The continuing thawing of relations between the US and Cuba took a significant step this weekend when the leaders of both countries met at the Summit of the Americans in Panama. US President Barack Obama and his Cuban counterpart Raúl Castro sat down for their first formal talks since announcing attempts to normalise relations last December.
Castro said that despite some disagreements, the renewed dialogue was encouraging
As discussed in the latest issue of World Finance, the improved relations between Cuba and its largest neighbour could see the Caribbean island’s economy undergo a dramatic transformation. Since the Cuban revolution in the late 1950s, the two countries have been at odds, with the most damaging consequence being the embargo placed on all trade by US authorities.
While the embargo has yet to be removed, the desire from both regimes to foster better relations offers a tantalising future for Cuba. The first steps of the new deal may lead to more money flowing between the two countries through remittances, which may in turn help boost Cuba’s underdeveloped private sector. US firms will also be looking at the improved relations closely, with a previously untapped market offering considerable new opportunities.
Speaking at the summit, Castro said that despite some disagreements, the renewed dialogue was encouraging. “We are disposed to talk about everything, with patience. Some things we will agree with, and others we won’t.”
Obama hailed the talks as an historic step towards cooperation with its former foe. “Wheat we have both concluded is that we can disagree with a spirit of respect and civility. Over time, it is possible for us to turn the page and develop a new relationship between our two countries.”
In step with a dismal past 12 months in which falling commodity prices have impacted both mining investment and the Australian dollar, Treasurer Joe Hockey has warned that he may be forced to write-off $25bn in revenue for the next four years if iron ore prices continue to fall. The country’s leading export is trading currently at $47 a tonne, down from $120 in 2013, and, assuming that demand fails to pick up in the years ahead, could put major names in the mining industry out of business.
Both parties have faced heavy criticism in recent months for expanding iron ore production
In an interview with The Australia Financial Review, Hockey said that there seems to be “no floor” when it comes to setting iron ore prices, which have been falling at a quite spectacular rate of late and hampering wage growth. Whereas previously Hockey was balancing the books using a price of $60 a tonne, a Chinese slowdown means that the treasurer must now factor in prices as low as $35 in order to more realistically reflect the changed economic landscape.
If prices were to reach the $35 mark, major mining names BHP Billiton and Rio Tinto would make only $1 for every tonne sold, whereas the vast majority of smaller miners would be forced to operate at a loss. Both parties have faced heavy criticism in recent months for expanding iron ore production in a time where there is a supply glut. As a result, lesser-known names are struggling to stay in a market where high-cost production is king.
According to Hockey, for every $10 taken off the iron ore price, Australia’s economy will lose $2.5bn and exacerbate the problems facing an economy already posting weaker-than-expected growth.
Matthew Spivack, Middle East and Africa Practice Leader at Frontier Strategy Group, speaks to World Finance about how reticence over sanctions being gradually lifted means some foreign players will be denied overnight access to the Iranian marketplace.
Come back later for a full transcript of this video.
On April 8, five memorandums were signed between Russia and Vietnam in order to bolster trade between the two states. A high goal has been set, with plans to double annual bilateral trade to $10bn by 2016, although details of which industries will be targeted have not yet been shared.
Russia has also pledged to help Thailand’s energy sector
During the first visit of a Russian prime minister to Bangkok in 25 years, Dmitry Medvedev also offered support for a number of other sectors. Tourism is said to receive a boost – a significant facet for Thailand following a steep decline as a result of recent political unrest. Additionally, the two countries will work more closely to reduce drug trafficking and crime.
Thailand’s military coup last May triggered widespread economic consequences, which led to a contraction of GDP growth to 0.7 percent in 2014. Thanks to a calmer political environment, the Asian Development Bank predicts that this figure will rise to 3.6 percent in the coming year. Economic cooperation with Russia may indeed present the trade opportunities required to achieve this growth.
Russia has also pledged to help Thailand’s energy sector. Although Thailand is a producer of natural gas and crude oil, imports are required in order to meet the country’s growing consumption needs. Production has grown substantially in recent years, yet further investment in upstream activities in required. According to the US Energy Information Administration, Thailand is the third largest producer of biofuels in the region, thereby presenting abundant investment opportunities for Russia.
In a further bid to bring the countries closer together, Medvedev has offered a Free Trade Agreement between Thailand and the Eurasian Economic Union. Vietnam is close to concluding such a deal with the newly formed association, which currently has Russia, Belarus, Kazakhstan and Armenia as members – with Kyrgyzstan expected to join imminently.
As such, it appears Russia is on path to forming a powerful economic alliance that can turn its back on the West, as it no longer needs to rely on its cooperation.
Jordan’s banking sector has been able to transcend the geopolitical chaos that has hampered many neighbouring nations. Jordan Islamic Bank’s Musa Shihadeh explains how.
Jordan’s banking sector has been able to transcend the geopolitical chaos that has hampered many neighbouring nations. Here to tell us how, Musa Shihadeh.
World Finance: We just talked about some of the tensions in your region. Tell me, how have you been able to continue to build on your country’s momentum despite all of this?
Musa Shihadeh: Jordan is secured and attractive for investors. The laws in the country are attractive for people coming to invest in the country. Regulations of the central bank enhance banks to make investments, and this gives the banking sector the success they have in this turmoil around our country.
World Finance: Of course you’ve been at the core of Jordan’s Islamic banking sector. Can you tell me what has been the key to your growth?
Musa Shihadeh: Jordan Islamic Bank is a pioneer in banking, established 35 years ago. We stick with Sharia rules and applications. We try always to have the technology and services to satisfy our customers in order to keep them and get other customers to come to the bank, and keep their loyalty for this business in order to continue successfully.
World Finance: As part of these long term plans you have of course incorporated corporate social responsibility. Tell me how.
Musa Shihadeh: Jordan Islamic Bank, as an Islamic Bank, should go to social responsibility so it is part of our mission in order to comply and apply these transactions for the bank. We have always put plans for social responsibility. We made a plan for five years in order to keep up with investing with SMEs for helping the people in education and financing them and medical systems.
We put a plan to have a solar energy system in order to save energy and keep things well, and always we apply these things in order to help the country and make sure that we are doing our business, applying to the social responsibility that banks should be part of a community.
World Finance: So as you continue with your high growth optimism, tell me how are you looking to expand your market share?
Musa Shihadeh: In our policy as a bank we make plans in order to keep our customers. They are our centre – in services and satisfaction of them – and we try always to get new customers in order to further our business.
World Finance: So who’s at the core of these growth plans, is it domestic clients or international?
Musa Shihadeh: Our domestic customers we rely on more, because we are a local bank, although we welcome international customers. Always we have a slogan that the customer is our partner in our business, and we welcome them.
World Finance: Musa, tell me, what’s next for your bank?
Musa Shihadeh: We plan to diversify and give more services for our customers to satisfy them. We hope to issue a tradable sukuk this year, because the government has issued a private loan for this. We hope that we will continue attracting our customers and satisfying their needs with more branches and ATMs, and improving our services.
World Finance: Musa, thank you so much for joining me today.
Two years after the island nation became the first – and still the only – country in the eurozone to impose capital controls on its banking sector, Cyprus has decided finally to lift the last of its remaining restrictions. The measures were first introduced to prevent the banking population from withdrawing their funds en masse, and the decision to do away with the controls completely shows that the banking system is on the mend.
The decision to do away with the controls completely shows that the banking system is on the mend
“It is a vote of confidence in our banking system, which, now fully independent of Greek banking institutions, can move forward”, said the country’s president, Nicos Anastasiades, in a statement. Whereas beforehand a monthly cap prevented any individual from transferring more than €20,000 overseas and stopped travellers from taking anymore than €10,000 out of the country, the restrictions are no more after a steady two-year recovery.
Following in the footsteps of Argentina and Iceland, who each imposed controls to protect against their own demons, the measures were not the first of their kind – though represented an unusual take in that the island nation is without a currency to call its own. However, the restrictions were adopted in 2013 by a country hit hard by the Greek debt crisis and one for whom strict controls were required as part of a €10bn bailout from the EU and IMF.
The free flow of capital also represents a considerable part of Cyprus’ continued efforts to distance itself from Greece, and restoring normality to the banking system could well prove decisive in bringing additional investment to the country from overseas.
In the early 20th century, Boston was a popular destination for migrants from across Europe looking to work in its various manual industries. But, by the 1950s, industry was also migrating – leaving this city of migrants in search of cheaper labour in the US’s southern regions. While it enjoyed world-famous and leading universities such as Harvard, as well as good banks and hospitals, at the time these industries did not play much of role in the American economy. In the 1970s these industries became increasingly import components of the American economy. Boston, with its pre-existing comparative advantage, was able to experience an economic renaissance.
Seattle
Seattle was home to the William Boeing’s boat company. Boeing also had an interest in aircrafts. Following the Second World War, Boeing took full advantage of the jet liner boom, providing employment for many residents. In the late 1960s Boeing ran into commercial trouble and slashed around three quarters of its workforce, giving Seattle an unemployment rate of 14 percent – well above the American average at the time. Seattle’s turnaround came about due to the growth of technology industries in the 1980s. Microsoft founders Bill Gates and Paul Allen quietly moved to the city in 1979. The success of Microsoft led to a proliferation of a whole host of other technology firms in the city.
Denver
After its 1970s oil and gas boom, a fall in energy prices in the 1980s put the economy of Denver in crisis. Nearly 15,000 people working in the oil industry found themselves unemployed. As a result of overbuilding, 30 percent of office space in Denver became vacant – the highest rate in America at the time. Migration to the suburbs also resulted in Denver’s population reaching its lowest level in thirty years. In the 1990s the Rockies city began to pick up again, with its overabundance of empty and affordable office space attracting business. The initiative of city authorities to construct Denver International Airport, which opened in 1995, also made Denver a key transport hub.
New York
Once plagued by financial crisis and in the grip of spiralling crime, New York is now one of the most successful cities in the world. New York’s status as a global financial hub allowed it to take full advantage of the financial big bang of the 1980s. In the 1990s as a result of a doubling of the police force and more aggressive policing, particularly of public space gatherings, in the 1990s the city saw a decline in its crime rate, attracting young professionals and graduates to work and live in the city. Some would argue New York has been too much of a success, with spiralling rents now forcing native residents out of the city.
San Francisco
The Dot-com boom of the 1990s saw an influx of entrepreneurs and software companies to the Bay Area city. As a result, the city was badly hurt when the bubble burst, leaving behind empty offices and “For Rent” signs. The decline was short-lived, with the new boom of web 2.0 and technology and internet start-ups leading the way. San Francisco is now one of the key destinations of budding internet and technology entrepreneurs and ambitious university graduates.
World Finance speaks with Frankie Fook-Lun Leung attorney and China expert on China’s economy, whether the country is devoid of cyclical changes, and tensions over the AIIB.
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The National Bank of Oman has become the second bank in the Sultanate to begin issuing bonds. Ahmed Al Musalmi and Wasfi Al Sayyid explain the ambitious infrastructure projects underway in Oman, and the excitement of the international investment community to sign up.
The National Bank of Oman has joined an illustrious club in the Sultanate, and across the Middle East and North Africa region. Here to tell us more – Ahmed Al Musalmi and Wasfi Al Sayyid.
World Finance: Now your bank is issuing bonds, only the second to do so in your country, why was it important to take part?
Ahmed Al Musalmi: First of all to diversify the funding profile of the bank, the funding base, traditionally what we’ve doing is through the inter-bank borrowings and the customer deposits. But is very important that we diversify with the funding base that’s a lot more sustainable and also helps a lot in mitigating the risks that are associated with concentration, whether it’s on deposits or whether it’s on the other side of the balance sheet.
So for us it has been a great success and this bond. Under the price we have actually closed the deal – it just shows us how much it is going to help us in reducing the overall cost of funds.
World Finance: Now having more access to bond markets of course increases your liquidity position. Can you tell me how this decision alone is going to help your bank in terms of building up investment capital?
Wasfi Al Sayyid: It’s a large issue – it’s very prominent. We’ve just closed a deal on the bond $500m, which is quite a large amount. We’ve had a lot of interest from all those countries that we talked about – particularly pleasing from European countries, in particularly from London. So we’ve managed to touch on a wide range of investors – some of the largest and most prominent investors in the world, and that will have a knock on effect.
Up to now Oman has been one of the best kept secrets I think in the Middle East and certainly in the Gulf, so this has given an opportunity for these investors to get to know Oman. And these people will be producing research reports – they will create a lot of buzz and a lot of noise around it, and be beneficial in the long term, in terms of our investment flows into the country.
And in terms of our tourism potential – tourism is one of the main diversifiers for the country and this is the vision 2020, where we expect tourism to form a good part of the GDP, and diversify away from oil and gas, and this is another way that we can help to achieve that for the country I think.
Ahmed Al Musalmi:And also I think from the banking sector perspective, when it comes to contributing to the overall economic diversification, which actually is under the government vision 2020, they key focus is to reduce dependence on oil and gas. What we have actually seen is that there is a tremendous amount of interest from all the markets that we have visited – Singapore, Hong Kong and London – a tremendous amount of interest from investors to actually invest in Oman, and Oman has been a very good story.
We have showcased this story of Oman. The government is investing a lot into infrastructure development in the country. There are mega projects that have been announced and these projects obviously need a lot of financing. And this will give a chance to the banks, once they get access to the global funding base, will give the chance to the local banks to participate in a lot more substantial ways going forward.
World Finance: Ahmed, can you tell me what sort of infrastructure projects are foreign investors looking to get involved with in Oman?
Ahmed Al Musalmi: We have quite a number of those. Under every sector of the economy, starting for example with the ports, we have got the new port in the central part of the country called ‘Duqm’. It is a mega project in infrastructure development; again it’s part of the overall vision of the government to diversify the economy.
And there is tourism, again a lot of interest we have seen in terms of hotels for example. We see quite a lot of interest from different investors who are interesting in investing in the tourism industry – it is very very attractive.
World Finance: Though there are many opportunities for investment, some people might be turned away frankly, because of the region you’re based in. How does that affect peoples’ confidence?
Wasfi Al Sayyid: If you’d asked that question 15 to 20 years ago then yes, there would have been an impact. I mean people didn’t know much about the region at all; a lot of what was coming out was quite scary. Today people are a lot more sophisticated. So we don’t get our news from just one source – we have access to the Internet, blogs; there is a lot of dialogue. So the truth tends to come out a lot more quickly than before.
And I think that, you know, people are able today to differentiate between the Gulf region, which is really relatively peaceful, and some if the wider MENA region where most of the geo-political issues are occurring. So I think when it comes to the GCC we are not really impacted when it comes to investment, people are looking to invest in all of the GCC countries. Oman is particularly attractive – it is a very stable economy. It’s a beautiful destination – sun, sea, sand, 1,800km of coastline. People want to participate in that story and the more they know about it – the more they’ll want to do that.
And I think that’s the same with all of our neighbours. At the same time, you know Oman is very strategically located. It’s located in the centre of Persia and Africa and you know god willing, when peace starts to become a reality in the wider region, Oman will be well placed to form the centre peace of a hub, a logistics hub, a commercial hub that stretches all the way from Persia into Africa, and I think that’s very exciting for all of us.
Jasper Lawler tells World Finance that as oil prices climb, high cost explorers may be forced out of the marketplace, while their low cost counterparts will still operate.
Come back later for a full transcript of this video.
World Finance speaks with security industry heavyweight Don Randall MBE Cyber Ambassador for the Bank of England and Senior Advisor with Pilgrims Group and Bivonas Law, to discuss the threats and precautions.
Come back later for a full transcript of this video.
