Author: Ashton Wenborn

For Portugal’s insurance sector, an ageing population could be lucrative

Posted on by Ashton Wenborn

In recent years, Portugal has become an attractive place to live, work and invest. Between 2015 and 2018, the annual number of greenfield foreign direct investment projects in the country grew by 161 percent, according to data published by the Financial Times. This was partly thanks to Portugal’s open attitude towards foreigners – the Iberian nation offers tax breaks to skilled professionals and five-year residencies to non-EU citizens who buy property worth €500,000 ($553,140). What’s more, Portugal’s politically stable climate and low crime rate make it a haven for those looking to avoid the economic downturn and political tension caused by Brexit and the US-China trade war.

But this hasn’t always been the case: six years ago, Portugal’s economy was on its knees. Amid the country’s worst recession in almost 40 years, unemployment climbed above 17 percent and hundreds of thousands of workers – many of whom were young and highly skilled – emigrated in search of jobs overseas. Today, though, Portugal’s economy is booming: unemployment has more than halved to 6.6 percent; two thirds of the 500,000 people who left the country during the crisis have returned; and strong performances in the tourism, export and housing markets have contributed to an economic resurgence that many have deemed miraculous.

Still, there is plenty of work to be done. Portugal is growing slower than Spain, and in recent years has been overtaken by Estonia, Lithuania and Slovakia in terms of GDP per capita (see Fig 1). If Portugal is to make the most of the good times, it needs to address some of its chronic issues.

Growing old together
Portugal boasts a warm Mediterranean climate, beautiful landscapes – from mountain ranges to idyllic coastlines – and a high quality of life for the people who call it home. It’s no wonder that it is the destination of choice for millions of tourists every year. However, Portugal isn’t just known as a tourist hotspot: it has also garnered a reputation in Europe for its ageing population.

In its 2019 World Population Prospects report, the UN outlined the scale of the planet’s demographic crisis: by 2050, 16 percent of the global population will be over the age of 65, up from nine percent in 2019. As life expectancy increases in many developed countries, fertility rates are on the decline. Consequently, the working-age population is shrinking, which will have potentially huge repercussions for economic activity.

Portugal is in no way exempt from this global trend. As a result of the country’s deep recession, many of the young people who didn’t emigrate chose instead to delay starting a family, causing Portugal’s birth rate to plummet. In fact, the Portuguese National Statistics Institute predicts that by 2060, the country will be home to just 8.6 million people, down from 10.5 million in 2012. In the same window of time, the working population – those aged between 15 and 64 – will drop from almost seven million to just over 4.5 million.

With an older population, Portugal could face spiralling health costs

As well as potentially slashing Portugal’s productivity, this could put significant strain on the country’s public services. Although people in Portugal tend to live to the age of around 80 – the average for European countries – they also experience health problems for most of their old age. This compares unfavourably with people in other European countries, such as Denmark. With an older population, Portugal could face spiralling health costs.

A window of opportunity
Although the situation seems alarming, it could present a new opportunity for Portugal. Increasingly, policymakers and economists are recognising that older workers and retirees can fuel economic activity, rather than impede it. As the World Economic Forum has pointed out, the elderly are no longer as financially dependent on their families as they used to be. Furthermore, they have the potential to be both important participants in the labour market and big spenders in the economy.

Through consumer goods and services, older citizens inject huge amounts of money into the ‘silver’ or ‘longevity’ economy, which the American Association of Retired Persons defines as “the sum of all economic activity driven by the needs of people aged 50 and older… [including] both products and services they purchase directly and the further economic activity this spending generates”. A 2018 study by the European Commission valued Europe’s longevity economy at €3.7trn ($4.09trn) in 2015 and suggested it could be worth as much as €5.7trn ($6.31trn) by 2025.

Instead of seeing Portugal’s ageing population as a burden, we should see it as an untapped opportunity. The sheer size of this market should not be underestimated: in terms of scale, it is on par with discovering the economic potential of an entire country, such as India or China when they were on the cusp of huge growth. However, what is unique and unprecedented about the longevity economy is that it has no borders – no country is immune to an ageing population, regardless of its particular social, religious or economic conditions.

Given the new opportunities the longevity economy will create across society, all industries (including the insurance sector) must be able to adapt their product offerings to meet the needs of an older population. At the same time, we need to embrace innovation to address the challenges presented by this major demographic shift. Before we can think about creating products for an ageing population, though, we need to prepare new generations for the future. By encouraging people to save money and educate themselves about financial matters from a young age, Portugal will help its population prepare for the challenges of a longer life and later retirement.

Moulding young minds
We are all faced with financial decisions daily – whether managing a family budget, contributing to our savings or making an investment. With better financial literacy, citizens can be more informed about the decisions they’re making.

In the past few years, aspects of the financial sector that were typically considered to be more obscure – such as insurance, the stock market and investments – have received greater media attention. What’s more, it is now much easier for people to educate themselves on financial topics, thanks to self-help courses and the wealth of information available online. This has helped to demystify these concepts.

Improved financial literacy has benefits for society as a whole. When a country has high levels of financial literacy among its citizens, it is more likely to have a healthy economy. It may also have a more engaged electorate, as its citizens will better understand decisions made around fiscal and monetary policy. There is no doubt that financial literacy is one of the key pillars for building resilience in today’s society – it should be a basic necessity for every individual, no matter their age.

With that said, the sooner people start to develop their financial literacy, the better. The OECD recommends integrating financial education into the school curriculum to help people develop good financial habits from a young age. At Ageas Portugal Group, we believe that improving young people’s financial understanding early on will give them the tools they need to face life’s challenges. As a nation, Portugal has made important steps towards this, implementing initiatives such as the National Plan for Financial Education and introducing financial literacy as one of its citizenship education subjects.

However, there is still a long way to go. Although the need for greater financial literacy is obvious, it is nonetheless a difficult issue to address. That’s why Ageas Portugal Group has helped found Ori€nta-te, a contest that teaches young people in Portugal how to save and prepare for the future. It introduces them to topics such as household budget management, expenditure and income, showing them how to formulate savings strategies so they can achieve their financial goals. Put simply, the contest rewards young people for learning as much as they can about financial products.

Ori€nta-te was such a success that it is now in its second edition. The huge amount of enthusiasm the contest has received in the school community proves that financial literacy doesn’t have to be a chore to learn. In fact, it should be made as engaging as possible. After all, few other subjects have such a profound bearing on the rest of students’ lives.

Standard Insurance is pushing industry-wide change in the Philippines

Posted on by Ashton Wenborn

After steadily expanding over a number of years, the Philippine insurance industry is set to scale new heights, pushed forward by technological innovation. The industry has remained resilient and upbeat in recent times, riding on the country’s evolving economy. Though it faces myriad challenges, the outlook for the Philippine insurance industry remains optimistic.

The Philippines’ Insurance Commission reported an increase in the country’s per capita insurance density of 16 percent from 2017 to 2018 – a value of PHP 2,054 ($40) for each Filipino with insurance.

These numbers indicate a growing demand for insurance cover in the country. More than 60 million Filipinos had some form of insurance coverage by the end of 2018, compared with just 48 million in 2017. More importantly, the fact that the industry’s insurance penetration rate remains low indicates that there is still much opportunity for further growth.

Millennial modernising
The Insurance Commission continues to push for digitalisation and further innovation by encouraging a better customer experience with more relevant products, thus increasing its levels of insurance penetration. Until recently, the industry has been known as a traditional market, with most individuals preferring the added comfort of a face-to-face meeting with an insurance intermediary. However, with the evolving market landscape intensifying as the result of a growing number of technology-savvy young customers, the industry is being challenged to innovate. Increasingly, there is pressure to create products that cater to younger customers by utilising online platforms as promotional channels for products and services.

Standard Insurance continues to focus on proper underwriting, intelligent pricing across all lines and high levels of sustainability, as well as fast and accurate resolutions to claims

Insurance companies have turned to insurance technology (insurtech) as another way to better serve its progressing market. Self-service dashboards, chatbots, SMS updates, the digitalisation of some parts of the claims process, and insurance comparison tools to guide customers to the best deal have all emerged in recent years. In fact, to encourage the use of insurtech, the Insurance Commission has issued a policy statement permitting insurance companies, subject to mandatory security requirements, to sell plans using apps on mobile phones, as well as to offer flexible payment frameworks in lieu of the usual payment methods.

Playing by the rules
The growth of the Philippine non-life insurance sector has not been without its challenges. The Tax Reform for Acceleration and Inclusion resulted in dismal sales for new motorcars in 2018, exacerbated by economic headwinds such as a weakening peso and rising inflation. New car sales for 2018 plummeted by as much as 16 percent, down to a total of just 357,410 new units sold, compared with 2017 sales of 425,673. As a result, motor vehicle loans have slowed down, recording a paltry 9.4 percent growth rate compared with 2017’s 21.6 percent. These conditions have understandably also had a knock-on effect on car insurance rates.

Although motorcar dealers and financial institutions are major sources of insurance business, the industry as a whole – specifically, the non-life insurance sector – still managed to generate over PHP 89.04bn ($1.7bn) in gross premiums in 2018. This figure was six percent higher than the previous year, with the top 10 non-life insurance companies accounting for 63 percent of said 2018 gross premiums.

Furthermore, the Philippine insurance industry is faced with two major regulatory developments: progressive increases in risk-based and minimum net worth requirements, and the forthcoming introduction of the new global insurance accounting standards, the IFRS 17. Based on the Insurance Commission’s list of insurance companies with valid and existing Certificates of Authority as of August 9, 2019, the number of insurance companies has decreased by 13 since 2013. Further contractions, mergers and consolidations are expected to be completed by year-end 2019, as several insurance companies are likely to remain significantly below the mandated PHP 900m ($17.8m) net worth level by this time.

Aggravating the situation is the forthcoming implementation of the IFRS 17, which necessitates the implementation of new systems that change how data is collected, analysed and processed. The International Accounting Standards Board approved the effectiveness of IFRS 17 for 2021 but subsequently proposed a delay until 2022. The implementation was then further delayed to January 1, 2023, with the Insurance Commission recognising a number of challenges to its implementation.

Nonetheless, all these measures are envisioned to further strengthen industry players and make them more competitive when facing their counterparts at the Association of South-East Asian Nations, while also aligning themselves with global insurance accounting standards.

Staking a claim
While insurance technology and other innovations are changing the industry almost imperceptibly, Standard Insurance has invested in a diverse range of skills, perspectives and approaches over recent years, and continues to do so today. This has allowed us to create and develop innovative products and new technologies, and maintain our relevance, even when faced with transformative market shifts.

Standard Insurance continues to focus on proper underwriting, intelligent pricing across all lines and high levels of sustainability, as well as fast and accurate resolutions to claims. Equally important, Standard Insurance has been deploying innovative products and new technologies while improving efficiencies in critical areas of operations to maximise sales potential and distribution networks.

Since 2009, Standard Insurance has been developing and maintaining a proprietary general insurance IT system called iINSURE, the core of which was designed based on a system inherited from Zurich Insurance Group following its acquisition in the early 2000s. Contemporary, flexible and affordably built in house, iINSURE enables Standard Insurance to meet existing and future customer needs.

Standard Insurance is proud to be an all-digital business, and its underwriting tools (such as the Web-Catastrophe Risk Management System), real-time claims evaluation system (iCATS) and telematics products, along with many other solutions, are all possible because of iINSURE. All subsystems that support the critical areas of Standard Insurance’s operations are powered and linked to iINSURE.

Risk and reward
As insurers, risk management is embedded in our nature. As such, a review of the company’s existing systems architecture was undertaken in 2016, which resulted in the eventual transition to using the cloud as a data centre. The past few years have seen the company exploring further ways of creating technological solutions to its business needs, increasing the pace of innovation and dramatically improving its already solid cybersecurity infrastructure.

Standard Insurance is well prepared and resilient when it comes to the challenges facing the industry, including the impact of new regulations

A collaboration with cloud services firm Cato Networks, formalised in early 2017, was used to connect our 60 branches nationwide, linking the head office and the company’s cloud infrastructure as a single software-defined wide area network. Firewalls, intrusion prevention systems and cybersecurity rules are now centralised in the cloud, providing greater operational stability.

In early 2018, iINSURE, iCATS and all related apps were migrated to the cloud, making Standard Insurance the first insurance company to do so. Amazon Web Services was employed to meet the company’s quality, reliability, speed and redundancy requirements.

Complementing the firm’s existing motorcar analytics, Standard Insurance has adapted tools like artificial intelligence and data science to enable a more in-depth analysis of its data sets. This has helped us to better understand the peculiar risks and characteristics related to different vehicle types and markets, to estimate our expected losses, and to improve churn rates. This approach serves as the foundation for intelligent motorcar strategies and pricing, improved customer services and the creation of innovative products that better address the needs of the evolving insurance population.

To develop marketing capabilities that complement our traditional sales platform, we have ventured into online sales, which allows customers to buy private car and travel insurance quickly and easily using our online risk assessments. Our digital sales platform has recently expanded to include social media as a tool for conversational marketing.

As consumers turn to Facebook and Google to find answers about insurance, Standard Insurance is ready to provide them. Initially this involves creating social media posts that build brand awareness, followed by other relevant posts that seek to educate the market on the importance of insurance. Finally, we create brand-building posts that communicate the four pillars of Standard Insurance: innovation, empathy, service and excellence. In 2019, after eight months of regular calibration, the company successfully sold 1,200 policies with a media budget of less than 10 percent of the premium, proving that Standard Insurance is more than ready to develop social media selling as its next major distribution channel.

Standard Insurance is well prepared and resilient when it comes to the challenges facing the industry, including the impact of new regulations, underpinned by the company’s strong financial position and well-developed insurance infrastructure. The company has been able to grow its total premiums business, despite the dismal motorcar sales of 2018, off the back of its expanding branch network and strong business relationships with intermediaries. Likewise, the business is well prepared for progressive increases in risk-based and minimum net worth requirements, and welcomes the implementation of new global accounting standards.

As always, Standard Insurance continues to maximise the effectiveness of innovative solutions to solve the challenges at hand – whether they relate to generating premiums, client servicing or systems support. While our latest efforts in developing artificial intelligence and our use of data science have been geared towards improving operations, the company’s strategic ambition is to become an exponential organisation – one that is able to post disproportionately large growth compared to its peers in the medium term. If we continue to listen, respond to our customers’ needs and push forward with innovative solutions, we hope to achieve this objective.

Andorra’s banking market is small but mighty

Posted on by Ashton Wenborn

Andorra’s banking sector is one of the country’s economic pillars. However, in the past few years, the market, clients and rules of the game have changed radically, forcing banks to adapt and transform in order to offer the modern services that customers want.

Away from the banking sector, the Andorran economy has had to deal with wider change. Although sometimes still referred to as a tax haven, this is no longer a fair description of the country’s regulatory environment: Andorra introduced an income tax in 2015 and now boasts a transparent and highly regarded banking model. While the landlocked principality still offers an attractive tax system and represents an excellent destination for clients looking to diversify their wealth management, it also abides by all the regulatory standards expected of a member of the global economy.

In the past few years, Andorra has been on a significant growth path that has created opportunities for the financial sector

At MoraBanc, reacting to the changes that have taken place in Andorra in recent times has been a challenge, but one we have embraced wholeheartedly. As the first bank in the state to implement a digital transformation – a process that was completed quickly and smoothly – we know all about the difficulties that change brings. Thanks to the efforts of our staff, we are now operating as a fully fledged digital bank.

Making the most of more than 60 years of private banking experience, we now offer a much more global service. We are fully committed to our clients, whether they reside in Andorra or further afield. Still, now is not the time to rest on our laurels: after navigating several years of profound change, we are excited by the challenges that await.

The little things
With a population measuring just over 75,000, Andorra’s internal market is certainly small. This makes gaining market share difficult and requires us to be more competitive. To engage new clients, we must offer high-value, differentiated and personalised services. Additionally, with such close client proximity, it is vital to maintain a high level of trust at all times.

Though we talk about Andorra as a small market, in the past few years it has been on a significant growth path that has created opportunities for the financial sector. The driving forces behind this economic growth have been tourism and commerce, and these sectors continue to generate a great deal of business, with the country receiving more than three million visitors between December 2017 and November 2018.

Andorra’s certification and adoption of international agreements, combined with its beneficial taxation schemes, make the country an attractive destination in which to incorporate businesses that don’t require major industrial logistics. Due to its high level of security and excellent geographic location, Andorra has become a place of residence for professional sportspeople and high-net-worth retirees. All of these factors create a strong internal banking sector that has the potential to find great success in the international market.

Thanks to the transformation of the banking sector and the focus on certification and transparency, new business options are opening up beyond our borders. We have had subsidiaries in Switzerland and Miami for years now, and have upcoming projects in Spain, which we are able to take on thanks to our solid financial footing.

Let’s get digital
Society has welcomed the digital banking revolution because it gives the consumer more freedom: it brings access to services better suited to their needs and lets them choose how and when to acquire and use such products. The banking system, both in Andorra and globally, must respond to these new consumer habits.

At MoraBanc, we have achieved our transformation by making a digital mindset an essential part of the company’s culture. Our strategy hinges on two courses of action: first, we have concentrated all of our strategies under one umbrella, streamlining the decision-making process for our multichannel services; second, we have integrated innovative methodologies in the design and creation of products and services at every stage of our projects.

Our investment in digital banking stood at €7.5m ($8.31m) between 2015 and 2018, during which time we succeeded in positioning ourselves as market leaders. In 2019, our investment totalled €5m ($5.54m), which included technological innovation that responded to regulatory updates, improving internal processes and revamping the client experience. These levels of investment are high given the size of the Andorran market, and reflect MoraBanc’s commitment to being the country’s benchmark digital bank.

However, it’s important to remember that digital innovation is always progressing. We are constantly updating our offering and working on new projects. Over the next few months, we have five key aims. The first is consolidation: we will make the most of our position as a benchmark of online services in Andorra and consolidate our image as a modern digital bank. The second is innovation, which involves improving the tools we have already launched, incorporating new functionality and upgrading our digital solutions every week.

We have not forgotten digital transformation, which is our third goal. We will continue to move our services out of branches and onto our digital platform, investing in new technology to ease the process. In the interest of furthering Andorra’s technological transformation, this year, we headed the first study on the digital maturity of companies in Andorra. Our fourth goal involves delivering an omnichannel customer experience; to achieve this, we must strive to improve the services offered to our customers, expanding their payment options through the digitalisation of transactions and simplifying the payments process. We also wish to provide clients with more information on using point of sale solutions so they are empowered to increase sales and improve their customer service.

Our fifth aim concerns private banking. In January 2019, MoraBanc entered into an exclusive agreement with Goldman Sachs Asset Management to offer unique investment services in Andorra, such as portfolio management and advisory services. The agreement provides differential value for MoraBanc clients, enabling them to obtain exclusive information and a more personalised range of products and services. Information regarding their portfolio’s performance can be viewed via MoraBanc Digital, making it easier for users to assess their investments.

Leading the way
To be viewed as a digital trailblazer, businesses must focus on commitment, adaptability and teamwork. We have displayed commitment through our efforts to implement digitalisation, viewing it not as an option but a necessity that allows us to offer a better service to our clients.

Similarly, adaptability has been fundamental in allowing us to make changes before our competitors, including launching a new website and app, which has shown us to be a benchmark digital bank. Solid teamwork has also been essential in ensuring that everyone at the bank is working towards the same goal of making MoraBanc Digital a reality. From our first meeting about the institution’s digital future to the consolidation of the project, many hours have been dedicated to creating a digital identity that satisfies our clients and the bank’s other stakeholders – shareholders, employees, suppliers and Andorran society.

We apply one ethos to everything we do: we are modern, innovative, accessible, efficient and trustworthy. These values, when transferred to the digital world, enrich our products and services. We want our clients to see us as a bank that responds to their needs and maintains remote channels that give them the freedom to operate at any time and from any place – all our metrics tell us we are achieving this.

We’ve seen remarkable results since launching our digitalisation project in December 2016. Our internal digital banking report, published in April 2019, found a 77 percent increase in digital users, a 181 percent increase in access to online banking across all devices and a 709 percent increase in clients conducting banking through our app.

MoraBanc is optimistic about the future. We are not Andorra’s biggest bank, but the way we have dealt with change in recent years has seen us receive a great deal of recognition. After successfully finalising our transformation strategy, we started a new plan focused on achieving constant, unlimited growth.

We have all the ingredients to make progress: a solid balance sheet, a talented and efficient team, agreements with first-class partners such as Goldman Sachs, and a well-defined, attractive business model in which digital banking plays a hugely important role.

Software firm Vertex delivers a reality check for real-time tax reporting

Posted on by Ashton Wenborn

In light of recent challenges to multilateral cooperation, global corporations, individual countries and tax administrations are striving to improve their coordination on numerous matters, including indirect taxation. One way to enhance this collaboration is through the implementation of technologies that enable the real-time – or near real-time – reporting of a company’s transaction data to tax administrations in certain jurisdictions. Hungary and Spain have already adopted real-time reporting requirements for transactions subject to value-added tax (VAT), and many more countries could soon follow. At least, that’s what one might believe from the large volume of articles and analysis extolling the rapid rise of real-time reporting.

In reality, though, the implementation of instantaneous transaction reporting has not been as widespread – nor as genuinely real-time – as initially predicted. There exists understandable resistance to this new requirement among companies, as well as plenty of confusion about the processes, technology and talent needed to make it work.

Global corporations, smaller to mid-sized companies and public sector organisations are all competing for the same tax technology talent

Hungary may have followed the lead of Spain – which implemented a near-real-time reporting system called Suministro Inmediato de Información (SII) in 2017, whereby companies digitally share VAT sales and purchase invoice data with tax administrators within four days of issuance or receipt – but several issues are slowing the adoption of similar proposals in other countries.

These obstacles must also be overcome if countries and companies are to optimise the potential benefits of real-time reporting, which include reducing a vast VAT revenue collection gap in Europe and avoiding lengthy (and disruptive) tax audits. Additionally, tax administrations will improve the processing time of exemptions, further helping revenue departments with cash flow and revenue cycle management, among other internal administration issues. Given the magnitude of the potential benefits and compliance risks, business and government leaders should develop a clear understanding of these issues and hurdles to implementation.

Not quite the real deal
Real-time reporting can help tax authorities detect suspicious transactions and uncooperative taxpayers at an early stage, as well as prevent tax avoidance and fraudulent activities. The VAT gap – the difference between expected VAT revenues and the VAT that is collected – has been the primary driver of EU countries’ interest in adopting real-time reporting requirements.

According to the European Commission’s 2019 VAT Gap in the EU-28 Member States report, the EU’s member states lost a combined €137bn ($151.5bn) in VAT revenue in 2017 due to tax fraud, tax evasion and inadequate tax collection systems (although bankruptcies, financial insolvencies and miscalculations also contributed to the gap). In the near future, the statistical data collection and analytics from combined taxpayers will provide tax administrations and revenue authorities with an improved understanding of taxpayer behaviour as it relates to compliance.

Although this shortfall has existed for years, in 2017 it finally motivated Spain to adopt its real-time reporting requirement, which has since shown positive results. According to a recent evaluation surveying a three-month period, SII covered 75 percent of the total turnover of VAT taxpayers in Spain, and the data supplied through SII matched the information given in VAT returns in 84 percent of cases. It is important to note, however, that 64,000 companies were initially obliged to join the new regime, but 10,000 companies left the monthly VAT refund regime or VAT grouping (both of which are optional) to avoid SII. Among the remaining companies within its scope, 90 percent complied with SII within the first three months of it being in effect.

While Spain’s foray into real-time reporting may have partly inspired Hungary to follow suit a year later, Hungarian tax administrators were also motivated by an exceptionally high rate of VAT fraud. Hungary’s requirements stand out because they require companies to digitally remit details on B2B sales transactions daily. Spain and Hungary’s adoption of real-time reporting requirements was widely viewed as a trend that would culminate in the adoption of similar tax reporting requirements in most, if not all, EU member states. Irish Revenue Chairman Niall Cody even recently described real-time VAT reporting as “inevitable”. To date, however, no other country has implemented such legislation.

Slow progress
As government leaders and business executives assess the viability and likelihood of new real-time reporting requirements, they should keep in mind several dynamics that affect how easily and cost-effectively these can be implemented. One issue to consider is that real-time reporting does not always translate to instantaneous data transfer or live-data transmission in practice.

Instead, real-time reporting rules may only require companies to submit VAT transaction data every few days, or weekly. Given that companies already collect, report and remit indirect taxes monthly in most EU countries, the actual time savings delivered via new real-time reporting requirements should be clarified and then compared to the potentially significant costs of the changes companies – as well as tax administrations – need to institute to comply.

This cost-benefit balance is crucial for businesses. If transaction data can be shared in real time (or close to it), these transactions can be immediately reviewed from an audit perspective by tax administrations. This would sniff out any inaccuracies within days of the transaction’s occurrence, enabling tax administrations and companies to resolve auditing issues at that point, rather than months or even years later, when the resolution process tends to involve far more time, effort, cost and disruption. This near-real-time assurance would greatly reduce the risk, disruption and cost of tax audits – benefits that can help companies offset the cost of implementing new tax management technology and related process changes.

The quick and secure exchange and storage of a company’s transaction data also requires relatively advanced adjustments to tax data management technology. While a growing number of global companies have this type of technology in place – in large part to keep pace with the competitive challenges posed by the digitalisation of the global economy – many enterprises still need to upgrade their tax technology. In fact, comparatively few tax administrations have the requisite tax data management technology in place.

It is also important to keep in mind that the impetus, receptivity and technological capabilities needed to support real-time reporting vary significantly across EU countries and other regions. Many developing countries with VAT regimes do not currently possess the appropriate technology to achieve automated real-time reporting systems. Even the EU’s 28 member states have different VAT compliance requirements and widely varying technology capabilities. This makes the widespread adoption of similar real-time reporting requirements unlikely.

In the US, for example, numerous state, municipal and local tax jurisdictions set their own unique sales and use tax rates and reporting requirements. There is also substantial pushback to real-time reporting in the US – due, in part, to resistance from credit card companies and retail and trade associations. Furthermore, many assert that this instantaneous reporting is not essential when considering the requirements of current regulation.

Bridging the gap
While the VAT gap represents a massive challenge for EU tax administrations and is a primary driver of the recent push for real-time reporting requirements, two other gaps also figure as major implementation obstacles.

The first is the technology gap. When governments want to implement real-time reporting, they quickly realise that they need systems in place to enable this capability. These systems must be able to accept transaction data from companies, run verification tests on the data and then store it securely. While tax data management systems with these capabilities exist, relatively few tax administrations currently have them in place. The cost-effective implementation of these systems depends on several factors that must be carefully evaluated, including the tax administration’s existing technology environment and any plans it has to alter or improve it.

While some tax administrations rely on traditional on-premises information systems, many government bodies are in the process of migrating technology functions to a private on-demand or public cloud model. Given this fluctuating IT setting, any real-time tax management system should be hybrid-cloud friendly. In other words, it should be able to exist within the three technology models: on-premise, private cloud and public cloud.

The other major challenge to implementing real-time reporting is the talent gap. Having advanced tax technology in place offers little value if an organisation doesn’t have access to the skills needed to operate these systems. And these relatively rare skills are in increasingly high demand: global corporations, smaller to mid-sized companies and public sector organisations are all competing for the same tax technology talent. The demand for technologically savvy tax professionals and the need for cutting-edge tax data management applications should only accelerate in the coming years, as tax compliance requirements intensify and more corporate tax functions implement additional technology such as robotic process automation, blockchain and artificial intelligence.

As the global economy becomes increasingly digitalised, governments and their tax administrations will face growing pressure to advance their technological transformations. This pressure is also likely to increase demand for more expedient data sharing among public and private entities. When this data sharing can be conducted and governed thoughtfully and securely, tax administrations and the companies they work with – not to mention the societies that both entities serve – have an opportunity to achieve significant mutual benefits.

Achieving this state of multilateral cooperation starts with a practical understanding of the issues, challenges, technology and skills needed to make these digital interactions thrive. In today’s modern digital tax compliance environment, both tax administrations and taxpayers should understand that the old technology that got them to where they are today will not be sufficient to take them where they want to go in the future.

Morocco’s infrastructural investment gap is hitting rural areas hardest

Posted on by Ashton Wenborn

As Africa’s sixth-largest economy, with a GDP per capita of just over $3,000, Morocco is certainly no economic minnow. Although growth has slowed of late, it measured a healthy 2.95 percent across 2018 and inflation remains low. But there is still work to do – particularly in terms of the country’s infrastructural development.

According to the Global Infrastructure Hub (GI Hub), in the years leading up to 2040, Morocco is set to face an infrastructural investment gap of $37bn. It is not a challenge that is being left unaddressed, though. In June 2019, the country’s government signed a $237m deal with the Arab Fund for Economic and Social Development (AFESD) to improve its dams and road networks. Then, in November, the African Development Bank approved a €100m ($110.6m) loan to finance further infrastructure projects.

Nobody could accuse Morocco of neglecting its infrastructure in recent years, even considering the funding gap facing the country

The Moroccan Government, however, should be wary of simply throwing more money at its infrastructural deficit. Overall, in terms of infrastructure, the country is actually performing pretty well; it is only in rural areas where a shortfall is particularly prominent. In many respects, Morocco’s infrastructure is the envy of the rest of Africa, but the country should not start patting itself on the back until all of its citizens can enjoy the kind of advantages in transport, education and healthcare that are available to those based in its major cities.

It could be worse
Nobody could accuse Morocco of neglecting its infrastructure in recent years, even considering the funding gap facing the country. After all, no matter which country is being analysed, infrastructure always appears to be in need of development: Japan has an infrastructure investment shortfall of $91bn, while the US has one of $3.8trn. Compared with some countries, Morocco’s infrastructural investment pipeline is not particularly worrying (see Fig 1).

“Morocco’s infrastructure is second to none in Africa today,” said Dr Ali Bahaijoub, Editor-in-Chief of North-South Publications. “There are motorways linking all the major cities, the new Tangier-Med port is the biggest in Africa and the Mediterranean, and there is a new high-speed rail link between Tangier and Casablanca, as well as new airport terminals in Casablanca, Marrakech, Rabat and Tangier. Roads within cities have also been widened to three lanes on both sides.”

These projects owe their existence to the proactive approach the Moroccan Government has taken to finding outside funding sources. Over the last four decades, the AFESD has provided Morocco with 72 loans, totalling some $4.4bn. Nevertheless, Bahaijoub admits that “some regions in the country are better developed than others” and that placing a greater focus on rural areas and creating “schools and hospitals that are accessible to all” should be made a priority.

The money entering the country has, by and large, been funnelled into infrastructure projects that bolster Morocco’s business environment, while residential areas remain underserved. Although corporate executives can travel between Casablanca and Tangier on Africa’s fastest train, in the country’s rural areas, Reuters reports that families are forced to travel by donkey to collect drinking water from outside wells. Infrastructure projects can be hugely effective in bridging inequality but, currently, the new builds in Morocco’s glittering cities are merely serving to accentuate it.

Casablanca’s modern tram system

Work to be done
Walking through the streets of Casablanca’s city centre, which harbours ambitions of becoming the foremost financial hub for companies doing business in Africa, it is easy to forget what life is like for those living outside the country’s urban areas. Approximately 40 percent of Moroccans live in rural areas and this often presents them with significant challenges that simply don’t exist for the urban population.

Rural Moroccans receive an average of 2.2 years of formal education, compared with 6.1 years for their urban counterparts, while rural women are more likely to drop out of school early and exhibit higher levels of illiteracy. For many of these individuals, the difficulty posed by a lack of transport options means there is little time for education or economic development. While in urban areas, 100 percent of the population live within 5km of a healthcare facility, in rural areas, this figure drops to just 30 percent. Thankfully, things have improved in this respect – a 13-year road-building initiative improved rural access to all-weather roads from 54 percent to nearly 80 percent – but more could be done, particularly in the isolated communities that have established themselves around the Atlas Mountains.

The most prominent infrastructural project that the Moroccan Government has planned outside of its urban locales is the Noor Ouarzazate concentrated solar power (CSP) project, which forms part of the country’s Moroccan Solar Plan (MSP). The largest solar complex of its kind in the world, situated where the Atlas Mountains meet the Sahara Desert, the project can supply around six percent of the country’s total energy needs using two million mirrors.

“One of the key projects delivered under the MSP is the Noor Ouarzazate CSP complex, which will be one of the largest single solar complexes in the world,” Marie Lam-Frendo, CEO of GI Hub, told World Finance. “The government of Morocco has set a goal of reaching 52 percent of installed capacity from renewable energy by 2030 and is well on track to meet this target, reaching 34 percent of targeted installed capacity of renewable energy in 2016.”

While infrastructural developments like the Noor Ouarzazate plant may not, strictly speaking, be located in one of Morocco’s urban hubs, the benefits that such projects deliver are unlikely to be felt in the isolated communities that need them most. Any employees will probably be drawn from the nearby city of Ouarzazate and the power it generates will not be much use to the people living in isolated Berber villages – not until much-needed cables are laid and power stations built.

Redressing the balance
While the Moroccan Government has been praised for the way it has sourced funding for its infrastructure projects, it knows there is still much more to do to address the shortfall in those areas outside its major cities. In July 2019, Moroccan Prime Minister Saadeddine Othmani announced that $1bn would be channelled into regional infrastructure projects by 2021 in order to achieve more equitable development. The government would do well to focus its efforts on the particular infrastructural sectors most in need of improvement.

“According to our [Global Infrastructure Outlook] report, Morocco is estimated to have an annual infrastructure investment need of $9.8bn in the years to 2040, primarily in the electricity and roads sectors ($4.5bn and $2.8bn respectively),” Lam-Frendo said. “To meet the UN’s Sustainable Development Goals on universal access to electricity, water and sanitation by 2030, Morocco will need an additional cumulative investment of $16.2bn in the electricity sector and $4.6bn in the water sector.”

Once again, attempts to plug the funding gap would be best served by targeting the country’s poorer regions. Although reports of major development projects being launched in the Laâyoune-Sakia El Hamra region may appear to be a step in the right direction – the area is not home to any of Morocco’s best-known cities – it is already one of the country’s most prosperous regions. According to the World Bank, it ranks first in terms of education and access to fundamental economic, social and cultural rights.

The Finance Act 2019, approved in October 2018, should improve inequality to an extent, with its promise to increase the regional share of corporate and income tax from four to five percent. As will Othmani’s commitment to delivering more interaction between government ministers and voters in these parts of the country. Similarly, a new approach to monitoring regional and local investment programmes should provide better accountability and transparency regarding the progress of any ongoing projects. These are the sorts of measures that are required – not more mega-projects that predominantly benefit those in society’s upper echelons.

Building a framework
The reason why Morocco has been able to achieve its funding goals where other African states have failed is that the country boasts a solid regulatory climate, which gives investors confidence that they will achieve an adequate return on their financial support. “Among the 15 African countries included in the GI Hub Outlook analysis, Morocco is expected to be the country to meet the highest proportion of its infrastructure investment needs by 2040 (85 percent),” Lam-Frendo explained. “This may reflect Morocco’s relatively strong infrastructure-investment-enabling environment.”

In terms of governance, competition frameworks and permitting procedures, Morocco outperforms the average seen across emerging markets, as well as in many of its fellow African nations. And although Morocco does not have a national or sub-national infrastructure plan that covers all sectors comprehensively, the Moroccan Government has launched a number of separate sector-based infrastructure plans, including the 2040 Rail Strategy, Vision 2020 for tourism, the 2030 National Port Strategy and the Noor Ouarzazate solar plan. These plans are often supported by their equivalent-sector-based, state-owned enterprises and should help the country deliver more targeted infrastructure spending over the coming years.

The government would do well to focus its efforts on the particular infrastructural sectors most in need of improvement

Another reason why Morocco has managed to maintain relatively healthy finances is its diversified economy, which is much less reliant on commodities and fossil fuels than its neighbours, such as Libya. This has ensured that, while several states in North Africa have struggled to entice investors to the region, Morocco has not. A stable investment climate should not be taken for granted, however.

Morocco may have an economy that is spread across multiple industries, but it could do more to ensure that it is equally diverse geographically. This is where better infrastructure could make a significant difference. It would also help the country’s poorer citizens support themselves economically as better transport links allow citizens to engage with the job market, sell their wares and access the amenities they need.

Morocco is certainly not ignoring its infrastructural shortfall in the hope that it goes away. The country’s government should be praised for the way it has secured funding sources that have created its first-rate cities, airports and rail networks. However, now is the time to direct this funding elsewhere. Discontent is rising alongside inequality in the country. Another brand-new motorway or high-speed rail connection might see this discontent rise further still.

Kazakhstan is developing a first-rate bond market

Posted on by Ashton Wenborn

Kazakhstan’s financial market is developing rapidly. Its capital city, Nur-Sultan, has ambitions to become one of the world’s foremost financial centres, with investors from East and West beginning to take advantage of the country’s position at the crossroads of Europe and Asia. Tengri Partners Investment Banking, a premier independent investment banking and asset management firm headquartered in Almaty, Kazakhstan, provides full-scale investment banking services in the fields of debt and equity capital markets, mergers and acquisitions, brokerage and asset management, merchant banking, and private equity investments.

Having tapped into IFI bond markets, Tengri Partners has demonstrated that it is a forward-looking enterprise ready to accept new challenges

Established in 2004 as Visor Capital (the investment banking arm of Visor Holding), our firm has advised and executed more than 40 transactions, collectively valued in excess of $17.3bn, over the years. At the end of 2015, Visor Holding sold the firm – the only investment bank in Kazakhstan holding a brokerage licence on the London Stock Exchange – to Tengri Partners Investment Corporation. Since then, the local investment banking market has entered a new era.

A capital idea
Tengri Partners has garnered a reputation as the go-to bank for attracting debt capital, as shown by our repeat clientele and status as the preferred investment bank for international investors on issues related to bond transactions in Kazakhstan. At the end of Q3 2019, Tengri Partners’ presence in debt capital markets significantly increased, reaching 20 percent of total market share, compared with one percent in 2018. Tengri Partners is also the market leader for debt capital in terms of completed transactions.

Our main aim is to boost the development of local capital markets, which are currently suffering severe deficits in terms of new issuers and secondary liquidity. Bringing risk-free instruments denominated in Kazakhstani tenge to local institutional investors has improved the potential for diversification from sovereign bonds and short-term notes. It has also allowed international financial institutions (IFIs) to expand their operations and avoid the currency mismatches that have been present for a number of years.

Tengri Partners brought AAA-rated IFIs to the public debt capital market for the first time in the history of Kazakhstan, at a time when the country’s sovereign rating was BBB. The deals we pioneered strengthened our position in the investment banking sector; now, we are looking to take Kazakhstan’s capital markets to the next level.

Transitioning International Finance Corporation (IFC) bonds out of global medium-term notes programmes and placing them on the Kazakhstan Stock Exchange (KASE) represented the first hybrid transaction in the history of Kazakhstani capital markets. Tengri Partners successfully saw through the adjustment of local legislation and regulation in order to make this a reality. This proved to be the most challenging aspect of the transaction, requiring us to develop new mechanics of issuance and conduct a public offering on the KASE.

Other challenges we faced were: allowing these deals to be settled through a local depositary system; developing a market valuation methodology for these bonds amid scarce secondary liquidity; including IFI bonds with AA and above ratings in the list of eligible collateral for the discount window with the National Bank of Kazakhstan; and applying identical haircuts as sovereign bonds. This final requirement proved to be a game changer for many investors and primary commercial banks, for which secondary liquidity is an extremely important issue.

In July 2018, the first IFC bond was placed for KZT 8.5bn ($22m), representing back-to-back funding for the issuer, with funds being immediately disbursed to the local borrower. The deal was structured to mirror the terms of the loan disbursement and resulted in an amortising fixed coupon bond – the first of its kind in Kazakhstan in almost 10 years. In arranging the deal, Tengri Partners outperformed the sovereign yield curve, which was a great achievement for us and the IFC as the issuer. It reduced the loan cost for the borrower, granting them access to the private sector for affordable funding amid limited local opportunities.

The transaction was an important benchmark in the history of Kazakhstan’s capital markets development. It was the first IFC bond to be denominated in tenge, the first AAA-rated bond placed on the KASE, the first AAA-rated IFI bond primarily for private sector investors in Kazakhstan, and the first time an AAA-rated IFI engaged a Kazakhstani investment bank for a public bond offering.

A done deal
In another unprecedented move, Tengri Partners has managed to engage every type of investor currently present in Kazakhstan, with 19 bids from 10 participants and a bid-to-cover ratio of 2.25. The issuance of the IFC’s tenge-denominated bond is in line with the IFC’s strategy to source long-term funding and create access to local currency finance for private sector expansion, helping to boost economic growth and create jobs.

The IFC almost immediately followed up with two deals in September 2018 and January 2019, worth a combined KZT 25bn ($64.7m), underwritten by Tengri Partners. Again, demand significantly exceeded the offered volume by an average of 1.64 times. The maturities of the three bond issuances were 7.5, four and two years respectively. This perfectly matched with investors’ appetites for risk-free, medium-term instruments. It allowed them to diversify their investment portfolios and comprehensively enhance the average quality of liquid assets.

An Asian Development Bank (ADB) bond issuance in tenge has also provided a back-to-back funding strategy for the issuer. The milestone dual-tranche, inflation-linked bond possesses a highly tailored structure mirroring the terms of underlying loans that will grant cheaper debt funding on market terms.

The hybrid bond approach was crafted by issuing and documenting the transaction under the ADB’s global medium-term notes programme and English law while settling the deal through the local depositary system – a first for the ADB in any developing member country. The issuance was placed exclusively with institutional investors and marked a series of firsts both for the ADB and the local market. It was the ADB’s first tenge bond issuance, the first ADB inflation-linked bond in a local currency and the first inflation-linked bond in Kazakhstan since 2016.

Building a reputation
The European Bank for Reconstruction and Development (EBRD) is the most active development bank in Kazakhstan in terms of project numbers and volume. With the help of Tengri Partners, it is the latest IFI to successfully tap the local market with a tenge-denominated bond issuance. The EBRD already raised KZT 260bn ($673m) through five issues in 2019 alone – another milestone for the local market. We have witnessed the first domestically placed public bond offering for the EBRD in Kazakhstan and the largest single inflation-linked bond issuance by an AAA-rated IFI in Kazakhstan. The execution phase of the deal took just one week from the approval of bond terms to final settlement. The bond issuances also provide proof of the feasibility of tapping spare tenge liquidity for a risk-free borrower.

For Kazakhstani investors, such bonds are important for diversifying their portfolios, while commercial banks and insurance companies that urgently need medium-term, high-quality liquid assets in tenge will also benefit. It is worth noting that the issuance of IFI bonds took place on market terms and was a significant success, since the demand of most placements exceeded the offered volume, emphasising the high rating appreciation by local market participants.

Moreover, the entry of issuers such as the IFC, ADB and EBRD to the KASE opens the way not only for other IFIs, but also entails further interest in local debt capital markets from both international investors and issuers, which is a positive sign for the reputation of the country and the development of capital markets in Kazakhstan.

Having tapped into IFI bond markets, Tengri Partners has demonstrated that it is a forward-looking enterprise ready to accept new challenges. The next cutting-edge solution for local quasi-government companies will be an opportunity to place their bonds among international investors. Tengri Partners has already developed a unique issuance structure that will make tenge-denominated local bonds an attractive security for overseas bond investors. At the same time, local capital markets will experience an investment boost, not a mere capital reshuffling within the country.

In two decades of operations, Irkutsk Oil has transformed East Siberia’s gas industry

Posted on by Ashton Wenborn

Irkutsk Oil Company (INK) was established on November 27, 2000. At the time, the company owned only three fields – Yaraktinsky, Markovsky and Danilovsky, with total annual oil production of just 30,000 tons per year. Delivery of oil to consumers over muddy roads was a major drain on revenue. To switch to year-round production, the company set about constructing a pre-fabricated aboveground pipeline – a unique undertaking considering the severe winter operating conditions in East Siberia. Later, the company built production wells, oil and gas treatment units and several other infrastructure facilities.

Today, INK is a successful operator of oil fields in the East Siberia and Yakutia regions, and has invested RUB 80bn ($1.25bn) in the construction of gas processing plants and a gas chemical complex in the north of the Irkutsk region, in and around the city of Ust-Kut. This covered around 17 percent of the total cost of the project, which is scheduled for completion in 2023.

For the first time in the history of East Siberia, a gas industry is being developed in remote territories, featuring sophisticated engineering solutions based on advanced technology

The project is an impressive one: for the first time in the history of East Siberia, a gas industry is being developed in remote territories, featuring sophisticated engineering solutions based on advanced technology. According to Russian petrochemical analysis firm Rupec, the construction of INK’s gas complex ranks among the most significant projects in the gas, chemical and petrochemical industries of Russia and the Commonwealth of Independent States.

On the up
When the company was first established, its early oil fields were poorly explored. The first production well quickly filled with water and many sceptics doubted whether the Yaraktinsky region held any more than a disappointing three million tons of oil reserves. However, time has proved them wrong. In those early days, finance was scarce, but each employee worked towards the company’s long-term success. Now, INK is among the world’s leading oil and gas companies.

Over the course of a decade, the company was able to reach the next stage of its development. In 2010, it built its Markovskoye oil custody transfer unit to export oil into the East Siberia–Pacific Ocean (ESPO) pipeline. By mid-January 2011, the company began shipping hydrocarbons to the Kozmino port oil terminal via ESPO, and by the end of that year, INK exported more than one million tons of oil into the pipeline. Global partnerships have also supported the company’s growth: since 2007, INK has been engaged in active cooperation with Japan’s Oil, Gas and Metals National Corporation. Currently, two Japanese-Russian joint ventures are successfully operating in the Irkutsk and Krasnoyarsk regions.

INK has been able to increase its production each year and, as of the end of 2018, production reached nine million tons. The company actively develops and implements innovative solutions, affecting core and auxiliary activities. The Yaraktinsky oil field has become a core asset, accounting for two thirds of total production. However, nothing lasts forever: as the oil aspect of INK’s activity begins to slow, the gas part is ramping up. Before long, oil production from Yaraktinsky may be on the decline, but just as soon, INK’s new gas project will be fully deployed.

In the pipeline
The new gas project is already underway. It all began in 2009 when the company started construction on a processing complex in the Yaraktinsky field for the reinjection of dry stripped gas and associated gas into formation – known as the cycling process – while producing gas condensate. The ambitious project has earned the support of the European Bank for Reconstruction and Development, which has a minority stake in INK’s holding company and provided a loan so the group could begin work on the project.

The cycling process was launched in 2010 – the first of its kind in Russia. It provided the company with an opportunity to dispose of unused associated gas and became the predecessor of a larger gas project that launched in 2014. INK then began the staged implementation of the gas project, including the creation of a production, treatment and processing system for the gas liquids produced by the company.

The first stage was accomplished in 2018. At that point, the company had completed construction of the Yaraktinsky gas processing plant, as well as a liquefied petroleum gas uploading facility in Ust-Kut and a unique multiphase pipeline for the transport of natural gas liquids. The pipeline will transport feedstock with up to 40 percent ethane content. In addition, for the first time in the Russian petrochemical industry, the company has begun to use new custom-built railway tank cars to ship its gas mixture to consumers.

At the second stage, three additional gas-processing plants will be erected in the Yaraktinsky and Markovsky fields, with a total capacity of 18 million cubic millimetres a day. The plants will feature innovative technology, enabling them to recover up to 98 percent of the ethane contained in feedstock. Furthermore, construction of a gas fractionation plant is currently underway near Ust-Kut. The plant will produce up to 900 kilotons of high-quality ethane per year for the future gas chemical complex.

The gas project will peak in its third stage, with the construction of a polymer plant in Ust-Kut with an annual capacity of 650,000 tons of polyethylene. The Toyo Engineering Corporation was contracted for the implementation of the third stage of the gas project. That plant will produce polyethylene of various densities, granting the company access to both the Russian and international polyethylene sales markets. In addition, the plant will include advanced technology for the production of bimodal HDPE, the raw material used for the manufacture of European-certified products.

A fuel injection
Another factor behind the company’s success is its implementation of new production programmes and technology for enhanced oil recovery. Oil remains the company’s core product, reinforcing its stability and capacity to pursue business diversification. One of the most promising technologies used by the company – water alternating gas injection – brings a dual benefit: it improves oil recovery in the company’s core fields and preserves gas injected into formation. In the future, these reinjected gas resources will be used to produce a propane-butane mix and provide up to one third of total feedstock for the gas chemical complex.

To make year-round oil production viable, INK constructed an ambitious pre-fabricated aboveground pipeline

The latter stages of the gas project will involve extensive infrastructure construction. In the summer of 2019, INK began testing cold recycling technology on its future plant site. This technology combines tarmac reconstruction and soil stabilisation to make roads suitable for year-round operation. This method of road restoration has been used globally for more than 50 years and has long proved to be an efficient solution.

The creation of an industrial complex in the north of the Irkutsk region will enable the efficient use of vast resources of natural and associated petroleum gas from Siberia’s fields, which have been unused for decades.

Implementation of the company’s projects would require the support of federal and regional governments, which have recognised the benefits that will be brought to local communities. The project is expected to create more than 2,000 highly qualified jobs in the region and generate over $1bn of non-raw material export per year. This will offer a real chance to improve the current situation in the northern towns of the Irkutsk region, which are still struggling in the aftermath of the ruble crises of 1998 and 2014.

This expanding industry will create jobs for local residents and boost the development of towns and settlements, as well as local small and medium-sized businesses. INK is already building a team of several hundred gas industry professionals from across the country to manage the project and, as of the end of 2019, is in the front-end engineering stage of a housing district for up to 3,000 members of staff and their families. The new district will include childcare centres, a school, a polyclinic and a multifunctional culture and education centre.

INK believes its independent status has enabled it to accomplish its goals, which seemed unattainable in the not-too-distant past. The company does not ask for external assistance: it discovers its own fields, builds the necessary infrastructure and is creating new jobs in the region. Over the past 10 years, it has discovered 13 hydrocarbon fields in the Irkutsk region and Yakutia. There is more to come for this ambitious player.

Banking Awards 2019

Posted on by Ashton Wenborn

With Brexit looming and trade wars causing political uncertainty around the world, it’s easy to believe the economic landscape is equally tumultuous. However, almost the opposite is true: a decade after the financial crisis and the banking sector is in one of its strongest states in recent history. The Banker’s Top 1,000 World Banks ranking showed that in 2018, total assets reached $124trn, with the return on assets standing at 0.9 percent.

Banking Guide 2019

Click here to view the World Finance Banking Guide 2019

Instrumental to the recovery of the industry has been the US, which has had one of the fastest recoveries since the financial crisis. Total assets at US banks reached a peak of $17.5trn at the end of last year, according to Deloitte’s 2019 Banking and Capital Markets Outlook, while capital levels are also on the rise. Return on equity for banking is at a post-crisis high of 11.83 percent, and in other metrics, including non-performing loans, the US has fared well. Furthermore, the Deloitte report suggested that aggressive policy inventions and forceful regulations are behind the excellent performance of the country’s banks.

China has also provided a boost to the sector over the past decade, with its banking industry having overtaken that of the eurozone in terms of assets in 2017, according to the Financial Times. In 2007, none of the top five banks in the world were Chinese, but now – thanks to the overwhelming profitability of its institutions – four of them are (see Fig 1). Analysts at Accenture have credited China’s impressive digital strategy for its rapid growth: the country has more than a billion regular users of mobile payments, thanks to apps like Alipay and WeChat, through which Chinese citizens conducted two thirds of all global mobile payment transactions in 2018.

Top Five Banks

Varied landscape
Though the overall performance of banks has been robust, there has been mixed success across specific regions. European banks have become smaller and more risk-averse in their approach, causing them to retreat from international markets. A mixture of low and negative interest rates, a lack of pan-European regulatory agency, structural deficiencies and overcapacity saw the profits of the top five European banks fall from $60bn in 2007 to $17.5bn in 2017. Japan has suffered too, thanks to the impact of slow domestic growth and disappointing exports.

The future for these countries is as varied as their current economic situations. There are indicators that Europe’s fortunes are about to change, with return on equity for the top 1,000 Western European banks rising from 5.5 percent in 2016 to 8.6 percent in 2017. Analysts are cautious about other parts of the world, though: the IMF’s real GDP growth forecasts suggest there will be a deceleration in all regions. Meanwhile, Deloitte economists have said there is a 25 percent chance of a recession in the US this year. China and the US’ tariff war could also drag on, to the detriment of global markets.

In order to accelerate the banking industry, leaders must innovate as much as possible, particularly with regards to their technological processes. Digitalisation is perhaps the most important area for them to stay on top of, with experts warning banks not to be complacent, as a large number of new players are already sweeping in where legacy banks have failed to take hold. The UK is just one example of this, with more than a third of new revenue and 15 percent of overall revenue now flowing to new entrants, according to Accenture. Organisations like Monzo, Starling Bank and Revolut have snapped up millions of customers, many of whom are seeking out a service that’s quick, convenient and easily accessible.

Tech revolution
In the coming years, artificial intelligence (AI), the cloud, robotic process automation (RPA) and blockchain will become increasingly important to banks’ success. Though these systems are complex and difficult to integrate into existing processes, when done correctly, they create a win-win situation for banks and their customers, building trust and engagement in the process. RPA can also lead to better productivity gains, while AI is able to streamline operations and provide important insights into consumer behaviour.

By implementing these technologies, banks can also better meet regulatory requirements. The EU General Data Protection Regulation, for example, requires banks to ensure the privacy of their customers’ data, which they can do much more easily when they have modernised platforms. Institutions that do not prioritise digital transformation can create major hazards for themselves, particularly if their systems do not adequately protect customers. There’s also the growing pressure to provide adequate cybersecurity to contend with.

In order to bolster technological services, human capital is vital. In its Banking and Capital Market Trends 2019 report, PwC suggested this is one of the biggest stumbling blocks for institutions that are trying to evolve, with almost 80 percent of banking and capital market CEOs seeing skills shortages as a threat to their growth prospects. According to the report, 35 percent of CEOs are ‘extremely concerned’, with 44 percent being ‘somewhat concerned’.

Clearly, a large number of institutions understand the need to digitalise: it can help them create more seamless interactions with customers and can bring their brands to life. According to the PwC report, more than 90 percent of CEOs believe AI will be key to their development, but they also need savvy individuals to knit these technologies together. PwC noted: “Technology alone can’t meet customer expectations; consumers still value human interaction and accountability.”

Overall, there is reason to be optimistic about the future of banking, which has made astronomical strides since the financial crisis. But its outlook rests upon a huge number of intricate variables, such as transparency, regulatory compliance and institutions’ ability to harmonise and expand their digital offerings. Organisations that are bold in their approach are most likely to reap the rewards and enhance the overall health of the sector.

The 2019 World Finance Banking Awards have sought to identify the banks that have excelled across a number of areas, including corporate governance, sustainability and innovation, and have played a key role in the industry’s growth. Congratulations to all our winners.

 

World Finance Banking Awards 2019

Best Banking Groups

Australia Westpac
Finland Nordea
Cyprus Eurobank Cyprus
Chile Banco Internacional
France Crédit Mutuel
Dominican Republic Banreservas
Costa Rica BAC Credomatic
Brunei Baiduri Bank
Spain Santander Group
Russia Sovcombank
Turkey Akbank
Nigeria Guaranty Trust Bank
Myanmar AYA Bank
Macau ICBC (Macau)
Jordan Jordan Islamic Bank
Ghana Zenith Bank (Ghana)

Best Investment Banks

Argentina Columbus Merchant Bank
Germany Berenberg Bank
Greece AXIA Ventured Group
France BNP Paribas
Dominican Republic Banreservas
Colombia BTG Pactual
Chile BTG Pactual
Brazil BTG Pactual
Kazakhstan Tengri Partners Investment Banking
Saudi Arabia GIB Capital
Switzerland Credit Suisse
Thailand Siam Commercial Bank
Russia Sberbank CIB
Norway Carnegie
The Netherlands ABN AMRO
Turkey Akbank
Nigeria Coronation Merchant Bank

Best Private Banks

Belgium ABN AMRO
Liechtenstein Kaiser Partner
Italy BNL-BNP Paribas
Greece Eurobank
France BNP Paribas Banque Privée
Czech Republic Česká Spořitelna
Canada BMO Private Wealth
Brazil BTG Pactual
Singapore DBS Private Banking
The Netherlands Triodos Bank
Poland BNP Paribas Bank Polska
UAE Julius Bär
Nigeria First Bank of Nigeria
Sweden Carnegie Private Banking
Turkey TEB Private Banking
Monaco CMB

Best Commercial Banks

Most Innovative Savings Bank, Greece Eurobank Ergasias
Hungary ING
Belgium ABN AMRO
France BNP Paribas
Germany Commerzbank
Chile Banco Bci
Dominican Republic Banreservas
Canada BMO Bank of Montreal
Sweden Handelsbanken
Macau Bank of China
Nigeria Zenith Bank
The Netherlands ING
Vietnam SCB
Portugal ActivoBank
US Bank of the West
Sri Lanka Sampath Bank

Best Retail Banks

Kenya KCB Bank
Austria BAWAG Group
Bulgaria Postbank
France BNP Paribas
Germany Commerzbank
Chile Banco Bci
Greece Eurobank
Dominican Republic Banreservas
Mexico Citibanamex
Portugal Santander Portugal
Poland mBank
Vietnam Saigon Commercial Bank
Turkey Garanti Bank
Myanmar AYA Bank
Nigeria Guaranty Trust Bank
Sri Lanka Sampath Bank

Best Sustainable Banks

France BNP Paribas
Egypt Arab African International Bank
Chile Banco Bci
Belgium Orange Bank
Poland mBank
The Philippines Bank of the Philippine Islands
Nigeria Access Bank
Jordan Jordan Islamic Bank

Most Innovative Banks

Africa First National Bank
Asia Maybank
Australasia ANZ
Europe EVO Banco
Latin America and The Caribbean Banco Popular Dominicano
Middle East National Commercial Bank
North America US Bank

Bankers of the Year

Africa Segun Abaje – Guaranty Trust Bank
Asia Tatsufumi Sakai – Mizuho Financial Group
Australasia Lyn Cobley – Westpack
Europe Zbigniew Jagiełło – PKO Bank Polski
Latin America and The Caribbean Gianfranco Ferrari – Banco de Crédito del Perú
Middle East Adnan Chilwan – Dubai Islamic Bank
North America Thasunda Duckett – Chase Bank

Liechtenstein walks the walk when it comes to sustainable banking

Posted on by Ashton Wenborn

Quality, stability and sustainability are the three long-term cornerstones of Liechtenstein’s economy and its financial strategy. For the country’s banks, this means offering integrated solutions, tailored products and premium services for their domestic and international clients.

Figures published in April this year prove that Liechtenstein’s banks are on the right track; in 2018, assets under management surpassed CHF 300bn. More than half are booked in Liechtenstein, which underlines its appeal as a location, but also the international reach of the banks the country attracts.

Sustainability must be embodied in corporate culture and promoted at the strategic level, with commitment coming from the top

At the start of June, S&P confirmed Liechtenstein’s long-term AAA country rating, highlighting its stability. Not only does the country have a track record of economic reliability, its financial institutions share the same approach. Banks operating in Liechtenstein stand for low-risk business models, as demonstrated by their average Tier 1 capital ratio of over 20 percent.

Weaving sustainability into corporate culture
With its reputation for stability solidified, Liechtenstein’s banks are turning their attention towards sustainability, the third cornerstone of the banking centre strategy. Sustainability is a factor affecting the entire value chain and all levels of a business’s hierarchy. As such, Liechtenstein’s financial institutions operate with a business model that prioritises long-term success over short-term gains. This sustainable approach has become an integral part of their corporate culture.

Sustainable investments will soon become banking’s new normal. Since the Paris Agreement was signed in 2015, there has been an urgent need for action, however, the challenges of achieving sustainability are multi-layered and complex. Therefore, the United Nations developed its own guidelines in the form of its 17 Sustainable Development Goals.

According to consulting firm PwC, the annual global investment volume required to achieve these goals is $7trn. Currently, only one seventh of this immense amount is financed by public funds. Thus, the financial sector, particularly banks, must play a central role in mobilising and channelling these resources. This brings with it great responsibility, but also huge opportunities.

Change comes from the top
Sustainability must be embodied in corporate culture and promoted at the strategic level, with commitment coming from business leaders. This is precisely where the strength of Liechtenstein’s financial centre comes from. Consequently, acting in a responsible manner, with long-term outcomes in mind, is a distinguishing feature of the country’s economic landscape.

In Liechtenstein, sustainability is broadly enshrined in policymaking and upheld by the population, reflecting the importance that has traditionally been placed on acting in a sustainable and responsible way. Hence, Liechtenstein and its banks are perfectly positioned to play an active role in guiding the world towards a more sustainable economy. They have shown in the past that they are not just able to talk the talk, but are prepared to walk the walk too.

As proof of their commitment to sustainability, many banks operating in Liechtenstein have set up their own sustainable commitments. For example, LGT’s social and corporate responsibility initiatives focus on the UN’s Sustainable Development Goals. The agenda outlines 17 goals that encompass economic, social and environmental domains, forming the scaffolding of LGT’s sustainable objectives.

Meanwhile, the Liechtensteinische Landesbank offers an ecological and renovation mortgage, which invests in new buildings that meet Minergie energy standards. Neue Bank has also launched a sustainable investment option, in the form of its Primus-Ethics mandate. The asset management product places investment in morally irreproachable securities.

Asset managers and private banks can generate a much greater leverage effect through balance-neutral transactions, incentivising companies towards more sustainable behaviour than is possible through lending alone.

Creating clear guidelines
While some progress has been made, Liechtenstein’s banking sector has not yet achieved its sustainability goals. A major challenge will be to use technology to transform the economy’s environmentally friendly credentials. Younger generations will play a key role in this respect. Schroders’ 2017 Global Investor Study shows that 52 percent of Millennials often or always invest in sustainable funds, compared with 31 percent of Baby Boomers.

Millennials are not only interested in short-term performance, but also in whether their money is being invested in a meaningful and responsible way. What’s more, for this generation, the daily use of digital technology is a given.

The combination of these two factors is set to be a powerful force in the finance sector. The banks and economies that take advantage of the Millennial mindset will find their sustainable transformation significantly more effective.

Additionally, asset owners will be crucial for a more sustainable future. Their preferences ultimately decide how capital is channelled into the economy. At present, there is no commonly agreed definition of sustainable investment. The taxonomy that is currently being developed under the leadership of the European Commission aims to establish an EU-wide classification system.

With a robust and workable definition, banks and other stakeholders will be better equipped to enhance awareness, deliver on investors’ preferences and improve investment advisory and suitability.

The Liechtenstein Bankers Association aims to help the country develop into one of the leading financial centres in sustainable finance. We want to be part of the solution, not the problem. Ultimately, we must make a real impact for the benefit of our clients, future generations and the planet.

Building a bright future for Kuwait

Posted on by Ashton Wenborn

The global economy is changing: technology is becoming more deeply integrated into everything we do; the invisible hand of the market is ever-changing in its preferences; and geopolitics is, as always, casting its shadow across global financial systems. The government of Kuwait and Kuwait International Bank (KIB) understand that it is not possible to stand still amid these moving tides. In order for the economy to grow, we need to understand the dynamics of global finances and be flexible in matching them.

Kuwait aims to strengthen its private sector and drastically increase investment from outside the country

Kuwait has successfully made changes and commitments that will help navigate these coming changes, while also improving the economy’s standing in the international system. In fact, Kuwait’s entry into the upper tiers of the global economy is being carried out against the backdrop of its Vision 2035 plan, which was launched in 2017 as a blueprint for diversifying the economy. As with similar plans like Saudi Arabia’s Vision 2030, Kuwait aims to strengthen its private sector and drastically increase investment from outside the country.

Rising stock
Over the past year, the Kuwait stock exchange, Boursa Kuwait, has been among the best-performing markets in the Gulf Cooperation Council (GCC). In 2018, it advanced its plans to attract international investment via the progressive implementation of international standards, thereby bridging the gap between Boursa Kuwait and the best-performing stock exchanges in the world.

This progress was perhaps best demonstrated by Kuwait’s transition to secondary emerging market status within the FTSE Global Equity Index Series. During a semi-annual review that took place in September 2018, the first half of the market transitioned, and was followed in short order by the second half in December.

Boursa Kuwait’s rapid ascent does not stop there. According to S&P Dow Jones, Kuwait is on track for an upgrade to emerging market status. London-based MSCI, for its part, is also weighing a potential reclassification of Kuwait from being a frontier market to an emerging market.

The exchange has also taken steps to drastically improve its transparency and liquidity, and to increase the number of shares traded by reclassifying its indices. Creating a transparent environment for trading has strengthened confidence in the market itself. The comprehensively supervised mechanisms that Boursa Kuwait has implemented have effectively removed any lingering doubts buyers and sellers may have had about participating in the market.

Further, Boursa Kuwait is increasingly important for the country’s long-term economic prospects. As a result of the significant efforts that have been made to reform it, stocks traded in the market are increasingly attractive to both Kuwaiti and international investors. It is one of the largest stock exchanges in the MENA region, and the country’s economic prosperity is further reflected in its position among the top 10 countries in the region in the World Bank’s Doing Business 2019 report.

Since the stock exchange was privatised, its transition into a competitive trading platform in the region has required the implementation of numerous tools and mechanisms. Today, the stock market has more efficient and accessible capital from both within and outside Kuwait as a result.

Foreign investment
The progress already made does not mean that the country is not taking additional steps to accelerate its climb. A medley of strict standards, international best practices and legislative measures are being implemented across the country to further pry open the floodgates to foreign investment.

The structural modifications made to the stock market, in tandem with changes to the legislative framework governing it, have paved the way for foreign investment. Foreign ownership of local banks, for example, was previously banned before the passing of Decree 694/2018.

An influx of foreign money has had a marked effect not just on capital markets, but on the entire economy, as envisioned in Kuwait’s long-term development plan. Currently, indirect foreign investment stock in Kuwait stands at around $800m. Additionally, Kuwait is one of several Gulf nations whose governments have pivoted towards digitalisation.

This trend is bringing modern technological systems to markets that foreign investors might have otherwise perceived as static or antiquated.
Technological change has not only been pushed at the governmental level, but also by financial institutions that have been at the forefront of the digital revolution. Innovation is both encouraged from the top down and grown organically from the ground up, which in turn is driving innovative business models across the Kuwaiti economy.

Moreover, Kuwait’s high level of political stability had been recognised by the major credit agencies, which see the country as having low political risk. Moody’s has given Kuwait an Aa2 rating, reflecting its strong investment opportunities. Increased investment flows have already had the knock-on effect of stimulating entrepreneurship and creating new businesses, which has then led to increased job creation. Programmes that have been initiated across Kuwait to feed the private sector have further buttressed this.

Human capital
For KIB, a crucial pillar of Vision 2035 is ‘creative human capital’, as it aligns with one of the bank’s core driving principles: supporting Kuwait’s national workforce. It is to this end that KIB has developed a series of training programmes for its staff and devoted significant resources to developing its employee base.

The bank has also implemented a comprehensive financial literacy programme for the wider community, with the aim of improving financial and economic awareness. In so doing, KIB is effectively investing in the future of the country’s financial system, as incoming employees are more in tune with how the economy works. The aggregate effect of this education will benefit not just Kuwait’s financial sector, but every industry in the country.

Human capital is the foundation of financial prosperity, and nurturing it is as important as any investment that can be made. Economies are, after all, managed by humans, and it is only through their success that economies grow. Through such investments, economic growth is not only achieved faster, but more sustainably, as workers become more productive and technologically savvy.

Oil prices
Like most Gulf states, Kuwait’s economy has historically been heavily dependent on its oil revenues. The government is well aware of the fluctuating nature of oil prices and the effects they can have on the economy. This was most starkly demonstrated in 2014 when the price of oil crashed due to high global production, the effects of which were felt not just in Kuwait, but across the Gulf.

Daily oil prices in 2018 were relatively unpredictable, and thereby acted as a function of unprecedented volatility in the market. The macroeconomic, geopolitical and technological factors that have caused instability in oil prices are not expected to see any meaningful change any time soon – these factors include a decrease in aggregate global economic growth and oil consumption.

This slowdown is reflected in industrial activity and freight transportation, which is expected to expand at a slower pace over the next year. Another is increasingly weak demand for oil in Europe and Asia: this can be attributed to environmental concerns and the accelerating uptake of renewable energy, which is maturing to the point of not needing government subsidies.

Separate from the demand-side factors, supply-side considerations include OPEC policies and the growth of shale production in the US, as well as sanctions imposed by the US on oil-producing nations. Kuwait has taken steps to mitigate these effects. In the near-term, the country’s sovereign financial reserves will continue to act as a buffer that softens economic shocks. Sovereign wealth vehicles like the Kuwait Investment Authority provide other revenue streams that reduce the country’s reliance on oil income.

In the long term, the government has a number of fiscal reforms in the pipeline that will apply more stringent measures aimed at bringing government debt under control and spurring economic growth. These reforms include the slashing of unnecessary expenses and the implementation of a value-added tax. The country’s budget will also be restructured to absorb market volatility. Below the governmental level, companies will have to further their technological advances while maintaining strict market discipline and improving their productivity.

Over the next year, we expect Kuwait’s economy to grow despite challenges posed by oil fluctuations and low prices. The fact that Kuwait is largely dependent on oil revenues also means that the country’s finances are heavily influenced by factors outside its full control. One of the more important external factors are policies set forth by OPEC – namely, the level of oil production agreed upon by the organisation. To stabilise prices, OPEC has already made efforts to decrease oil production in a bid to balance the market, carrying out a round of production cuts that took effect in January.

Naturally, steering the economy towards more private sector activity, as well as exploiting other potential markets, will continue to grow as national priorities. The first steps have already been made, and for Kuwait, the only way is up. KIB has been at the forefront of Kuwait’s financial relations with the rest of the world since its creation in the early 1970s and will continue to lead the way for decades to come.

How AVANGRID is working to meet the world’s growing electricity demands

Posted on by Ashton Wenborn

Electricity is essential to our lives today: our connected world, our economy and our society depend on it in a way we never have before, and this will intensify as we embrace innovations like electric vehicles. At the same time, more intense weather patterns are testing our infrastructure in new and challenging ways. Meanwhile, policymakers are looking for ways to lower CO2 emissions and employ clean energy solutions. These trends provide an amazing opportunity for energy companies like AVANGRID to lead the way in delivering safe, reliable and clean energy to meet changing demand.

According to the US Energy Information Administration, the use of wind, solar and other renewables is projected to increase by nearly a third by 2050. However, the shift to renewable energy brings its own set of technical challenges, to which the industry must adapt. Responding to these challenges – and capitalising on the opportunities that arrive with them – requires us to think differently. That’s why AVANGRID embraces innovation as a core value. We invest significantly in talent and technology to unlock innovation across our businesses. Moreover, we have implemented a corporate governance system that firmly entrenches a commitment to sustainable development and ethical conduct – guiding everything we do.

Clean future
AVANGRID is a young company, formed in 2015 from the merger of Iberdrola USA and UIL Holdings. Today, it is listed on the New York Stock Exchange and has approximately $32bn in assets and operations across 24 US states. While AVANGRID’s utilities have been providing electric and gas services to communities on the East Coast for more than 150 years, we are also at the forefront of the transition to a clean energy future. In addition to our focus on bringing innovation to our utility business, the company is a leader in renewable energy through Avangrid Renewables, which owns and operates 7.1GW of electricity capacity and is the third-largest generator of wind power in the US.

More intense weather patterns are testing our infrastructure in new and challenging ways

At almost nine times lower than the US utility average in terms of CO2 emissions intensity, AVANGRID is among the cleanest energy generation companies in the country. We have also pledged to achieve carbon neutrality by 2035. Further, we are investing in better, smarter, stronger power grids that are hardened against extreme weather and can be restored quickly after sustaining damage.

As one of the largest US operators of renewable energy facilities, with approximately 6.5GW of installed renewable capacity, AVANGRID is already at the cutting edge of the clean energy revolution. Now, we’re turning our attention to the largely untapped resource of offshore wind.

The US is ripe for development in this field, particularly in the Northeast corridor, where wind potential is among the best in the country. Currently in the permitting stage, Vineyard Wind – Avangrid Renewables’ joint venture with Copenhagen Infrastructure Partners – is poised to develop an 800MW offshore wind farm off the coast of Massachusetts. With construction due to begin later this year, it’s expected to be the first large-scale offshore wind farm in the US at the start of operations in 2021.

Vineyard Wind and AVANGRID have also won Bureau of Ocean Energy Management lease sales and rights to develop wind farms on additional sites off the coast of Massachusetts and North Carolina. Meanwhile, other East Coast states, including Connecticut, New York and New Jersey, have announced requests for proposal in a bid to bring more offshore wind energy to their power grids.

As part of the global Iberdrola Group, AVANGRID is well positioned to kick-start the industry’s development. Indeed, Iberdrola has the global experience and expertise to help develop offshore wind capacity in the US. Incidentally, offshore wind power is one of the key drivers of Iberdrola’s growth, with 544MW of installed capacity as of 2017, mainly in the UK, Germany and France.

Pioneering solutions
As renewables account for an ever-growing share of the national energy portfolio, we’re imagining new ways to deliver their full benefits to our customers. One such initiative is Avangrid Renewables’ new ‘green’ Balancing Authority, which launched in 2018. The Balancing Authority allows Avangrid Renewables to deliver a tailored blend of energy from various sources to customers in western US states, thereby ensuring a stable, low-carbon supply.

$32bn

AVANGRID assets

24

Number of US states in which AVANGRID has operations

6.5GW

AVANGRID’s installed renewable energy capacity

Another project, still in the approval phase, seeks to capitalise on the growing demand for clean energy in New England and the availability of abundant hydropower resources in Canada’s Quebec province. New England Clean Energy Connect proposes to deliver up to 1,200MW of clean, reliable hydropower via a transmission line running from the Quebec border to Lewiston, Maine. If approved, the project will be New England’s largest source of carbon-free electricity through 2063 and beyond. Moreover, it is expected to produce nearly $1bn in economic benefits for Maine through to 2027.

As the energy industry responds to the call for more clean generation, transformational change is also underway on the distribution side of the business, which manages the grid that brings electricity to homes and businesses. The proliferation of private solar power and the rise of electric vehicles, among other trends, threaten to upend decades of conventional wisdom about managing demand and loads on electric grids. Energy companies are challenged to accommodate these new demands on existing infrastructure, while providing customers with opportunities to reduce their energy usage too.

In New York, Avangrid Networks companies recently launched four pilot programmes to evaluate how energy storage systems can help offset load during system ‘peaks’ – when grids are near capacity and energy prices are high – and take advantage of low-cost energy supplies available during low-demand periods.

These systems use batteries to store energy when demand and costs are low, and either return that energy to the power grid or deliver it directly to end users to offset system peaks. For instance, the battery-supported electric vehicle chargers recently installed in Rochester, New York, can provide a quick charge without taxing the grid, and then recharge when demand is low. A similar concept is being tested at the circuit, substation and individual customer level. Broadly applied, these technologies could help Avangrid Networks companies to use existing infrastructure more efficiently, thus avoiding the need for costly upgrades, while also helping to shift demand to periods when clean energy is available at low cost.

We’re also employing new technology to empower customers to better manage how they use energy, thus helping them to reduce their overall usage and lower their costs. Digital smart meters, coupled with web-based customer portals, provide customers with insights into how they use energy, so they can discover opportunities to save. These tools also support programmes and technologies that can incentivise customers to shift some of their energy usage away from peak times. They can even unlock the prospect of improving grid efficiency through remote energy management.

Safe, reliable service
All of these efforts contribute to our provision of a modern and resilient grid that is capable of delivering energy to customers safely and reliably. We are already seeing the impact of increasingly frequent and severe storms on the power grids we operate, so we’re taking action to protect our customers from absorbing the brunt of these weather effects.

In 2013, floodwaters from Hurricane Sandy threatened to inundate a critical power substation in Bridgeport, Connecticut, which could have potentially left thousands without power for weeks. Since then, we’ve launched a project to relocate that substation to higher ground. It is expected to be in service at its new location by 2021.

In New York and Maine, we’ve proposed a $2.5bn, 10-year ‘transforming energy’ initiative to harden our power grids against storms. These measures aim to reduce storm-related outages through accelerated pole replacement, increased preventative vegetation management, and the installation of independently powered microgrids that can keep critical facilities up and running, even when the surrounding power grid goes dark. This initiative includes a full rollout of smart meter systems to electric
customers in New York.

AVANGRID is also taking action to protect customers from the growing threat of cyberattacks, which, if unchecked, could disrupt our systems or even damage our electric and natural gas infrastructure. Through ongoing collaboration with our industry peers, regulators and other partners, we are working to detect attacks and prevent them from endangering the energy grid we all rely on.

Our leadership team is engaged with industry groups, such as the Edison Electric Institute, the American Gas Association and the North American Electric Reliability Corporation (NERC), to combat this issue. We also participate in joint training and drills, such as NERC’s biennial GridEx grid security exercise, to share information and maintain a high level of readiness. Meanwhile, our employees receive annual cybersecurity training that teaches them to recognise and report potential cyberthreats, including malware spread by email, which could leave the organisation vulnerable to intrusion.

Through our scholarships, internships, partnerships with top universities and employee development programmes, AVANGRID actively invests in the next generation of energy leaders, who have the skills and talent to rise to the energy challenges of the future. At our annual Innovation Challenge, AVANGRID employees partner with students from top universities to compete for scholarships and cash prizes in a competition, where they propose solutions to some of the sector’s most profound issues. We see this as a model for how our company and the industry can develop the forward-thinking mindset necessary to adapt to a fast-changing energy landscape.

We live in a world that’s rich in resources and alive with energy. Our challenge is to have the vision and imagination to use them productively and wisely. By harnessing renewable technology, investing in modern, reliable infrastructure and focusing on innovation, AVANGRID is well positioned to lead the industry into a clean energy future.

The booming battery market brings significant opportunities to mineral-rich Finland

Posted on by Ashton Wenborn

The forecasted increase of electric vehicles (EVs) is huge: according to the International Energy Agency, there will be around 125 million EVs on the road globally by 2030. The battery market is surging in parallel, with the raw materials market set to join it. However, until circulation technology is developed further and totally new battery technologies appear, there is sure to be a shortage of primary raw materials, such as cobalt.

The Finnish mineral potential is substantial, particularly for lithium, cobalt, nickel and graphite

In Europe, Norway is racing ahead in terms of EVs, but China will soon become the frontrunner on a global level. Even so, other markets are making progress of their own. Finland may only be a small economy, but it has notable strengths in the development of battery technology, particularly in terms of raw materials, chemicals, control systems and industry machinery. Collectively, Finland and Sweden control close to 80 percent of the global underground mining equipment market. Nevertheless, the battery challenge facing the EV market is a global one, meaning that all countries, big and small, must contribute to solving it.

Buried treasure
Finland is already a major producer of battery metals in Europe. For mobile batteries, the Finnish mineral potential is substantial, particularly for lithium, cobalt, nickel and graphite. The known lithium reserves in Finland are around 20 percent of the global total. Further, Finnish mining company Keliber is now developing a new lithium mine in the west of the country and estimates that it will start production in 2020.

125m

Electric vehicles globally by 2030

80%

of the global underground mining equipment market is controlled by Finland and Sweden

20%

of global lithium reserves are located in Finland

13%

of global cobalt chemicals are produced in Finland

At present, global cobalt production is very much concentrated in the Democratic Republic of Congo, which contributes more than 50 percent of overall global production – a figure approximately equal to the amount currently used by the battery industry. The supply risk of depending so heavily on one market is obvious. Further, if the current growth scenarios for EVs materialise, primary cobalt production must increase by more than 10 times what it is today.

Globally, only one percent of cobalt supply is obtained from primary cobalt mines – the rest is a by-product of copper and nickel ores. Currently, Finland is the biggest producer of cobalt in Europe, with all the country’s cobalt associated with copper and nickel ore minerals. Annual cobalt production in Finland is approximately 2,000 tonnes, and is mainly produced by mines in Sotkamo and Kevitsa. If all reserves are converted to useful resources, Finnish cobalt production could reach approximately two percent of global production within a few years.

Today, the most promising exploration and mine development project is Anglo American’s Sakatti multi-metal mineralisation in central Lapland: the reported grades are high, and the potential reserves are large. In addition, the Geological Survey of Finland is currently mapping potential ore reserves for cobalt, copper and nickel across possible metallogenic areas. In addition to lithium, nickel and cobalt, Finland is also likely to have graphite reserves on a significant scale.

Unearthing potential
Freeport Cobalt in Kokkola, located in the west of Finland, is the biggest cobalt refinery in the world, with an annual production of 10,000 tonnes – slightly less than 10 percent of global production. Alongside Nornickel’s refinery in Harjavalta, this means that Finland is producing approximately 13 percent of global cobalt chemicals. Currently, Terrafame’s cobalt is sold as part of nickel concentrate, but the company has decided to invest close to €300m ($339m) for a cobalt and nickel sulphate plant, with production scheduled to start in 2021. In addition to its mining operation, Keliber is also constructing a chemical plant to produce battery-grade lithium hydroxide, which is also scheduled to start production by 2021.

Given these developments, I believe Finland is well on track to further develop its battery sector. In the fields of primary mineral production, chemical production, battery control systems, and the electrification of machinery in mining, forest and maritime environments, Finland can be a leader in Europe. That being said, car production in Finland is marginal, and having a battery gigafactory in the country could be challenging.

In Finland’s favour is its enviable investment environment: the country has good infrastructure, is politically and economic stable, and the corporate tax rate is very attractive, at only 20 percent. The research and development landscape and accompanying financing routes are well developed, and the country’s entrepreneurial mindset is engineering-focused. These ingredients are necessary for any industry cluster, and especially for the complex battery value chain.

Electrification and green energy solutions are essential and are sure to happen sooner or later. We will see new technological breakthroughs and their deployment in industrial products faster than we thought possible. The future offers a lot of opportunities to create new innovations and businesses in this area – when it arrives, Finland will be leading the way.

Cities must adapt quickly to accommodate the flood of people moving to urban areas

Posted on by Ashton Wenborn

Dick Whittington was by no means the first or last person to journey to London to discover whether the streets really were paved with gold. According to Trust for London, an estimated 426,637 people from both the UK and abroad moved to the city between 2014 and 2015, the latest period for which figures are available. The trend is not limited to the UK either: according to StreetEasy, more than 264,000 people moved to New York between 2017 and 2018, while, according to Federal Reserve Economic Data, 146,542 made Hong Kong their home in the first six months of 2017.

This influx of opportunity-seeking people has left many cities bursting at the seams, with ageing public and private infrastructure creaking under the weight of new residents. From transport to irrigation, education to healthcare, it’s clear that a wide variety of facilities are in need of modernisation. What is less certain is who is responsible, or how best to go about it. The answer to these questions may lie in consultation and collaboration, in order to ensure that urban landscapes advance in a way that improves the lives of residents.

Talking it out
One of the greatest issues that befalls cities today is a lack of engagement between those building infrastructure and those they are building it for. When this feedback loop functions effectively, it’s a powerful tool that can be used to shape the fabric of cities. In France, for instance, the Commission Nationale du Débat Public (CNDP) hosts early-stage debates on potentially contentious developments, with all interested parties given equal resources to make a case. Of the 61 projects debated by the CNDP between 2002 and 2012, 38 were significantly modified.

“One of the issues is a lack of engagement between those building infrastructure and those they are building it for”

However, in many cases, these consultation structures are not so well implemented. In AECOM’s 2019 The Future of Infrastructure report, which surveyed more than 10,000 residents in 10 global cities, 52 percent of respondents said that requests for feedback on infrastructure improvement or investment came at too late a stage to be meaningful. By having the opportunity to comment, but not enact change, on ill-designed or poorly suited projects, urban residents have the worst of both worlds – they may be forced to live with infrastructure that they know could do more harm than good.

When it comes to commercial and residential projects, the picture is bleaker still. While some considerate developers do take the time to consult with local residents, these companies’ own business interests remain the predominant driving force. “The commercial fundamentals for each side are: what the developer can get planning permission for; how much it would cost to deliver the finished project; [whether] there is a market for the proposed development and how much income will be generated; and [whether] the site can be bought at a price that leaves a sufficient margin…to make it viable,” explained Don O’Sullivan, CEO at property developer Galliard Group.

Generating profit in urban landscapes, though, is hugely challenging. Availability of land stock is often very limited, and developers can be forced to pay extortionate amounts for plots, which is then transferred to the final purchase price. In San Francisco, for example, land is so scarce that the plot itself can account for up to 80 percent of a home’s cost.

This often results in an affordability gap between what potential tenants or buyers can afford and what developers are willing to accept for newly constructed properties. Some developers are dissuaded from taking on new projects in the fear that they will not draw profit or even recuperate the significant upfront costs involved in development; this then leads to a shortage of available homes. “The massive undersupply of housing is what drives up the price of sites and – by consequence – the finished homes,” said O’Sullivan.

Conflict of interests
In urban areas, developers must also ensure that land is safe and ready to be built upon. “Every site is ‘brownfield’ in London, and the other urban locations where Galliard work, so there is always some element of demolition and contamination to manage,” said O’Sullivan. This previously developed land not currently in use generates an additional cost burden: in the US, for instance, the average per-site cost for brownfield treatment is an estimated $602,000, less than a third of which is covered by a government grant.

426,637

people moved to London between 2014 and 2015

264,000+

people moved to New York between mid-2017 and mid-2018

146,542

people moved to Hong Kong in the first six months of 2017

In a bid to obtain lower-cost land, some contractors have advocated for the development of green space – an option that is unpopular with city residents. There are a huge number of benefits in preserving urban parks, from providing outside areas for exercise to reducing city pollution and boosting the mental health of residents.

The fact remains, though, that they are expensive to maintain, and do occupy valuable land that could be utilised for high-density housing. For instance, the average size of a studio apartment in Manhattan is 550sq ft – if Central Park, which is around 34 million square feet, were to be completely developed, there would be space for almost 62,000 studio apartments just at ground level, without accounting for skyscrapers.

On the other hand, New York residents would lose all of the health and environmental benefits derived from urban green space. Aligning social, ecological and economic goals is near impossible in this regard.

Another option for developers is to build homes further away from transport links. Again, this is problematic as prospective buyers or tenants are then forced to endure longer commutes – and they expect a price reduction on housing as a result. Additionally, developers are less likely to obtain planning permission for inaccessible sites. “Access to transport links always positively influences sales prices, but in London it also affects planning – there is extra weighting attributed to sites with good public transport options nearby,” O’Sullivan explained to World Finance.

In pursuit of collaboration
It’s clear that more alignment between commercial, governmental and public interest is needed – and that begins with creating opportunities for all stakeholders to have their say. Similarly, the success of this endeavour relies on an understanding that the growing popularity of cities necessitates additional infrastructure development, and any reticence about that is simply not a productive attitude. “Our general experience is that almost every politician wants more housing built – as long as it is not next to where their voters live,” said O’Sullivan. “If communities campaigned to encourage development in their area, the world would look very different.”

One potential solution is increasing private sector involvement in public infrastructure projects. This would allow developers to have their say on proposals relating to transport or energy systems, for example, and would remove some of the logistical barriers to residential construction and building management. It’s certainly popular with urban residents – 63 percent of respondents in AECOM’s survey wanted more private sector involvement in city infrastructure. They hoped this could contribute to better financing, development, delivery and management in public facilities, which – given that 61 percent of respondents experienced power outages and 43 percent suffered an interruption to their water supply in the past year – is clearly needed.

63%

of AECOM survey respondents want more private sector involvement in city infrastructure

61%

of AECOM survey respondents have experienced power outages in the past year

43%

of AECOM survey respondents have experienced interruptions to water supply in the past year

O’Sullivan explained that Galliard already contribute financially to infrastructure development in the form of tax, which amounts to “tens of millions [of pounds] annually”. As for delivery and management, he told World Finance that there used to be a private finance initiative (PFI) to do just that, but it was “formally killed off by the UK Government in 2018”.

PFIs, which allow private sector companies to invest in public infrastructure, were pioneered by the UK and Australian governments and have found particular success in Spain: both the Parque Forestal de Valdebebas in Madrid and the Ciutat de la Justícia in Barcelona were built under PFI contracts. The Parque in particular has significantly boosted Madrid’s environmental credentials: built on the site of a former illegal dump, it now removes an estimated 1,250 tonnes of carbon dioxide from the air every year, according to Foro Consultores Inmobiliarios. This not only alleviates pollution for city residents, but also facilitates property development in the area by replacing what was previously an eyesore with a selling point for construction firms. However, if PFIs are mismanaged – as was the case in the UK with companies like Carillion – they can collapse, leaving the taxpayer to foot an extortionate bill.

The success of joint projects like PFIs relies upon all stakeholders working collaboratively to ensure that urban infrastructure is fit for purpose for both current and future residents. After all, in the majority of countries, thriving cities are the lifeblood of the national economy – they are the birthplace of technological innovation, the lynchpin of financial markets and the setting for transformative political decisions. It is imperative that urban spaces are constructed to underpin their purpose.

Top 5 emerging fintech hubs across the globe right now

Posted on by Ashton Wenborn

Fintech is proving to be one of the most fruitful sectors for venture returns. According to Juniper Research, fintech companies will generate $638bn in revenue in 2024, a 143 percent growth on estimated revenues for 2019.

As Brexit uncertainty clouds the prospects of one of the world’s financial capitals, London, there is a growing interest in the fintech hubs emerging elsewhere. Around the globe, cities are opening their doors to foreign investment and creating incentives for start-up creation, all in the hope of tapping into this burgeoning market. According to a survey by Startup Genome, these are among the top emerging fintech hubs to watch right now:

 

1 – São Paulo
Brazil has more fintech start-ups than any other Latin American country, and most of them are consolidated in the country’s financial centre, São Paulo.

Home to the European Central Bank and more than 200 banks – most of which are foreign – Frankfurt plays an important role in the EU’s financial system

Owing partly to a decade-long financial crisis and the high concentration of power in the country’s five largest banks, many Brazilians have become distrustful of traditional banks, having come to associate them with high interest rates and bureaucracy. As a result, approximately 40 percent of Brazilians are excluded from traditional banking services. This has made the city a thriving space for disruptive fintech start-ups.

One such start-up is Nubank, a Brazilian online bank and credit card operator, which is currently one of the most highly valued privately held start-ups in Latin America. Over the next 10 years, Brazil’s fintech market is projected to generate potential revenue of up to $24bn.

 

2 – Lithuania
One country poised to see an explosion of opportunities after Brexit is Lithuania. In February of this year, the country saw around 100 British financial companies apply for a licence in the country. This is in part because Lithuania has been creating a favourable regulatory environment to help start-ups flourish. For instance, the Bank of Lithuania’s regulatory sandbox allows firms to test new technology before releasing their products to the market.

The country also has the shortest waiting time for e-money or payment licences in the EU. As such, the World Bank placed Lithuania 14th out of 190 countries in its Ease of Doing Business index in 2019. With the number of fintech firms in Lithuania having doubled between 2016 and 2018, the country appears to be well on its way to becoming a leading fintech hub.

 

3 – Estonia
Estonia has one of the highest rates of start-ups per capita in Europe. According to Startup Genome, 29 percent of all jobs created by these start-ups are within the country’s fintech industry. One of the most prolific unicorns to emerge from the Baltic country is international money transfer company TransferWise, which raised $280m in investment in 2017.

This surge in start-ups has in part been driven by Estonia’s e-residency programme, launched four years ago, which allows people to register a business in Estonia from anywhere and run it remotely. The government also created the Startup Estonia initiative, which provides training programmes for start-ups and education for investors.

Furthermore, Estonia is considered to be one of the world’s most advanced digital societies. According to CNBC, 99 percent of its public services are available online and it has stronger broadband than many countries across the developed world.

 

4 – Frankfurt
Home to the European Central Bank and more than 200 banks – most of which are foreign – Frankfurt plays an important role in the EU’s financial system. As a result, the city is well-placed to attract cutting edge start-ups. The business community in the country encourages such ventures through a number of programmes, including accelerators and corporate involvement initiatives. In 2016, Deutsche Bank launched Digitalfabrik, which supports the development of digital banking products, while platforms like TechQuartier have been created to connect start-ups with banks, investors and mentors.

Financial institutions and newcomers alike are keen to drive innovation, partly inspired by the city’s start-up success stories. Perhaps the most well known of these is 360T, a foreign exchange trading platform. In 2015, Deutsche Böerse bought 360T for $796m in Germany’s largest start-up acquisition at the time. Although Berlin is still largely considered the tech centre of Germany, it appears Frankfurt is quietly fostering a start-up ecosystem that could one day rival the capital’s.

 

5 – Bengaluru
Bengaluru (previously Bangalore) is anticipated to become one of the next big tech hubs. One of Asia’s fastest growing start-up ecosystems, the city is home to 438 fintech start-ups and has been dubbed the ‘Silicon Valley of India’. One such start-up is Bengaluru-based Zerodha, an online broker that has transformed stock trading in India.

While fintech is in its early stages in India, the opportunities are rapidly growing. The country recently overtook China as Asia’s top fundraising hub for fintech. These opportunities are especially exciting in areas such as payments, which constitute the largest share of fintech start-ups in India. As a testament to the country’s potential, Mastercard is planning to invest $1bn in India over the next five years and has opened offices in Gurgaon and Bengaluru.

Zurich Insurance takes care of Turkey’s population

Posted on by Ashton Wenborn

Last year was challenging for all emerging markets, including Turkey. A strong dollar, high interest rates in the US, trade wars and political uncertainties in developed markets all led to deterioration in risk perception. In response, emerging market currencies were negatively impacted due to massive capital outflows by the third quarter of 2018. Fortunately, however, thanks to its economic attributes and resiliency, Turkey recovered quickly and returned to its growth path.

Turkey boasts an extremely favourable demography: its 80-million-strong population, which includes a young, educated and tech-savvy workforce of 32 million, creates momentum for the economy. The government has also implemented crucial structural economic reforms in recent years, which have contributed to a strong banking sector and have had a major impact on Turkey’s resistance to economic shocks. Turkey now has Europe’s lowest debt-to-GDP ratio at around 35 percent, a budget deficit of around 1.8 percent, and low household debt of 17 percent. Overall, the Turkish economy is well diversified, with no dependence on any single industry, commodity or country.

Performance of the non-life insurance segment is directly linked to overall economic activity in Turkey

The Turkish insurance market, which is currently worth around $25bn, consists of three main segments: non-life, life and private pensions. The non-life segment is valued at $10m, making up around 40 percent of the Turkish insurance market. Performance of the non-life insurance segment is directly linked to overall economic activity in Turkey, which has experienced 15 percent annual growth in the past decade, as the economy itself has grown at an impressive rate.

There is potential for further growth, as non-life insurance penetration currently stands at only 1.3 percent of GDP – much lower than the average for OECD countries. Most insurers operating in the segment are foreign-owned or partnered, showing it is a popular area of investment for foreign companies.

The success story
As the result of an acquisition, we entered into this high-potential non-life segment as Zurich Insurance Group in 2008. Since then, we have invested over $500m in the sector. Through a very effective restructuring programme that launched in 2013, our performance has become a huge success story. Based on the latest market results, today we are the most profitable company among international players in Turkey’s non-life market.

Our strategy of focusing on bancassurance and partnerships plays a key role in this best-in-class performance. Zurich’s mission is to be the most successful insurer in terms of initiating and managing partnerships. As the only company with two exclusive bancassurance partners in the market, we reach almost six million customers across 2,000 points of distribution. We are also second in Turkey’s insurance market in terms of branch productivity, and have almost a 10 percent market share in bancassurance in the lines of business in which we are strategically active.

35%

Turkey’s debt-to-GDP ratio

1.8%

Turkey’s budget deficit

17%

Turkey’s household debt level

Our success is not limited to financial performance either. Over the past five years, our Net Promoter Scores have improved by almost 60 percent, as we actively listen to our customers and take action accordingly. This high-quality performance has been recognised externally as well: Turkey’s most popular online customer request communication platform, Sikayetvar, recognised us as the top insurer in their Achievement in Customer Excellence Awards in both 2017 and 2018.

At Zurich Turkey, we have a broader view of our customers: ‘external customers’ are our end customers and distribution partners, whereas ‘internal customers’ are our employees. As a result, we give equal weight to ensuring our internal customers are happy, and we aim to help them achieve their very best – something that is crucial to our success.

The numbers speak for themselves: since 2013, our employee engagement scores have improved by almost 65 percent, which made us the best rated in terms of employee engagement among all Zurich Group markets and a case study for global best practice. Furthermore, our voluntary turnover ratio has decreased from 25 percent in 2013 to around 10 percent in 2018.

A crucial aspect of this success story is sustainability, which is only possible with a strong governance environment. Our risk and internal control teams work very closely with the business, actively managing risks and proactively taking necessary measures. This environment ensures best performance in a sustainable manner.

An innovation pioneer
Actively listening to customers is not the only reason behind Zurich Turkey’s excellence in customer satisfaction. Our goal is to always offer the most innovative products and services to our customers. For instance, with digitalisation becoming increasingly common in the Turkish market and cybersecurity becoming a big concern as a result, we have acted swiftly to become a pioneer in cyber insurance.

We are the first company in the market to have developed and launched a cybersecurity insurance product for individuals and small-business owners. This is a new-generation product, which not only provides coverage for cyber risks, but also helps customers protect their critical information, such as credit card numbers and passwords, from cyberthreats through a web radar service.

As another example, we have developed Turkey’s first all-risk-type product for small-business owners, therefore providing a one-stop shop for their insurance needs. We have also developed a new health insurance product that is unique in the market thanks to its focus on inpatient treatments.

Over the past five years, we have taken a number of actions to foster innovative and customer-orientated service processes. Through the use of artificial intelligence and cutting-edge redesign technologies, we are now able to make claim payments in as little as two days. Further, our average end-customer request resolution time has improved by 70 percent, to less than two days.

Meanwhile, our average bancassurance partner request resolution time has decreased by 60 percent, to less than one hour. We deliver almost all of our policies to our retail customers digitally via SMS, and we have also developed a new mobile interface for our customers, from which they can access our assistance services with just one click. Our customers appreciate all these efforts, as reflected in the improvement of our Net Promoter Scores.

Investing in society’s future
At Zurich Turkey, we strongly believe that business is not just about making profit. We strive to carry out numerous corporate social responsibility (CSR) projects that reflect our values. Our CSR activities are focused primarily on women and children, as we strongly believe that the best form of insurance for a society is the wellbeing and empowerment of these social groups. In this context, we are proud to announce that we have recently started a six-year CSR project that will have a nationwide impact: in collaboration with the Ministry of National Education and the Turkish Education Association, we will be supporting female teachers who are assigned to work in rural villages and towns in remote parts of Turkey.

The objective is to try and reduce the environmental, physical and professional challenges experienced by teachers, to enhance their knowledge, to improve their confidence, and to nurture them as ‘social entrepreneurs’ in their own communities. With this initiative, we aim to reach 1,000 female teachers, more than 30,000 students and 150,000 family members in Turkey by the 100th anniversary of the Turkish Republic in 2023.

We play a vital role in Turkey’s arts and culture scene as well. Since 2014, we have been the insurance sponsor of the Istanbul Foundation for Culture and Arts (IKSV), a leading art foundation in Turkey. Through this partnership, many projects and festivals have been jointly organised. For instance, during the International Istanbul Film Festival in 2018, more than 100,000 people watched around 230 international films.

In the same year, the Istanbul Music Festival hosted around 500 local and foreign artists and was attended by some 16,000 art lovers. Then there was the Istanbul Jazz Festival, which had an audience of 52,000 people watching 450 artists across more than 50 different concerts.

Our partnership with IKSV is not limited to organisation-based sponsorships. At present, we are working together to restore old Turkish movies: we recently restored Silky (ipekce in Turkish) and this year we plan to work on 10 Women (10 Kadin), in which one of Turkey’s most popular actors, Turkan Soray, played a leading role.

We were able to achieve so much in the past six years thanks to our vision, and are well on track to becoming the country’s best insurance company as rated by our clients, shareholders, business partners and employees. As we arrive at this significant milestone, we have also been named as Turkey’s best general insurance company in the World Finance Global Insurance Awards, the sixth year in a row we have been honoured in these awards listings.

Going forward, with our 150 years of insurance know-how and global expertise, we will continue to offer the very best to our customers, providing them with the confidence that they are being well looked after.