Year: 2015

Is European airline consolidation ready for takeoff?

Posted on by Ashton Wenborn

On January 1 1914, Abram Pheil flew as a single passenger on the first scheduled commercial flight of its kind across Florida. A century later, on January 1 2014, it’s estimated eight million passengers flew on nearly 100,000 commercial flights around the world. Airports, originally little more than grassy fields, have become bustling hubs for tourism and the playing field for airlines to battle for a share of the 3.3 billion annual passengers. Over the past decade a number of mergers have taken place in the US that has halved the number of large carriers from eight to four.

Data from OAG outlines the clear difference in the European airline market, where 17 airlines battle for market share, compared to the US, where 10 firms make up the predicted airline traffic for 2015. Over 53 percent of the European market is shared between the top six airlines, whereas in the US 46 percent of the market is shared between the top two airlines. In Europe, consolidation has struggled to take hold. While large carriers have formed mergers, flag carriers and budget airlines are fuelling cut-throat competition on short-haul journeys. IAG has recently offered Aer Lingus a £1.1bn takeover bid that is widely considered the first significant airline consolidation deal in five years. This has signalled a resurgence of M&A across Europe.

Flag-carrier systems have created an abundance of airlines and have led to inefficient excess-capacity. These legacy airlines have large market positions from their government-affiliated status but they are being undercut by low-cost competitors. Operators are left with over capacity and profitability problems and unable to compete with the consolidation that has happened in the US market. This has primarily been due to differences in language, culture, political risks and government approach to the industry.

Flag-carrier systems have created an abundance of airlines and have led to inefficient excess capacity

Speaking to World Finance, James Halstead, Partner at Aviation Strategy said: “The European industry has been restricted by the continuing state ownership of these carriers by the countries. Where you have a problem with these airlines is because of restrictions in ownership and restrictions in services and the involvement of government. Do you want an airline that flies your flag or something that will be a profit?”

High fliers
Middle-east airline Etihad has taken up a 49 percent share in Air Serbia, this adds to its three percent share in Aer Lingus, 29.2 percent share in Air Berlin and 33.3 percent share in Swiss Darwin Airline. These shares allowed Etihad to acquire several significant hubs across Europe and participate in the European airline industry. SAS, the Scandinavian airline, has also been suggested as a potential takeover candidate with Lufthansa being speculated to acquire the airline. Finnair offers the shortest route from China to Helsinki and has set up a joint venture with Flybe for domestic services. The airline may consider a merge with IAG to aid with connections and retain operating independence.

IAG, formed from a 2011 merger of BA and Iberia, has already had two takeover approaches rejected by Aer Lingus with BA boss Willie Walsh first pitching €2.30 a share, then €2.40 and now €2.55. Acquiring Aer Lingus, with its highly sought after 23 takeoff and landing slots at Heathrow Airport in the UK, would be an attractive addition to IAG’s portfolio of airlines and enable them to develop Ireland into a transatlantic traffic hub. Qatar Airways has also recently announced purchasing a 9.99 percent stake in IAG, becoming its biggest shareholder. Qatar is just one of the gulf airlines challenging European carriers and, although non-EU ownership of European airlines is capped at 49 percent, should the Irish government back the IAG deal, the takeover would signal a step towards a European airline industry with just a handful of strong players.

There is also opportunity for consolidation amid Europe’s low-cost carriers. Wizz Air has revived plans for an initial share sale. The budget airline that operates within Eastern Europe could attract interest from Ryanair or EasyJet if it does issue stock. The success of low-cost airlines has boomed following EU deregulation and has forced the big airline groups to keep pace with the growing budget market.

Turbulent times
Despite incredible growth in commercial flights since 1914, airlines are failing to cover the cost of capital and companies are looking towards consolidation to increase their presence in key markets and pave their way in emerging ones. There is very little competition in the industries that supply airlines. Airbus and Boeing provide the vast majority of planes and terrorist attacks, global illness and rises in oil prices all make the industry more vulnerable.

Charlie Leocha, Director of Consumer Travel Alliance, said in a statement: “Internationally, only three airline alliances, each of which operates much like a single airline, control more than 80 percent of international traffic. This is not a healthy economic environment from a consumer point of view; it brings us only one or two mergers away from having a dominant national carrier.”

Consolidation in the European airline industry is on the rise but it is unlikely the notion will become an overnight solution. It will not sit well with regulators, who do not want to allow a monopoly, or the consumer, who will not want to suffer loss of choice and increased prices as a result. Both have to think about whether the need for consolidation outweighs the negatives, in an industry that is unable to sustain itself.

“The industry does not make returns on capital. From a consumer point of view it probably is better to have a consolidated market. Even though prices will rise it is better to have an industry that is sustainable,” said Halstead. “If the industry is in a position to consolidate, it will be in a position to sustain itself; this will have a beneficial effect on the global economy.”

Bank Aljazira rises to become top Islamic institution

Posted on by Ashton Wenborn

Making banking more secure is now a priority for suffering Western economies ravaged by the financial crisis. Islamic finance, which bans the practice of depending on debts, collaterised debt obligations and hedging bets, was one step ahead, protecting institutions from the downturn when it struck in 2007.

That was the year Saudi Arabia saw the rebirth of Bank Aljazira as a new, fully sharia-compliant institution. Converting from an ordinary bank to one subject to Islamic law meant undergoing substantial changes in its infrastructure, regulations and services, as well as creating a sharia advisory board, made up of leading scholars in the sector. It delved further into the realm of socially responsible banking by launching Khair Aljazira Le Ahl Aljazira – a scheme to provide financial support to charities.

Since then – and in the face of challenges brewed up by the transition – Bank Aljazira has seen significant growth, expanding its operations, growing its assets, increasing its market share and extending its network of branches. As the first bank in Saudi Arabia to launch mobile apps for Android and Windows, it’s also expanding its digital reach and setting a trend in the country’s financial market.

Bank Aljazira in numbers

2007

Year fully sharia-compliant

$10.66bn

Assets

3.4%

Asset market share

$14.4bn

Deposits

69

Branches

489

ATMs

World Finance spoke to Khalid Al-Othman, Senior Vice President and Head of the Retail Banking Group at Bank Aljazira, about how its ambitious investment and expansion plans have helped it to achieve success, what it offers customers as a market leader in the mortgage sector and where the future lies for one of Saudi Arabia’s most innovative financial institutions.

Where does Bank Aljazira stand in comparison to other Saudi banks and which factors drive your market share?
In 2008 the board of directors decided to expand the bank’s operations, growing from what was primarily a brokerage firm to become a fully-fledged bank with a diverse portfolio of banking services. Since then the bank’s asset book has grown to reach SAR 40bn ($10.66bn), giving us a market share of 3.4 percent in the sector. Our deposits have grown to SAR 54bn ($14.4bn), which gives us a market share of 3.3 percent in that division.

Since 2008 there have been huge investments across all aspects of the business. We implemented ambitious growth plans within our retail banking segment. The bank planned to extend its reach through a large network expansion plan, which incorporated both branches and electronic channels. Our network has grown almost three-fold, increasing from 24 branches in 2008 to 69 branches by the third quarter of 2014. Our electronic channels have also evolved at a rapid rate, helping us to become one of the leading electronic banking channels in the market. In addition to that we rolled out an efficient ATM network, which means there are now 489 ATMs in the country, resulting in a market share of 3.2 percent during the same period.

Over the past few years the bank has attracted strong talent and expertise, forming a workforce that has been able to deliver all of the above with success, while creating innovative Islamic banking solutions. We launched one of the most competitive and flexible real estate financing solutions on the market for both housing and investment, which saw our market share grow within the sector to reach 6.9 percent in the space of three years. We also introduced competitive personal finance services, which grew our market share to 3.34 percent in the second quarter of 2014. Thanks to our balanced scorecard and compensation scheme our demand deposits have also grown, rising 225 percent since 2010.

As part of plans to diversify our revenue stream, we introduced a strategic business line in 2013 in order to tap into one of the biggest international markets – remittance. We launched Fawri, a money transfer service that opened its first remittance centre back in December 2013 and now has seven such centres in Saudi Arabia.

We believe that further investment in expanding our branch network, while continuing to upgrade our electronic channels to serve our clients more efficiently, will be the main pillars for our growth in the coming years.

What are your expectations for the development of the mortgage loan market in line with the new credit regulations?
In the short and medium term, the real estate market will introduce new laws and regulations to govern real estate finance and its impact on the market. Given the demographics of Saudi society – where young people make up the majority – and the estimated demand for real estate units (250,000 to 300,000 units per year), we expect demand for mortgage finance from financial institutions to increase. That demand will be supported by various flexible products, as well as the ‘additional finance’ product that we offer in partnership with the real estate development fund, which will help citizens to get on the property ladder.

How is the bank leveraging technology to enhance retail banking for consumers? How is that likely to grow your customer base?
We aim to introduce innovative electronic banking solutions that offer a pleasant banking experience in a convenient, user-friendly and secure manner. We have set that out clearly in our vision, ‘Retail Banking… Differentiated’. Our network of electronic banking services can add value to both existing and potential customers. That network includes the Aljazira online banking service, Aljazira smart mobile banking service, our award-winning Aljazira Phone and the Aljazira ATM Network, which has a large reach stretching across the country.

What innovative products and services does Bank Aljazira offer?
With regard to services, we were the first bank in Saudi Arabia to launch mobile banking apps on Android and Windows phones. Other banks have since followed our lead.

Bank AlJazira’s aim is to provide competitive Islamic finance products that suit our customers’ needs. For example, we offer investment mortgage finance, where customers are able to buy an apartment or commercial building and repay the loan out of the income they receive from the property – in installments that suit them. For customers who already own properties and want to repay the loan from their property’s income, we offer equity release finance.

Our clients are also able to purchase villas, apartments and actual land, whether from individuals, developers or other financial institutions. They can do that either on their own or with one of their family members. The bank also provides an optional grace period of six months where no installments are required, in order to give our customers the chance to purchase furniture and anything else they might need for the house.

Personal finance is another finance product that we offer our customers at competitive rates, using the Tawurq Islamic compliant concept; the bank takes ownership of local commodities or shares, and then transfers its ownership to the customer. The customer then has the option of either retaining the ownership or authorising the bank to sell them to a third party, with money from the sale going to the customer.

In terms of credit cards we offer classic, gold, platinum, and infinite cards, which provide one percent cash back on all purchases. We are also proud to offer the club cards branded ‘Nadeek’, which come in seven different designs that represent the football clubs in Saudi Arabia; thereby providing fans with a new way of showing support for their favourite teams.

As well as that we offer Visa low-limit cards, which are accepted worldwide and come in eight different designs, including Tamouh and Nadeek. They are easy to obtain, with the only requirement being that the applicant already has a Bank Aljazira current account. Customers can deposit their own funds to use as payment for goods and services. The card can also be used for online purchases and at outlets worldwide that accept Visa. These cards have proven to be very successful, with a large number of our customers applying for them.

How has the bank sustained its rapid growth over the past few years?
Bank Aljazira has continued to see strong growth over the past three years by focusing on an aggressive expansion project in terms of its branch network, establishing the credit card and remittance standalone businesses, improving internal operational efficiencies and ensuring we attract a workforce with exceptional talent
and expertise.

What is Bank Aljazira’s strategy for growth in terms of its network of branches?
We plan on growing our retail assets and liabilities by further expanding the bank’s branch network in the future. By the end of 2015, we plan on having 78 branches and 21 women’s branches. Our aim is to have a total of 109 branches by 2018, thereby further extending our reach to meet demand in the market.

KBZ Group on Myanmar’s developing banking sector

Posted on by Ashton Wenborn

Economically-speaking, Myanmar’s major challenge is to create a fully developed financial system. World Finance speaks to KBZ’s Nyo Myint, Kim Chaw Su and Myint Yu Yu Khine to speak about how the banking sector is developing in the country.

World Finance: Well Nyo Myint if I might start with you, Myanmar’s banking sector is still underdeveloped, so what is the penetration rate and what needs to be done for further development?
Nyo Myint: Over the last two years, the liberalisation of the banking sector in Myanmar has witnessed explosive growth in terms of deposits, loans and customers. Customer penetration is now 20 percent, which has also doubled.

The Central Bank of Myanmar, together with other financial institutions, has stepped up its efforts to ensure this important sector develops at a pace that will support the economic growth. The Central Bank of Myanmar should continue its tight supervision of the financial institutions, to ensure the banking sector is well managed.

World Finance: Kim, how have government reforms benefitted the sector?
Kim Chaw Su: The McKinsey international organisation has predicted growth to be over eight percent. So the banking sector like any other sector in Myanmar is actually going through a process of transformation. We are talking about upscaling our human capital, ensuring that the financial regulatory compliance is there and making sure that everything is moving towards acceptable international practices.

Over the last two years, the liberalisation of the banking sector in Myanmar has witnessed explosive growth in terms of deposits, loans and customers

World Finance: Well Yu Yu, with nine foreign banks going to start operating in the country, what are local banks doing to stay competitive?
Myint Yu Yu Khine: It is a positive step that will benefit the industry, and Myanmar banks like Kanbawza Bank have also established a strong franchise in consumer and SME lending taking one third of the market share. So in terms of retail banking we have a dominant channel in bank branches and we are also expanding to electronic channels in terms of the wholesale banking, transaction banking, trade financing and cash management services.

We are also trying to build up our capabilities so we are ready to face the competition.

World Finance: Well Kimmore generally speaking, what sectors will be driving Myanmar in the coming years?
Kim Chaw Su: Myanmar is open for business so every sector needs to be developed. In the financial sector we have actually given foreign banks licences to operate. In the Telco sector in the last two years the government has given licences to Ooredoo and Telenor to actually operate, so that they come and build the infrastructure we badly needed.

In terms of developing within the special economic zones, the government is working with people from every sector to ensure that Myanmar is receiving the attention that it needs in terms of investment and growth opportunities as well as helping us to upscale our human capital and gain more investments for the future.

World Finance: Well Yu Yu, what are the challenges for foreign investors and what can be done to improve the situation?
Myint Yu Yu Khine: The foreign investors coming to Myanmar today may need to expect the infrastructure to be poor in terms of power generation distribution, telecommunications and transportation. There are also opportunities for them to contribute to these sectors.

And another issue would be the rental property market where we have more demand than supply. I think the government should establish new industrial zones and also new satellite towns near the city areas. And we have another big challenge which is the lack of skilled labourers.

World Finance: Well Nyo Myint, finally looking to the year ahead what are your priorities?
Nyo Myint: Well the further liberalisation of the banking sector in Myanmar and the entry of the foreign banks are expected to force local banks to reposition themselves for this change. And for Kanbawza we have prepared ourselves for this change for two years now. So the focus for the next two months is to strengthen our consumer banking business with new innovate product offerings as well as further enhancing customers’ experiences and also to build up our capabilities in regards to wholesale banking.

We have to leverage on our IT investment in order to enhance our transactional banking services in the area of trade financing, cash management services and operational efficiency. We would like to continue with our human capital initiative to enhance our HR capabilities; and lastly we have to collaborate more intensively with foreign banks in order to acquire technical know how and networks.

World Finance: Nyo Myint, Yu Yu, Kim: thank you.
Nyo Myint, Kim Chaw Su, Myint Yu Yu Khine: Thank you very much.

India’s Common Man deals Modi a blow in Dehli election

Posted on by Ashton Wenborn

Just eight months after Prime Minister Narendra Modi swept to power in India’s general election, he has suffered an embarrassing setback in the country’s capital. In elections for Delhi’s assembly, Modi’s ruling Bharatiya Janata Party (BJP) was resoundingly beaten by an anti-establishment party led by a former tax inspector who campaigned for the poorest in society.

Many of the poorest in India fear that Modi is too concerned with helping businesses rather than the common man

The Aam Aadmi party, also known as the Common Man Party, is headed up by Arvind Kejriwal, a former tax inspector who has taken advantage of the chaos within the usual opposition Congress Party, which has been seen in the past as representing a tight group of wealthy families. However, the fact that his party has also defeated the incumbent BJP represents a worrying sign for Modi’s rule.

It is not even a year since he took office off the back of years of economic disappointment, promising to overhaul the country’s bureaucracy and get growth started again. However, he has faced considerable opposition to many of his key reforms, with strikes hitting the coal industry just a month ago over plans to part-privatise some of the state-owned Coal India.

The result of the election saw the Aam Aadmi party seize 65 out of 70 seats in the assembly, while Congress failed to win any seats. While the Delhi assembly election may have local implications at first, it is sure to send shockwaves across the rest of the country where many of the poorest in India fear that Modi is too concerned with helping businesses rather than the common man.

Campaigning against perceived corruption and overly powerful big business, Kejriwal captured the mood of many disgruntled Indians living near to the country’s political powerbase. Speaking to a crowd of supporters this morning, Kejriwal said he hoped to make the capital city a more equal place. “With the help of people, we will make Delhi a city which both poor and rich will feel proud of.”

Talking trash: can a zero-waste world exist?

Posted on by Ashton Wenborn

Take, make, consume and dispose. This manner of unsustainable consumption has always played a part of the growing global economy. Waste, a by-product of economic activity, acts as a useful input to economic activity and its management holds significant economic implications. The utopian world of bountiful natural resources has faded into the growing smog and what we are left with is a reality where 11.2bn tonnes of landfill waste accumulates globally and the number is growing at an alarming annual rate.

The linear ‘throw away’ economy we currently live in is no longer a viable option and companies and countries are implementing zero-waste policies worldwide to tackle the issue. By recycling waste and then reselling the recycled waste companies have found a new source of revenue that simultaneously increases social responsibility and lowers their carbon footprint. This upsurge to create a regenerative circular economy can help to reverse the huge environmental cost the world is currently paying. With Unilever recently announcing itself as the first global company to achieve zero wastage, what was once an environmental dream is fast becoming a major business priority.

A global redesign
A linear model of consumption is no longer realistic in the burgeoning face of resource depletion. Research carried out by the World Economic Forum suggests that our linear economy is fast reaching its limits: 65bn tonnes of raw materials entered the eco system in 2010 and this figure is set to reach 82bn tonnes by 2020. Research conducted by McKinsey & Co predicts that by 2030 three billion people from developing countries will rise into the middle class. This will create an unprecedented demand for energy and resources.

The linear ‘throw away’ economy we currently live in is no longer a viable option

Speaking to World Finance, EU Commissioner for Environment, Maritime Affairs and Fisheries, Karmenu Vella said: “For 200 years of the industrial revolution, we have had one very specific type of one particular business model. We mine raw materials, make products, create demand, sell, often with inbuilt obsolescence and then at the end of the cycle the product is thrown away and becomes waste. This was always seen as the way – easy – straightforward and completely unsustainable. It is time to look at new production cycles.”

In a circular economy 80 percent of waste is created at the design stage and so products are specifically designed to be disassembled and reused to keep resources in circulation for longer. A circular economy, regenerative by intention, provides businesses with an industrial model that dissociates prosperity from resource consumption growth.

In a statement, Paul Polman, CEO of Unilever said: “The concept of a circular economy promises a way out. Here products do not quickly become waste, but are reused to extract their maximum value before safely and productively returning to the biosphere. Most importantly for business leaders, such an economy can deliver growth. Innovative product designers and business leaders are already venturing into this space.”

Breaking the status quo
Landfill waste has dramatically increased with the EU producing more than two billion tonnes of waste, including hazardous materials, every year. In Eastern Europe, Caucasus and Central Asia the situation is worse with nearly four billion tonnes produced in 2009. In order to make zero waste an effective part of business a full transformation from a linear to circular economy is required and organisations must depart from the current status quo and collaborate with interdisciplinary parties.

A transition to a circular economy is estimated to be worth more than $1trn in material savings and McKinsey & Co predicted a global saving of $2.9trn from reducing landfill waste. The rise of a circular economic model would eliminate the use of toxic chemicals that can re-enter the biosphere and ensure the minimal use of inputs. By maximising the value of the product in each stage of the process the model will focus on optimising the entire chain rather than each link allowing companies to establish mutually beneficial relationships.

If the situation is to change a paradigm shift is needed to focus sustainability at the heart of industrial organisation and business models. With several hoops to jump through the primary issue is overcoming the complex supply chains. A simple product could be built using components from a number of countries and overcoming this would involve helping manufacturers develop an understanding of how materials are sourced and processed.

Trailblazers
Unilever claims to be the first global company to have achieved zero waste in all of its 240 factories in 67 countries and they encourage a circular economy through a number of schemes. In Cote D’Ivoire waste is turned into low cost buildings while in India organic waste is composted and shared with the local community. The local team in Egypt empowers disabled employees to earn an extra income by recycling waste material from their production lines. In China, Unilever’s largest factory in Asia uses waste to manufacture bricks and paving.

In Denmark, Carlsberg is developing the world’s first biodegradable receptacle for beverages. The country has banned the construction of new incineration plants and aim to recycle 50 percent of all household waste by 2022. The Netherlands also has new targets with the aim of reducing waste-to-incineration by 50 percent and bringing waste-sorting and separation at the source to 75 percent. Sweden passed legislation that requires retailers selling electronic goods to accept the same quantity for reuse or recycling.

Vella added: “The circular economy sees product designs that facilitate effective recovery and reutilisation of components, in ways that minimise loss of value. Accordingly, companies adjust their business models to better protect their investments in valuable materials.”

As more businesses start to favour this model, the consumer can be a powerful driver towards this new circular economy. To achieve a zero-waste world a monumental effort is required by countries, companies and consumers to prioritise green waste removal methods and transform our global economy to ensure a sustainable future.

OECD report highlights need for structural reforms

Posted on by Ashton Wenborn

Marking the first day of the G20 Finance and Deputy Bank Meeting in Istanbul, the OECD has released its 2015 edition of Going for Growth: a report that assesses the progress made by each member country and identifies the changes needed in order to boost the economy. The report, which was presented by OECD Secretary-General Angel Gurría and Turkish Deputy Prime Minister Ali Babacan, refers to the sluggish growth that still persists in a majority of the G20 countries, more than six years after the financial crisis began.

The report describes how many advanced economies are in the midst of a
vicious cycle

The OECD underlines the ongoing concerns for advanced economies, as illustrated by recent growth revisions, such as slowing productivity, infrastructure restraints, long-term unemployment and resource misallocation. Chronic shortfalls in demand and the slow pace of structural reforms can be attributed to this continued period of stagnation. “It’s important that structural policies, in addition to improving growth prospects in the medium-term, can help support demand in the short-term. The ones we focus more on are investments and global trade, because these are two elements that can directly help with demand,” Alain De Serres, Chief Economist at the OECD, told World Finance. In order to restore healthy growth, the report recommends that resolute policy changes must be made and followed up with the appropriate legislation, thus ensuring implementation at all levels.

The report describes how many advanced economies are in the midst of a vicious cycle, whereby growth is undermined by weak demand, which in turn reduces demand further as consumers and investors become increasingly risk averse. The OECD recommends the promotion of investment as being vital for countries to break out of this rut, with a focus on infrastructure spending being particularly important. “This is where governments can push, because they can increase public investment and help with infrastructure investment; they can try to improve the regulatory environment to facilitate the combination of private and public investment into infrastructure,” said De Serres.

The obstacles to foreign trade and investment, such as high tariffs, as well as legal and administrative obstacles, have hindered the potential for growth. This is an area in which can be drastically transformed in order to promote economic activity among G20 states. “There is still more to be done in terms of facilitating the entry of new firms, those that have new ideas, and allowing them to tap into resources so that they can grow more rapidly,” explained De Serres. Other suggestions made by the OECD include increased investment of R&D and promoting the pursuit of innovation, as well as the global integration of knowledge-based capital. Furthermore, key drivers of productivity gains can be achieved through greater wage dispersion, in addition to broader access to all levels of education and skills development. The report also highlights how job creation can be boosted through alleviating labour taxes and reforming labour market policies.

First Bank of Nigeria on African banking trends

Posted on by Ashton Wenborn

The African banking industry is attracting huge interest worldwide, where the opportunity of an untapped market in Nigeria, where 35 million adults keep their cash at home, shines bright. World Finance speaks to Bernadine Okeke from First Bank of Nigeria about the market’s potential.

World Finance: Well Bernadine, let’s start with the private banking industry, which is still emerging in Nigeria. How does it stand today and how do you see it developing?
Bernadine Okeke: Many of our clients are entrepreneurs, and therefore it’s new wealth, first generation wealth, emerging wealth. And therefore it needs to be managed in a particular way. It’s not the same as it is in Europe or in the US. Our entrepreneurs are learning how to invest and manage wealth, rather than simply churning it into their businesses.

So it gives us an opportunity to actually educate an entire nation about the next opportunity to manage wealth, to grow wealth and to transit this wealth. From one generation to the next.

I know that a lot of foreign banks are very interested in the Nigerian private banking space. But I also believe that the domestic market has room to grow. And that many Nigerians are finding their way back to Nigeria and bringing this wealth back, so it creates a massive opportunity for us to capture this market.

The other trend that we see is a reduction in barriers to trade between west African countries and other countries on the
African continent

World Finance: Well Nigeria has the highest population in Africa and also the strongest economy. So what kind of an investment opportunity is it, and how does the economy stand today?
Bernadine Okeke: We have well over 170 million people, and the saying goes ‘one in every five black people on this earth is a Nigerian.’ You can imagine the investment opportunity of having 170 million wallets, in the space of the size of Texas in the US, to be able to sell your goods to.

Also there has been a recent rebasing of our economy, and that has actually shown that rather than having or believing that the economy is all oil and gas, there were many other industries that actually contributed to the revenue of the country. And these include telecoms, agriculture, financial services; even human capital development, among several others.

Each of these are actually private sector driven and therefore presents an opportunity for massive investment, if you want to take the risk of being in a third world economy that is emerging. And what we’re finding is, the returns are fantastic, because with an economy that is growing at well over 8.1 or 8.2 percent per year. The risk return ratio will be probably about the best in the world.

World Finance: Well, First Bank of Nigeria operate internationally, so what trends do you foresee impacting the African banking industry in the coming 12 months?
Bernadine Okeke: Families in general are becoming more connected to the internet, and as a result of that they are expecting many of their banking services to be delivered electronically. This is a great opportunity for banks like ourselves to use technology to create financial inclusion.

We can actually use mobile phones to deliver services to customers and then use the electronics base for online banking. I’m sure you have heard of M-Pesa out of Kenya, where they actually deliver services through a mobile phone. At FirstBank we have Firstmonie, which does the same thing, and therefore I can text money to you or I can pay for services using a mobile phone.

What this really will do for the African continent is actually help us leapfrog, from cheques to cards to mobile phones, and we might end up not having as many cards in our wallets, as you find in most western countries.

The other trend that we see is a reduction in barriers to trade between west African countries and other countries on the African continent.

World Finance: So how do you see Nigeria’s economy growing and how are you set to capitalise on this?
Bernadine Okeke: We have focused in the past, and will continue to focus on, the small and medium scale enterprises. Providing them with the necessary credit financing; also with the skills acquisitions they need to run their businesses because a lot of times, they do not have those skills. And then to support them as they move into other markets. Also supporting the government through our ability to fund private public partnerships and things like that.

Our bank is 120 years old older than the country. And I think we have been a major player in the growth of the economy, and we will be around for another 120 years, doing just that.

World Finance: Well finally, what’s First Bank of Nigeria’s strategy for future growth?
Bernadine Okeke: To focus on the SME space, the retail space, but also innovation. Being the go to bank for new solutions as things come up. There are some regulatory head winds which will impact everyone in the Nigerian space. But we will come up with whatever we need to do, to be able to remain a viable player and a profitable bank, for the next 120 years.

Mashreq’s banking expertise makes it a leader in UAE financial market

Posted on by Ashton Wenborn

These are exciting times for Mashreq, a leading bank in the UAE and one of the most successful in the Middle East. It has launched a new corporate identity that builds on its history of innovation and customer service and illustrates to the wider world just how committed it is to its customers, to the continued building up of its comprehensive expertise and market knowledge, and to nurturing its top-class reputation in the industry.

The bank’s new identity is illustrated by its new logo, but the logo is only a small part of the story. What really matters is the new direction of the bank’s brand and above all that the brand is always focused on the relationship with the customer.

Mashreq is not a bank that devises products and services to meet its own needs. Instead, the needs that direct the bank’s plans and initiatives are those furnished to it by its customers. The bank’s approach to customer service is founded upon its pursuit of excellence, which is the cultural and commercial catalyst for everything that the bank does.

Mashreq is not a bank that devises products and services to meet its own needs

Overall, the main competitive advantages that Mashreq has established in the highly competitive UAE banking industry are: financial strength, a wide breadth of products, services and solutions, strong customer relationships, and a strong brand customers can identify with.

Quality and quantity
As well as offering personal-banking services, including a considerable diversity of accounts designed to meet all the likely customer requirements that are presented to the bank, Mashreq has established a significant reputation in the area of corporate and investment banking.

For example, on the lending front, Mashreq offers trade finance, project finance, corporate finance, contracting finance and lending for businesses. The bank also offers a wide range of cash management services for businesses, a comprehensive suite of business banking products and services. The bank, in addition, provides all necessary treasury and capital market products including a margin desk, foreign exchange services, equities services and domestic trading facilities in equities.

The corporate banking service provided by Mashreq is, like all areas of its business, founded on the bank’s understanding of the needs and demands of its business clients.

The bank is fully aware that every corporation or firm that makes use of its services has different requirements and that in order to provide the best products and services to individual business organisations, the bank seeks to know as much as it can glean from the organisation about the its requirements, in order to make sure that what the bank offers is fully appropriate to those requirements.

Mashreq’s banking expertise is tried and tested. The bank has been customising banking and financial services to millions of individual customers and corporate customers ever since its foundation back in 1967. Now, not far from half a century later, the bank is one of the leading financial institutions in the UAE and has an increasing retail presence both in the UAE itself and also in other parts of the Middle East including Bahrain, Egypt, Kuwait and Qatar. Both in the UAE and beyond, Mashreq focuses on providing its individual customers and corporate customers access to the innovative products and services they need to carry out with maximum efficiency their own financial objectives.

In surveys, Mashreq is always among the highest performing banks in the region. For example, in 2004 it was awarded the EMEA Finance Best Cash Management Services in the Middle East at Sibos. Mashreq was also awarded the Best Corporate Account Product Award for the Middle East by The Banker Middle East. These awards show the quality of the bank’s customer service and the excellence of its products.

Going further
Such is Mashreq’s penetration within the UAE that one in every two households bank with it. The bank also has customer service centres in all key retail locations in the UAE and runs one of the largest ATM networks in the country. There are also a dozen Mashreq overseas offices in nine locations across Europe, the US, Asia and Africa.

Of course, other banks have won awards and other banks have established infrastructures and networks. Mashreq, however, believes that it goes further than its competitors by bringing a quality of vision, leadership and single-minded commitment and devotion to its goals. Indeed, so vital is the bank’s perception of how it outshines its competitors that its organisational culture is specifically based on fundamental commercial values and upon the highly significant features of vision, mission and goals.

The bank’s vision includes such key factors as an absolute commitment to customers, the banks determination to use state-of-the-art technology to ensure that its customers are getting the best service and also that customers are enjoying maximum security in terms of their assets and their data.

On the mission front, the bank considers that it has an edge, defining its overall strategy as a highly relationship-based bank. It is a bank that delivers a superior service, a bank that is in fact the primary bank of choice for almost all its customers. Mission, though, is about internal qualities as well as qualities of products and service and best attention to customers’ needs.

As far as an overall end goal is concerned, Mashreq endeavours to be the best in its field at everything it does. This is not a goal that can be entertained lightly or that can permit any room for complacency or resting on one’s laurels. The bank is working towards achieving such an ambitious goal by pursuing a culture of maximum quality in customer service offerings and one of continuous improvement.

Track record
Mashreq has also managed to achieve an enviable track record when it comes to innovation in the financial sector. One of the most effective tests of a bank’s devotion to service and to overall quality is how rapidly and effectively it implements the very latest technology. The banking and financial sectors have traditionally been one of the first sectors of commerce to deploy new technology. Why? Ultimately the reason is always the same: because this new technology gives customers a better service. For example, Mashreq was the first UAE bank to offer chip-based credit cards, digital point-of-sale readers and an investment fund directly linked to the Indian stock market. As always, this particular innovation was triggered by the bank knowing that some customers wanted this facility and so the bank introduced it for the customers.

On the brokerage front, Mashreq Securities is a wholly owned subsidiary of Mashreq and offers full brokerage services for all UAE equities. The brokerage service at the bank is based on industry best practice and as anybody would expect from any organisation that is part of Mashreq Bank, the standards of service, execution and, where necessary, advice, are among the very best in the UAE banking industry.

Mashreq also owns Mashreq Capital, a wholly owned subsidiary that has a licence to operate from the Dubai International Financial Centre offering the widest range of investment and brokerage services. Mashreq Bank also has wholly owned subsidiary, Makasab, which offers mutual funds and associated services for sophisticated investors. The subsidiary Mashreq Al Islami is the Islamic banking division of Mashreq, and offers a broad range of corporate and retail products that comply with sharia law.

Overall, the aim of Mashreq’s Corporate Banking Group is to spearhead the very highest quality of relationship banking based around a fully customer-centric approach to offering banking services. Mashreq Bank sets out to win the privileged status of being the primary bank of corporate clients, and the bank will spare no efforts to achieve this fundamental goal. The Corporate Banking Group delivers world-class investment banking services to its customers particularly in areas customers find so crucial such as corporate finance, real estate and investment services, including both Islamic and conventional types of service.

The strength and expertise of the banks corporate finance division is shown by its winning the Best Loan House in the UAE Award from EMEA Finance for two years in a row and reaching the number two ranking for Middle East 2013 Book Runner Loan League Table.

Through its comprehensive range of activities in the UAE and beyond, the awards it has won, and in the confidence it has gained from its customers in the UAE and around the world, Mashreq has shown itself to be a bank that people like doing business with and like having as their primary bank.

Mashreq will never rest on its laurels; will always be seeking to meet fresh challenges and to find new ways of giving individual and corporate customers a great service.

Indonesian economic growth at five-year low

Posted on by Ashton Wenborn

According to data released by the statistics bureau, Southeast Asia’s largest economy has seen GDP expand 5.02 percent in 2014, to $663m, compared with 5.58 percent in 2013.

This growth is the weakest expansion since the height of the financial crisis in 2009

This growth is the weakest expansion since the height of the financial crisis in 2009 when the economy grew just 4.6 percent. In the fourth quarter, the economy grew a better than forecast 5.01 percent from a year earlier, but it then contracted 2.06 percent against the third quarter.

Speaking to Channel NewsAsia, Gareth Leather, Asia economist from Capital Economics, said the figures “help to underline the challenge facing the country’s new president, Joko Widodo, who despite a promising first few months in office faces a tough challenge to reinvigorate the economy.”

The export of goods and services make up 24 percent of Indonesia’s economy and saw the lowest growth last year at one percent from 5.3 percent in 2013.

Investments, which contribute 33 percent of the economy, and household spending, which contributes 56 percent, also fell behind with growth lagging at 5.1 percent and 4.1 percent respectively.

President Widodo, in his first full year in office, won office partly on a pledge to revive the slowing economy and has pledged to cut through red tape surrounding investments as well as slashing fuel subsidies, promising to divert the money towards boosting the economy.

Competences enables companies to step up their security

Posted on by Ashton Wenborn

Military strategies are methods of arranging and manoeuvring large bodies of forces during armed conflicts. There are offensive strategies, defensive strategies, and strategic or intelligence concepts. These strategies can also be applied to business management.

The management of any asset, such as materials or equipment, is absolutely critical for the health of an organisation. The same holds true for data because it represents the entire organisation. It is an important business asset, since it is the raw material used to run an organisation and produce information vital for its survival. That is why, more than ever, major companies in the financial services industry are looking to the Chief Data Officer (CDO), which is a new role for many institutions, to be the steward and champion of enterprise information management.

Data is an important business asset, since it is the raw material used to run an organisation and produce information vital for its survival

The role of the CDO
Three years ago, by appointing John Bottega as its CDO, Citigroup became the first financial institution to formally create a c-level data executive position. Bottega, who has 20 years experience managing and transforming reference data functions at Credit Suisse, Merrill Lynch and the Lehman Brothers, became responsible for planning and managing the CIB’s data strategy, policies, line functions and data investments. He is currently the CDO of the New York Federal Reserve.

According to a recent report by Capgemini, there are no less than 18 reasons why an organisation needs a CDO. Among the reasons are that financial services firms need to become information-centric enterprises, and strategic thinking and decision-making is needed on the issue of whether data should be centralised or distributed.

It has also been commonly accepted that a Data Management Organisation (DMO) is needed to support the CDO. A DMO is a group of people responsible for designing, creating and implementing data management policies, procedures, practices and processes. Its purpose is to ensure that all areas of the business consistently have the accurate and relevant information they need to do their job.

Unfortunately, most DMO’s today are company-centric – relying only on company internal data/resources – and thus remaining in that area neglecting some of the relevant datasets, which could also be easily collected from:

  • Publicly available sources; often referred to as open source intelligence (OSINT);
  • First-look impressions of a specific or isolated event by any of the organisation members, which we will call significant events (SE) for the purpose of this editorial;
  • Visual intelligence analysis.

We at Competences propose to have another look at why these alternative sources of data collection derive from military intelligence concepts, and which should seriously be considered in your DMO. Established in 2004, the headquarters of Competences are in Praia, Cape Verde, and specialises in the security sector. From global companies operating in Africa, police and paramilitary forces, customs and immigration services, special forces, intelligence, and the armed forces. We enable Fortune 500 companies and governments to reach a level of security and autonomy through our knowledge and understanding of the African continent.

Open source intelligence
Derived from public information, OSINT is tailored intelligence or data that is based on information that can be obtained legally and ethically from public sources. It includes a wide variety of information and sources, from media, social networks and web-based communities to government data, professionals and academics.

OSINT is both a force and resource multiplier. It provides a practical strategic and competitive advantage that complements the advantage provided by traditional DMO sources, it is available at a low cost, and cannot be ignored. For the financial sector, OSINT does offer three major advantages for planning and strategising.

Firstly, when encountering situations involving external factors – like for investment abroad or due-diligence investigation on a potential partner – OSINT is frequently the only discipline able to respond rapidly, and it provides the manager with a rapid orientation adequate for decision-making. It is also a means of achieving significant savings, in that many essential elements of information required by the manager can be acquired from open sources at a lower or even no cost, in less time, than from classical commercial capabilities, with the added advantages that OSINT is often more up to date, and requires no legal risk in its acquisition.

Finally, whether it precedes or follows traditional data collection, OSINT can protect company information sources and methods by serving as the foundation for data support to joint-venture initiatives where it is not possible, or desirable, to reveal capabilities and limitations to partners.

Significant event tracking
We view the SE as historical data. We believe SE give a first-look impression of a specific or isolated event. This can be an order cancellation, a default in debt re-payment, a threat of a lawsuit by a dissatisfied customer, a delay in the delivery by a supplier, or any other event a specific staff member documented and reported in real-time. In our perspective, the information contained within a single or group of SIGEV’s is not very sensitive. The events encapsulated within most SIGEV’s involve either financial loss or incident, commercial success or failure – any event which incurs a financial, social or commercial consequence for the organisation.

We feel that SE are similar to a daily journal or log that an employee may keep. They capture what happens on a particular day and time. They are created immediately after the event and are potentially updated over a period of hours until a final version is published.

Each business unit can have its own procedure for reporting and recording SE. In human resources, SE normally involve personnel issues, such as absentee information incident, or any conflicted situation involving an employee and its supervisor. The report starts at the work-group level, and goes up to the department, territory, and even up to the business unit level.

In an overseas mission configuration, a corporate delegation may observe or participate in an event, and the delegation leader may report the event as an SE to the company headquarters. The manager will then forward the report to its director. Once the director receives the report, he or she will notify the COO, conduct an action, or record the event and further report it up the chain of command to the CEO.

Once an SE is reported, it is further sent up in the company hierarchy. At each level, additional information can either be added or corrected as needed. Normally, within 24 to 48 hours, the updating and reporting of a particular SE is complete. At corporate level, the SE is finalised and published. The ultimate purpose is to collect and analyse operational data in order to provide daily operation reporting, relevant to a manager’s daily decision-making process.

Deciphering anomalies
A visual intelligence analysis environment can optimise the value of massive amounts of information collected by financial services companies. It allows analysts to quickly collate, analyse and visualise data from disparate sources, while reducing the time required discovering key information in complex data. Such environmental help determines real-world links between people, social networks, companies, organisations, websites, phrases, documents and files by:

  • Rapidly putting together disparate data into a single cohesive intelligence picture (from a wide range of data types, including telephone call records, financial transactions, computer IP logs and mobile forensics data);
  • Identifying key people, events, connections and patterns that might otherwise be missed;
  • Increasing understanding of the structure, hierarchy and method of operation in a fraudulent networks;
  • Simplifying the communication of complex data to enable timely and accurate operational decision-making;
  • Capitalising on rapid deployment that delivers productivity gains quickly using a well-established visual analysis solution.

For a while now, visual intelligence analysis methodology has been a part of the Human Terrain System, a US Army programme that embeds social scientists with combat brigades. Several investigations, including an investigation into fraud in the US Army, are reported to have used such capabilities. It is also used by several police departments to analyse social contacts and networks.

The tools that we briefly described do not resolve the fundamental issues that companies are facing today regarding their data management alone. The dysfunctional cycle of data chaos continues to grow, as the tool-technology approach fails to get data under control. Change is definitely needed. A DMO is the catalyst for this change, because it brings focus to many and processes of data management. Military strategy could be applied to provide a new perspective on your company data management approach.

Live multi-gaming: a new win for Macau?

Posted on by Ashton Wenborn

Macau is known as the Las Vegas of the East, although, ironically, its gaming revenues currently exceed the figures generated by the gambling industry in Las Vegas – by almost six times.

Being the largest gaming city in the world by revenue, Macau faces constant challenges to keep developing its gaming industry in order to fulfil the new needs of clients and casinos alike. Such clients constitute the main industrial and economic pillar of this Special Administrative Region of the People’s Republic of China.

Macau and its casinos should be looking to offer new and creative solutions

VIP gaming has been, in past years, the biggest reason for the casinos’ tremendous success in Macau. However, it is now the time to broaden the gambling business to the mass market. In fact, attracting more than 30 million visitors per year, Macau and its casinos should be looking to offer new and creative solutions through which smaller bets made by huge masses of players may become as profitable as huge bets from select individuals.

Live multi-gaming (LMG), which is already being explored by several casinos, could be the key to successful expansion into the mass market, taking into account the opening of various new large casinos in Macau until the end of 2016.

A solid bet
LMG systems are integrated gaming devices that involve a traditional live dealer handling one or several types of casino table games (such as baccarat, roulette, black jack, etc.). The results of each game are reported to each player’s electronic terminal from which their bets are placed and the payouts announced. LMG therefore combines basic electronic gaming technology with the traditional live dealt casino games. This means, inter alia, that less dealers are needed to serve an enormous number of players, although the results of the games (and, thus, the gaming experience of the players) is determined exactly as it would be at a real table – not through any sort of computer generated algorithms.

In Macau, as the number of real gaming tables operated by each casino is capped by the government, LMG plays a unique role in the development and expansion of good casino operations by allowing virtually an unlimited number of betting terminals be linked to a single live gaming table. Gaming machines are locally regulated and supervised by the Gaming Inspection and Coordination Bureau (DICJ), notably through the enforcement of the Administrative Regulation 26/2012.

Legal approval
Nevertheless, several nuances of LMG, namely the fact that the casino games involved are operated by live dealers, raise several interesting points regarding the applicability of the Administrative Regulation 26/2012.

It can be legally questioned if the definition of ‘gaming machine’ covers LMG solutions or if those fit the definition of ‘game located in a computer server’. There are some good reasons to possibly reject both such thesis (and also any way of inclusion of LMG in the definition of Section 31.2 of the Administrative Regulation – ‘game supported by computer server’ – since LMG terminals may not operate autonomously vis-à-vis the whole LMG system). This is especially relevant when you consider that all the casino games (such as baccarat) are handled as if they were played at a real casino’s gambling table.

Thus, it is questionable, inter alia, for the companies providing LMG solutions to the casinos, even considering the fact that DICJ has not been treating LMG as real gambling table games, are legally obliged to require the approval by DICJ of LMG sets. In addition, pursuant to the same Administrative Regulation 26/2012, the DICJ should not only approve gaming machines, but it is also the competent authority to authorise any entity to supply such machines to the casinos.

Accordingly, gaming machine suppliers have to require DICJ administrative authorisation to operate in the Macau gaming industry, and have to comply with several requisites in order to obtain such authorisation. They must perform their commercial activity through an affiliate or a limited liability company by shares (sociedade anónima, according to Macau Law). Its share capital must be wholly represented by nominative shares and such company’s activity (as reflected in the respective articles of association) may only consist in “producing, supplying, assembling, installing, programming, repairing, adapting, modifying, technically assisting and maintaining gambling machines”.

Obviously, some of the legal issues arising in respect of the approval of LMG’s by DICJ may also be raised in regard of DICJ’s legal competence to authorise the performance of activities by any entity that intends to provide LMG solutions to Macau casinos.

Whereas, from a technological point of view, LMG’s are a well-known solution to the gaming industry worldwide and an unquestionable asset for the local gaming industry, the relative novelty of Administrative Regulation 26/2012, and the hybrid nature of LMG’s, raise particular issues, which gaming operators and providers of gaming solutions are likely to confront.

‘To hell with it. Let’s get the money out there’: Paul Krugman on Asian Infrastructure Investment Bank

Posted on by Ashton Wenborn

World Finance speaks to Paul Krugman, Nobel Prize-winning op-ed columnist and economist, about the merits of China’s proposed Asian Infrastructure Investment Bank.

China has cemented its status as a global financial heavyweight, but many wonder whether the advent of the Asian Infrastructure Investment Bank is giving the country a new title, and that’s as the World’s lender. Well that’s a question that World Finance posed to Nobel Prize-winning economist Paul Krugman at the latest Asian Financial Forum.
Paul Krugman: This issue about regional banks stepping in and to some extent supplanting or supplementing the Washington based institutions, sure. Anything that supplies more money where it might be useful is a good thing.

There was a time way back when, when the US tried to block that because we had various reasons, but we really just sort of wanted the stuff run from Washington, but not now. The hell with it, let’s get the money out there, and if it’s a way to recycle funds within Asia that’s good.

TriGranit: retailers must adapt to e-commerce revolution

Posted on by Ashton Wenborn

Consumers are constantly evolving, adapting to the dynamic retail market and the rapid development of new technologies. With the type of visitor and the market changing so quickly, in-depth consumer research conducted on a regular basis is essential in order to evaluate, track and benchmark key metrics such as a visitor profiles, dwelling time, conversion rates, visiting frequency, spend, satisfaction and penetration rate for retail outlets to remain competitive, successful and, most importantly, relevant.

Changing priorities
Social communication has far greater importance today than it had in the past. Global social responsibility also weighs heavily on a number of people’s minds, along with the needs of family, community, society and the environment – which greatly influences purchasing decisions. Accordingly, shopping centres need to place a higher value on family, community and experiential retailing. Leisure-based centres catering for families are more likely to entice higher-spending visitors with a more directed dwelling time.

Modern consumers are quickly adapting to the digital revolution. E-commerce, combined with smartphones and tablet devices, not only offer consumers very competitive prices due to lower operational costs of electronic retail, but also provide the largest assortment and quantity of products ever available to them, just a few clicks away, accessible from anywhere. Consequently, modern consumers have become more comfortable, knowledgeable, and aware of opportunity. The shopping centre model is losing ground as the convenient shopping solution.

The shopping centre model is losing ground as the convenient shopping solution

As convenience and the internet create a breakdown in community structures, retail shops may respond by increasing their size, and become more like showrooms – providing customers with an interactive experience. Early e-commerce experiences were designed where retailers tried to replicate their retail stores online. Now cutting edge retailers are duplicating their online experience in-store.

Today, shopping centres are becoming more than just a shopping destination. Industry leaders are beginning to position their centres as a place that offers meaningful lifestyle experiences, a fun destination for all age groups and families to spend quality free time together. This is something web-based experiences cannot offer. Shopping centres therefore need to provide consumers with more non-retail experiences in order to compete with the convenience of e-retail, and to meet the increasing demand for physical leisure and entertainment.

Electronic retail is progressing, and now offers a wider range of collection and delivery options, including same-day delivery. However, the market seems to be shifting towards the click-and-collect formula. The click-and-collect model is welcomed by shopping centre managers and landlords alike, the trendsetters of which are already devising future concepts to meet these consumer demands. However, the traditional stores will still remain.

As shopping becomes more and more of a leisurely activity, and mobile technology fundamentally changes the way that consumers interact with brands – this allows consumers to shop while on the move. Shopping centres need to embrace new technology as well and incorporate synergic solutions into modernised business models.

Non-retail tenants
Services, including the post office, dry cleaners, telecommunications, fitness, medical and shoe repair are vital to accommodate the daily non-retail needs of consumers. These should be complemented by unique, specialised services that can offer a more pleasant, convenient and comfortable shopping centre experience, with concierge and VIP services, centralised home delivery, free Wi-Fi, work areas with power outlets for laptops and mobile phones, children’s play areas, valet parking and car wash, expert product advice and consultancy, electric vehicle charging station, bicycle related services, and well-trained customer service staff. Moreover retail outlets should tailor to the demographic profile of the catchment area and the current market intricacies.

Leisure and entertainment are both gradually becoming an integral part of shopping centres’ marketing strategies, and for now, they are still an effective means of image differentiation.

Shopping centres need to move away from costly architectural features like fountains, and include factors such as climbing walls or other high-adrenalin based activities that encourage shoppers to pause and watch. ‘Edutainment’ concepts can cater to both children and adults, and provide excellent synergy with brands and tenants. In the retail market of the future, these shopping centres will represent an average lifestyle. Shopping centres of the future are not likely to be termed in this way, but described more accurately as ‘lifestyle’ centre.

These will offer a complete real-life experience focusing on leisure activities, entertainment and edutainment, services, along with food and beverages. A typical shopping journey will likely to begin online, and in many cases, will continue inside lifestyle centres providing visitors with experiential retail. An unprecedented proportion of space will be allocated to leisure, entertainment and edutainment functions, including new and unique concepts targeting all age groups.

Fig 1

Multi-channel marketing
Lifestyle centres will perfectly merge the physical and online world through sophisticated multi-channel strategies, the development and gradual implementation of which can already be seen from industry leading shopping centre managers today. As one of the largest fully integrated regional real estate investment, development, and management companies in Central and Eastern Europe, TriGranit is also going to use this channel.

With operations in nine countries across central and Eastern Europe, the company has a large portfolio of completed trophy assets, and a pipeline of over €4bn of major mixed-use developments, as well as a number of public private partnership (PPP) investments, and is positioned well to participate in the expanding real estate markets.

In shopping centres, this means that not only all communication channels – touch screens, websites and mobile applications – should share the same content management system, but that offers, messages or interactions should also look and behave the same. More importantly, they should be personalised based on customers’ interactions in other channels. This will create unique experiences, which will lead to increased customer engagement and loyalty, as well as an increase in conversion rates as a result of precisely targeted messages.

Lifestyle centres will facilitate social interactions and provide a full day’s experience for families and groups of friends alike. At the heart of a lifestyle centre will be leisure activities. Food and beverage will not be limited to an improved food court, but will provide a wide range of options from fine and family dining to casual dining, cafes and bars that interact with the entertainment components.

Retail in lifestyle centres will comprise mainly of showrooms accompanied by click/reserve, and collect points. Many online orders will be placed for delivery, but most will be reserved or purchased online and collected at click-and-collect points located within the lifestyle centres. Showrooms will provide consumers with the opportunity to test, see and feel products including electronic equipment and devices, and to try on clothing.

Denmark defends euro currency pegging

Posted on by Ashton Wenborn

As the European Central Bank (ECB) finally gets started on its large-scale bond buyback strategy, many countries that have pegged their currencies to the euro have faced the prospect of drastically dwindling values. While the Swiss government abandoned plans to tie the Swiss franc to the euro in light of the Quantitative Easing, Denmark policy leaders have insisted they will maintain their own pegging.

Further rounds of bond buybacks in the Eurozone could heighten the pressure on the country to scrap its ties with the euro

In an effort to maintain the pegging but avoid a rapid devaluation of the krone has seen the Nationalbank cut interest rates four times during the last three weeks. The rate on bank deposits now sits at – 0.75 percent, a record low for any global economy.

Lars Rohde, the Nationalbank’s governor, told the FT that such a strategy could go on indefinitely. “The main message is that we are ready to do whatever it takes to defend the peg. We have unlimited access to Danish krone and we have no restrictions on our balance sheet.”

However, while Rohde seems insistent on Denmark maintaining the pegging, further rounds of bond buybacks in the Eurozone could heighten the pressure on the country to scrap its ties with the euro. Some analysts believe it might be inevitable, with BNY Mellon currency strategist Neil Mellor telling The Wall Street Journal he felt the bank will “ultimately have to break the peg.”

Ever since 1982, Denmark’s central bank has pegged the krone to the dominant European currency – initially the German deutschemark, before following the euro. A referendum in 2000 over whether to adopt the euro was rejected by Danish voters, but that has not prevented the two currencies maintaining a close link ever since.

The news comes just weeks after ECB Governor Mario Draghi got his wish to start a massive round of quantitative easing that has amounted to €1.1trn worth of bond buying. However, it has not been without a few caveats to placate German opposition, with much of the risk of the quantitative easing being maintained in individual states.

A crude response: great oil price correction coming soon

Posted on by Ashton Wenborn

For months, oil watchers have seen the steady decline of prices. They’ve now hit a record-making seven month consecutive low. Now given these dismal prospects, is there any hope for a Brent benchmark bump-up? World Finance speaks to oil markets expert Gaurav Sharma to find out.

World Finance: Gaurav: it’s a big question on everybody’s mind. Are we going to see a bottoming-out of prices?
Gaurav Sharma: Interesting times! I would compare it to, sort of a skating ring analogy. We have a lot of to-and-fro. We’ll see the oil price fall further; it could fall below $40. Then we have a stabilising in the range that we are: somewhere between $40-55.

This situation will last probably up until the summer. Then what I see from thereon is a surplus correction kick-in.

World Finance: How low are we really going to go?
Gaurav Sharma: The way I see it, we could go as low as $35. Now, what’s happening at the present moment in time is, we have the three major producers: the US, Saudi Arabia, and Russia, all collectively pooling up to somewhere in the region of 30 million barrels a day; in excess of 30 million barrels a day.

Right now everybody thinks that we’re just awash with oil; which is pretty much close to the truth

Here we are! We have this supply glut, and the way I see it is, it is driving prices down; but this cannot be sustained. This cannot be sustained in the long-run.

World Finance: So who’s going to prompt this change among the big players?
Gaurav Sharma: I think it’s going to be the Russians. Because the Russians are suffering from a double-blow. They’re suffering because of the sanctions; then the oil prices are going down. And of course the sanctions have resulted in a lot of their international oil and gas partners – the likes of Exxon Mobil, Shell, and so on – from sharing their technical know-how.

Now, if you take all these three factors into account, I doubt that Russian production can be sustained above 10 million barrels per day.

World Finance: Let’s talk about some of the over-arching macro-economic realities that we face right now. Christine Lagarde, head of the IMF, is warning about a drawback on investments as well as consumption; first, can you tell me if oil prices are responding quickly enough?
Gaurav Sharma: I would say, with near 70 percent certainty, that the oil prices are currently ahead of the curve.

It is a big, big bonus. Now, you cite the IMF chief, and I would say that the IMF itself, and the World Bank, and the OECD, and several independent analysis organisations, have observed that if you look at the positive effect of declining oil prices, it could add up to 0.5-1 percent of GDP. Especially to some of the emerging markets, who are heavily reliant on oil and gas to power their economies.

It’s disputed: everybody comes up with a different percentage. And you know, data is always… the projections are forward-facing, but the reality’s always looking backwards.

World Finance: Given this reality, what then does it do to commodity prices?
Gaurav Sharma: The way that I see it is, if we go back to the pre-financial crisis years, you looked at a basket of commodities, and they were always to the up-side. Then of course we had this financial tsunami in 2008-09; the whole basket of commodities, oil included, nose-dived.

Then we had a very interesting event. We had the Chinese give their own economy a massive, massive, $400bn stimulus. What happened that time was that the whole thing got flagged up again. We had again, a sort of mini-bubble.

This correction should have happened five years ago, but it didn’t. And again, the sort of leading voices were out there, calling it, ‘Oh yes, see here, it’s the commodities super-cycle.’ I’m very sceptical about that term; why can’t we just call it an ordinary cycle?

World Finance: So oil of course is only one of many indicators on commodities; so why are we hearing forecasters weighing so heavily on the impact of the slump in the market? It’s sort of a misnomer, wouldn’t you say?
Gaurav Sharma: I would say so; because another thing is, oil gives a lot of market commentators the pretext to, sort of, appear to be a little bit more shocked than they ought to be.

World Finance: Let’s talk about it, I mean… oil market watchers get paid to talk about…
Gaurav Sharma: Haha! Absolutely.

World Finance: …how important their industry is in the larger scheme of things. And yes of course, it drives markets forward. But when there is this over-emphasis, what sort of implication does that have? Don’t you think it sort of, misleads the public, in many ways?
Gaurav Sharma: Absolutely. We talk about all the upheavals in the oil market, but I can tell you for a fact: oil is one of the easiest commodities that you can trade on the market. You only need to fork up a price of about 10 percent of a barrel. You can buy as few as a thousand barrels. Let’s say, at today’s prices you could probably put a bet in at about $500!

World Finance: The million-dollar question, Gaurav, let’s leave you with this. Will the price fluctuation that we’ve been seeing in the oil markets make for a more bullish or bearish 2015?
Gaurav Sharma: I am still overwhelmingly bearish. I would still say we will sort of have this fluctuation between $35 and $55 as far as oil is concerned, all the way up to June.

As I said earlier, I do not see the current levels of production being sustained. And that will definitely have a bearing. We will see some of these projects… I mean, if you look at some of the independent upstarts in the US. You look at some of the Russian projects. You look at the Arctic. You look at Brazilian deepwater.

Some of these projects were not event profitable at $100 a barrel! Now if these projects could not be sustained, even at $100, how do you think it’s going to be sustained at $50?

So there will be a correction. We will see some of these projects being put on hold, some of them being financed at a massive premium… all of this will be, sort of, price positive, as far as the direction of the oil price goes, because it will create the perception that less oil is coming out of the market. Which isn’t the case right now.

Right now everybody thinks that we’re just awash with oil; which is pretty much close to the truth.