to have some terminals that would service the oil and gas. Again, we also need to have transit sheds for transmission of goods from the port to our neighbouring countries and even to the interior of the country. Again, we also want to look at, to construct, terminals for bulk ore, that is manganese, bauxite etcetera.

World Finance: We’ve talked about your transport projects, you also have a healthcare project in the Korle Bu Teaching Hospital, tell us about that.

Magdalene Apenteng: Well the Korle Bu Teaching Hosptial Diagnostics Centre, is expected to provide service, efficient and reliable services as well as affordable services to the hospital. Korle Bu Teaching Hospital is the third largest hospital in Africa, it has a 2000 bed capacity, and has an out patient department of about 1400 patients per day, and also admits about 135 persons a day. What it means is that for these 16 clinical departments, we need effective services in terms of diagnostics for these departments. Therefore this centre is expected to service these departments effectively.

“The Korle Bu Teaching Hosptial Diagnostics Centre is expected to provide efficient, reliable, and affordable services”

World Finance: And you’re currently accepting bids on this project?

Magdalene Apenteng: Yes, we have already done the pre-feasibility, and approved the pre-feasibility. However, there are some issues that came up which have to get looked at, and therefore the consultant has been requested to update their pre-feasibility and the report is supposed to come in by the end of May. After which we’ll go ahead and do the procurement and negotiate a contract with the respected private partner that will actually win the bid.

World Finance: Magdalene, thank you

Magdalene Apenteng: Thank you very much Nick.

Ammar Shata on Saudi real estate | Al Khabeer Capital

Posted on August 23, 2013August 28, 2013 by Ashton Wenborn

The government of Saudi Arabia has enacted the third of five regulations announced to shake up the country’s underdeveloped real estate sector. Ammar Shata, Executive Director and CEO of Al Khabeer Capital, and World Finance Man of the Year for 2012, joins World Finance to discuss.

World Finance: First, what is the Saudi government hoping to achieve with these reforms?

Ammar Shata: They are hoping to achieve reforms in terms of competitive advantage. If you want to compete in this kind of world, you have to be sure that you have the right reforms. We’re still yet at the beginning of what we need in terms of social reforms, political reforms, and even human rights reforms, and for that reason I think it’s a good start. If you heard the news recently, we’ve changed the weekend from Thursday and Friday, to Friday and Saturday, women’s rights is improving in terms of allowing them to be part of the political system, and obviously the mortgage finance which was announced earlier in the beginning of the year.

“What we need is an improvement in terms of social needs”

World Finance: And there’s still some work to do?

Ammar Shata: Definitely. We’re a bit slow, we need to move a bit faster, the world is not standing still. What we need is an improvement in terms of social needs, in terms of people sharing in the political system, in terms of human rights, and definitely women’s rights. We see improvement, but definitely, I do not believe any nation can sustain this economic progress and improvement without having its people sharing in the decision making.

World Finance: So what can investors expect from the Saudi real estate sector in both the medium and long term?

Ammar Shata: Well it’s usually between the supply and demand of real estate, there’s about 3-4 years gap. We’re in the beginning of a serious demand for housing, because 65 percent of the Saudi society is below the age of 20, and that means that there is a lot of need for housing in the coming 10 to 15 years. The worry is about euphoria so you want to be sure that in the coming 3-4 years, you are part of the supplying side of the chain of properties into the market that is needed by the society. And this is why Al Khabeer is focussing on asset under management that is real estate basically development, and income generating, because we see this part of the expertise for the Saudi market is an important topic.

“Islamic finance is about fairness, you have to put fiduciary duty into perspective”

World Finance: Now tell us a bit about your background, World Finance has named you Man of the Year in 2012, but you actually got into economics by accident?

Ammar Shata: Yes it’s true. What happened was my advisor at University of Southern California, while I was studying Electrical Engineering, forced me to take an economics course. It was a graduate course, and I did so well I was actually number one in the class, and I amazingly found out I’m pretty good at this topic and I’m enjoying it, so this changed my career to start my Masters degree in Economic and Financial Planning, and here we go, I’m here.

World Finance: And here we are, you’ve created Al Khabeer to offer shariah-compliant investment vehicles- how important are Islamic finance principles to you personally?

Ammar Shata: There’s two dimensions to it, for me, developing the community is an important issue, and Islamic finance is part of that requirement. Islamic finance is about fairness, and for me financing you have to be fair, transparent, and you have to put fiduciary duty into perspective. For that reason, Islamic finance is an important element to Al Khabeer to its people and to its shareholders, and we think it will definitely help in developing the community, which is the final and most important aim for all of us.

World Finance: And now the firm manages assets worth $500m, what would you say is your greatest achievement so far?

Ammar Shata: I think it’s three elements, the first one is the fact that we’re growing at a difficult time. We’re growing at 40 percent per year for the last three years, at a period when a lot of companies are going bankrupt. It’s also an environment where a lot of people have recognised that it’s the best environment to work for- we won for the third year consecutively the best environment to work for in Saudi Arabia, and lately we have been ranked one of the top in the middle east in terms of people management and taking care of our people. And obviously the third one is to lead into the Islamic finance, and that’s Alhamdulillah, we will be successful.

“Hire the right people, and to allow them to perform”

World Finance: And finally, being our incumbent Man of the Year, tell us the best piece of advice you have ever received?

Ammar Shata: It’s to hire the right people, and to allow them to perform. If you don’t have that, you really can’t be calling yourself a good CEO.

World Finance: Ammar, thank you

Ammar Shata: Thank you.

George Stylianou on emerging economies | Forextime

Posted on August 21, 2013August 22, 2013 by Ashton Wenborn

Forextime is an online forex broker that offers trading services on an international scale. Discussing the continuing growth of the forex industry is George Stylianou, Chief Marketing Officer at Forextime.

World Finance: First, introduce us to Forextime and the services you offer your clients

George Stylianou: Forextime is a newly formed forex broker, regulated in the EU. We take a very fresh and dynamic approach to the way we do our business. There are two key things that make us truly unique, and the first one is, well, time- it’s the essence of how we run our business, hence the name Forextime. We use time as the bench mark to optimise the way we do our business both internally and externally. For example, clients can register in less than a minute, and we have a new service called video compliance, whereby we can expedite the approval process so the client can get it up and running really really quickly. We also have MyFXTM so once users have access, they have a birds-eye view of the status of their account, and they can also personalise and optimise the way they trade forex. The second thing that makes us truly unique is the way we deal with localised products and services. One example is our Amanah accounts, this is more popularly known as Islamic accounts in the industry, where they are simply swap free accounts- but we’ve gone an extra step further, we’ve got this account type blessed by the appropriate Imams from the two most popular religious sects. The second is PAMM accounts, now Europe has been looking for a regulated version of PAMM, so far it’s been available outside of Europe but not really regulated, well we have this available for our clients to use. So that’s what we offer our clients that makes us really fresh and new and different in the market place.

“What really makes us different is our experience and expertise in the market place”

World Finance: Now, being a relatively new firm in what is a crowded brokerage space, how do you differentiate yourself from the competition?

George Stylianou: What really makes us different is our experience and expertise in the market place. Andrey Dashin is the founder of our company and he also has a really good track record. He has founded the Alpari group, which is a very successful forex broker. In addition, in amongst the upper ranks of our company management, we have over 50 years of experience, so this really gives us the ability to know what the market needs, and to deliver it when needed. It’s also helped us to achieve maturity much quicker, and allowed us to contend with much more mature brokers.

World Finance: How big has the online fx market grown and what are its future growth prospects?

George Stylianou: Well the forex market has grown tremendously over the last couple of years, and I believe it will grow even more. Forex is becoming more and more accessible to a wider range of demographics since the increased use of mobile and tablet, PC and web-based trading platforms, this opens up a world of opportunities for a lot of forex brokers. With a relatively low minimum deposit anybody could give forex a go and by the time this interview is over it could be thousands of more people that could be interested in trading forex.

World Finance: Emerging economies are real growth areas for forex so why do you think this is and how are you targeting traders in these markets?

George Stylianou: Yes, emerging economies are growing two to three times faster than developed economies, and what this does is it creates a wider pool of people that have more disposable income and this net effect is that more people have more interest in forex because they want to diversify their portfolio’s and assets. We have seen significant interest in central Africa, middle-east, and Asia, and the solution we have for this region is our regulated version of PAMM, which is targeted towards experienced and inexperienced traders.

“The forex market is growing and becoming accessible to a wider range of people due to their increased use of mobile and tablet”

World Finance: And finally, how do you see forex trading developing and changing in the future?

George Stylianou: Well the forex market is growing and becoming accessible to a wider range of people due to their increased use of mobile and tablet, and because the industry is very dynamic and changing, the companies that are able to shift their business model and adapt to these changes are the ones that will prosper in the future. I also believe that social media is the future of forex trading. Forex brokers should find ways to deeper integrate their products and services within these social networks, and this is a key area of focus for us. Because we are a newly formed and dynamic brand, we most certainly have the ability to adapt to all these different situations and deliver to the clients what they want and when they want it.

World Finance: George, thank you.

George Stylianou: Thank you Nick.

Huw Jenkins on Latin America | BTG Pactual | Video

Posted on August 19, 2013August 27, 2013 by Ashton Wenborn

With 30 years of experience, BTG Pactual is a leading investment bank, asset manager and wealth manager with a dominant franchise in Latin America. Discussing the ways in which it has expanded in recent years is Huw Jenkins, a managing partner at BTG Pactual.

World Finance: Firstly, introduce us to BTG Pactual tell us what has made you so successful in Latin America, and what you offer your clients

Huw Jenkins: We are a Latin American bank, so we have 2500 employees, we’re based in South America’s largest economy Brazil, which is our home market, and we now have offices in Chile, Colombia, and Peru. Of that 2500 employees we’ve got 200 partners who are deeply embedded in the business community, and in each of the territories in which we operate. And then we combine that with the global reach of having distribution offices in London, New York and Hong Kong, and so in terms of being able to offer access to capital markets, we have all the capability that a global investment bank might have. So we think we offer the best of both worlds to our clients, the intimacy, fast decision making, and understanding of the scene within the South American economies, and at the same time, the global reach of a world-class distribution network. So, we were described recently in a well-known international publication as a pocket battleship, so rather than being the classic emerging market securities company, where it’s an agency-brokerage model, we actually have significant balance sheet to commit to our clients as well, so we have the ability to underwrite and to lend in probably the similar if not greater scale than the risk limits that global banks have in Latin America. So we combine, knowledge of the local scene, global distribution, and balance sheet strength.

“The real challenge is finding good teams that fit our culture”

World Finance:What are some of the challenges that BTG has had to overcome in the LatAm markets?

Huw Jenkins: Finding a way to enter some of the markets that we chose to enter in the last couple of years, we’ve had to think about whether it makes sense to go with an established local platform, or whether it makes sense to do an organic build. So one of the things we felt very strongly, was that the experience we’d had in Brazil of it becoming a destination for international capital, and Brazilian companies wanting to reach out to the rest of the region, meant that we really needed to focus on building a regional network so that we had capability within all the various market places. And that involved different strategies for different territories, so we made some acquisitions, we did some start-up operations, we’ve opened some additional offices. So I think the real challenge is finding good teams, whether it’s through acquisition or whether it’s through recruitment, that fits our culture and can deliver our kind of service to our clients.

World Finance: BTG was listed on the Brazilian stock exchange in 2012, what do you think the reason for your success has been?

Huw Jenkins: Primarily, our culture, and our position as the leading independent Latin American investment services company. So I think people were very attracted to the idea that as Latin America continued to develop, there would be a process of financial deepening, so there’s a tailwind for us in terms of being in the right part of the world with the right product offering as a securities company. And then on the other hand, we have a unique culture because although we’ve gone public, we’ve chosen to maintain our partnership structure, so 75 percent of the company is still owned by the partnership, we have no intention of ever allowing the partnership to sell its shares on the public market so we aren’t in the business of making one generation rich at the expense of others, we want to keep a culture of owner-managers within the company. And that results for investors in the company in showing best in class really, cost-income ration and revenue per capita, in terms of our efficiency measures.

“We really look to acquire companies that have great customer relationships”

World Finance: You undertook several important mergers last year in Latin America, can you tell us about these and and what effect they’ve had on BTG Pactual

Huw Jenkins: We acquired, or merged with, a business in Chile called Celfin, which was the leading independent investment services platform in Chile, which brought about another 500 employees into the group and really gave us a very strong position in terms of primary and secondary markets in Chile. And we also acquired Bolsa y Renta in Colombia, which is a great group of guys, who are very entrepreneurial, who basically established or re-established this company over the course of the last 5 years. And what we try and do when we make acquisitions, as I was saying earlier we’re a pocket battleship, we do have a significant balance sheet that we can deploy, but what we really look to do is to acquire companies that have great customer relationships, and actually very little in the way of trading or balance sheets, so that we can actually bring value-added to them by connecting their customer relationships with our balance sheet strength.

World Finance: Tell us about some of the highlights of your financial results last year.

Huw Jenkins: Last year was our first year as a public company and we had a very good set of results. We were especially pleased because we were able to deploy the capital that we raised from the IPO very effectively during the course of the year, so our return on average equity was close on 30 percent. We grew our revenues by over 100 percent, to north of $3bn and we had about a 48 percent net margin, so round about a 40 percent cost to income ratio, which we were delighted with. If you look at the recurrent income that the bank generates from either fees on asset management, or commissions on brokerage activity, we covered our expense base two and a half times before bonus, so a very very healthy financial model. And I think importantly for investors, we were able to demonstrate that we were growing our franchise businesses the recurrent income, that comes from investment management mandates or from non-risk businesses such as brokerage or investment-bank advisory, to be a more significant part of our business, which resulted in a really very strong stable earnings base for the firm.

“We want to focus on developing our own people, remaining focussed on the clients, being a meritocratic organisation”

World Finance: Finally, tell us about some of your developments and targets for the next few years

Huw Jenkins: What we really want to do over the next several years is really focus on execution, so making sure that we deliver our partnership culture throughout an enlarged organisation, and that really means focussing on developing our own people, remaining focussed on the clients, being a meritocratic organisation. So with a bit of luck, it will just be more of the same.

World Finance: Huw, thank you

Huw Jenkins: Thank you.