Category Archives: Finance

Fishing Poacher’s Rescued on Africa’s West Coast

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Environmental activist group Sea Shepherd said it rescued 40 crew members from a sinking “poaching” ship it was pursuing for months for allegedly illegally fishing in the Southern Ocean, but described the ship’s sinking as suspicious.

Sea Shepherd said its ships Bob Barker and Sam Simon picked up the crew, which included the captain, from life rafts from the Nigerian-flagged boat Thunder.

They had been sailing in the waters of Sao Tome and Principe, an island nation off Africa’s western coast.

“It is an incredibly suspicious situation, to say the least,” Bob Barker’s captain Peter Hammarstedt said in a statement.

“When my chief engineer boarded the Thunder in the hours leading up to the sinking, he was able to confirm that there were clear signs that the vessel was intentionally scuttled.

“Usually when a vessel is sinking, the captain will close all hatches so as to maintain buoyancy. However, on the Thunder, the reverse was done — doors and hatches were tied open and the fishhold was opened.”

Sea Shepherd said the crew were given food and water and were transferred to Sam Simon.

Video recorded by the activist group showed the ship sinking just hours after it said Thunder issued a distress signal on Monday afternoon.

Hammarstedt said Thunder’s captain, who was not named, complained about being rescued and “started applauding and cheering” when the vessel sank.

“We’ve been chasing the Thunder for 110 days now, and I think they’re basically at the end of their fuel, and they would have had to make a port call,” Hammarstedt told the Sydney Morning Herald.

“I think the captain of the Thunder made the decision that he preferred the physical evidence on board… was better on the ocean bottom than going into port with him.”

Thunder, on a list of boats deemed to have engaged in illegal, unreported, or unregulated fishing activities by multi-national body the Conservation of Antarctic Marine Living Resources (CCAMLR), is suspected of illegal fishing for Patagonian toothfish and other rare species in the Antarctic.

Toothfish is sold as Chilean sea bass, which is popular in high-end restaurants. It sells primarily in the United States, Europe and Japan, although there is also a growing market in China.

Fish

Has the US Lost Role as Underwriter of Global Economic System

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Lawrence Summers writes: This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. I can think of no event since Bretton Woods comparable to the combination of China’s effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies, starting with Britain, to stay out.  This should lead to a comprehensive review of the U.S. approach to global economics.

With China’s economic size rivaling that of the United States and emerging markets accounting for at least half of world output, the global economic architecture needs substantial adjustment. Political pressures from all sides in the United States have rendered the architecture increasingly dysfunctional.

Largely because of resistance from the right, the United States stands alone in the world in failing to approve International Monetary Fund governance reforms that Washington itself pushed for in 2009.   At the same time, pressures from the left have led to pervasive restrictions on the infrastructure projects financed through the existing development banks — which consequently have receded as infrastructure funders, even as many developing countries have come to see infrastructure finance as their principal external funding need.
With U.S. commitments unhonored and U.S.-backed policies blocking the kinds of finance other countries want

First, U.S. leadership must have a bipartisan foundation, be free from gross hypocrisy and be restrained in the pursuit of our self-interest.

Other countries are legitimately frustrated when U.S. officials ask them to adjust their policies — only to then insist that state-level regulators, independent agencies and far-reaching judicial actions are beyond their control.

Second, in global as well as domestic politics, the middle class counts the most. It sometimes seems that the prevailing global agenda combines elite concerns about matters such as intellectual property, investment protection and regulatory harmonization with moral concerns about global poverty and posterity while offering little that speaks to those in the middle.

Third, we may be headed into a world where capital is abundant, deflationary pressures are substantial and demand could be in short supply for quite some time. In no big industrialized country do markets expect real interest rates to be much above zero in 2020 or for inflation targets to be achieved.

These precepts are just a beginning. There are questions about global public goods, about acting with the speed and clarity that the current era requires, about cooperation between governmental and nongovernmental actors and much more. What is crucial is that the events of the past month will be seen by future historians not as the end of an era, but as a salutary wake-up call.

US No Longer Global Leaderal

The Impact of Hi Tech in Latin America

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Luis A. Moreno: At the upcoming Summit of the Americas in Panama City, business and government leaders will discuss the economic challenges facing the Western Hemisphere, especially how to support inclusive growth in the wake of the commodities bonanza that endured for the better part of the last decade. Any strategy will have to account for an inescapable global phenomenon: the so-called “Second Machine Age.”

The MIT economists Andrew McAfee and Erik Brynjolfsson, among others, identify the Second Machine Age with the rise of new automation technologies and artificial intelligence. While optimists predict that these innovations will usher in an era of unprecedented abundance, less sanguine analysts estimate that nearly half of all jobs currently performed by humans are vulnerable to replacement by robots and increasingly sophisticated software.

Advanced technologies are already making inroads into some of Latin America’s principal industries. For example, carmakers, which employ hundreds of thousands of people across the region, are rapidly deploying robots that are more efficient and precise than humans. I

Service industries, which already account for two-thirds of all jobs in Latin America, are particularly vulnerable. One Brazilian startup’s tax-management software, for example, can perform in seconds operations that would demand thousands of billable hours from an army of accountants.

Is Latin America ready for this epochal change?

Most notably, Latin American and Caribbean economies must address their productivity gap – the result of their failure, with few exceptions, to boost productivity significantly since the 1960s. As they adjust to lower prices for oil, metals, and grain – and the eventual upturn in global interest rates – they will have to pursue productivity-enhancing reforms. Ensuring that the region’s already-skewed income distribution does not worsen – and, indeed, improves – is also essential.

The good news is that Latin America’s agendas for technology, productivity, and inclusivity overlap; for example, improvements in education and the encouragement of formal employment advance all three objectives.

First, companies can boost their own human capital by providing on-the-job training – a proven tactic that remains rare in Latin America. Here, there has been some progress.

Second, Latin American companies should increase their investment in research and development.

Latin American businesses can change this by emulating their counterparts in the Brazilian state of São Paulo, which have research contracts with leading public universities. Such links, common throughout North America, have helped to lift São Paulo’s R&D spending to 1.6% of GDP – higher than that of Spain or Italy.

Third, Latin American companies can help to improve education – often much faster than the government can implement effective reforms. In Peru, one businessman took matters into his own hands, commissioning the creation of an entirely new education model. Four years later, Carlos Rodriguez-Pastor has established 23 Innova schools, serving 13,500 students, where teachers’ knowledge and skills are continuously updated. He hopes to build a 200-school network in the coming years.

Finally, Latin American business leaders should support budding entrepreneurs, who lack not only the capital, but also the support system needed to turn their ideas into viable ventures.

Von Ahn, a professor at Carnegie Mellon University in the United States, has already sold one innovative company to Google. That company, reCAPTCHA, harnesses CAPTCHAs to have people decode a word from, say, a newspaper article that a computer scanner has been unable to recognize and digitize.

Latin America cannot afford to lose gifted innovators like von Ahn. It is in the interest of established business leaders to help mentor and finance these visionaries, enabling them to flourish at home so that they do not set up shop abroad.

Impact of Technology in Latin America

 

Renewable Energy Makes Economic Sense?

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Klaus Topfer writes:  A silent revolution is under way. In November, Dubai announced the construction of a solar energy park that will produce electricity for less than $0.06 per kilowatt-hour – undercutting the cost of the alternative investment option, a gas or coal-fired power plant.

The plant – which is expected to be operational in 2017 – is yet another harbinger of a future in which renewable energy crowds out conventional fossil fuels. Indeed, hardly a week seems to pass without news of a major deal to construct a solar power plant. In February alone, there were announcements of new solar power projects in Nigeria (1,000 megawatts), Australia (2,000 MW), and India (10,000 MW).

There can be no doubting that these developments are good for the fight against climate change. But the major consideration driving them is profit, not the environment, as increased efficiency in energy distribution and, where necessary, storage, reduces the cost of producing renewable energy.

As efforts to improve the management of electricity from fluctuating sources yield further advances, the cost of solar power will continue to fall. Within ten years, it will be produced in many regions around the globe for 4-6 cents per kilowatt-hour.  By 2050, production costs will fall to 2-4 cents per kilowatt-hour.

We should not underestimate the tremendous potential the sun and wind have for building global wealth and fighting poverty. As solar power becomes increasingly cost-effective, countries located within the planet’s sun belt could develop entirely new business models as cheap, clean energy enables them to process their raw materials locally, adding value – and profit – prior to export.

Unlike large-scale conventional power plants, solar installations can be built in months; in addition to being cost-effective, they provide a quick means of responding to growing global demand.

Solar power plants thus could play the same role for energy that mobile phones did for telecommunications: rapidly reaching large, underserved communities in sparsely populated regions, without the need to invest in the cables and accompanying infrastructure that once would have been necessary. In Africa, 66% of the population has gained access to electronic communications since 2000. There is no reason why solar power could not do likewise for access to electricity.

The time to invest in large-scale solar energy production is now. For starters, construction costs for solar power plants are finally low enough to produce electricity at a competitive, stable price for more than 25 years. The price of oil may have plunged for now, but it will rise again. Solar power plants provide insurance against fossil fuels’ inherent price volatility.

Even more important, the cost of capital currently is very low in many countries. This is a decisive factor for the economic viability of solar power plants, because they need very little maintenance but require relatively high upfront investment. The Fraunhofer study shows that differences in capital expenditure are as important for costs per kilowatt-hour as differences in sunlight. Solar power is currently cheaper in cloudy Germany than in sunny regions where the cost of borrowing is higher.

The amount of sunlight that shines on a country is impossible to change. But the cost of capital is something over which a country can maintain a certain amount of control.

Factors like these explain why international climate policies increasingly focus not only on solar power, but on other forms of renewable energy as well. Technological breakthroughs have boosted these energy sources’ competitiveness relative to fossil fuels. As a result, instruments that make their adoption more affordable are becoming some of the most important weapons we have in the fight against climate change.

What Kind of Bank Helps?

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Kenneth Rogoff writes: With China set to lead a new $50 billion international financial institution, the Asian Infrastructure Investment Bank (AIIB), most of the debate has centered on the United States’ futile efforts to discourage other advanced economies from joining. Far too little attention has been devoted to understanding why multilateral development lending has so often failed, and what might be done to make it work better.

Multilateral development institutions have probably had their most consistent success when they serve as “knowledge” banks, helping to share experience, best practices, and technical knowledge across regions. By contrast, their greatest failures have come from funding grandiose projects that benefit the current elite, but do not properly balance environmental, social, and development priorities.

Dam construction is a leading historical example. In general, there is a tendency to overestimate the economic benefits of big infrastructure projects in countries riddled by poor governance and corruption, and to underestimate the long-run social costs of having to repay loans whether or not promised revenues materialize. Obviously, the AIIB runs this risk.    What Kind of Bank Helps and How

China and Infrastructure?

 

 

Are Bank Holding Companies’ Stress Tests Meaningful?

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In March, the Federal Reserve and thirty-one US bank holding companies announced the results of the latest Dodd-Frank mandated stress tests.   Somehave arguedthat that the bank holding companies have strong incentives to mimic the Fed’s stress test results, since the Fed’s results are an integral part of the Federal Reserve’s supervisory assessment of capital  adequacy for these firms.  Stress Tests- Dodd Frank versus US Fed

Dodd Frank Stess Test 2015

Bank Stress Tests?

US Lags in Numeracy Skills

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On the human-capital side, in 1995 America had the highest graduation rate in the OECD. Now it lags behind seven other countries. President Barack Obama has set a target for his country to return to the top of the graduation league by 2020, but it is unlikely to be met. Young American graduates are below the OECD average in numeracy and literacy, and are doing relatively worse than older ones. Some of the explanation lies with the poor performance of America’s schools, but the most expensive tertiary-education system in the OECD might be expected to help students catch up.

Recent work by American academics suggests that it does not. Richard Arum of New York University and Josipa Roksa of the University of Virginia, authors of “Academically Adrift”, looked at the results of 2,300 students who took the Collegiate Learning Assessment (CLA), a test of critical thinking, complex reasoning and writing, and found that 45% of the sample showed no significant gains between their first and third years. Innumeracy in America

American Education Failing

US and Central Asia

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Casey Michel writes:  The United States is often – and often fairly – maligned for a distinct lack of strategy in its relations with Central Asia. Tacked on to Chinese or Afghanistan policy, bogged in securitization or stilted democratization efforts, Washington has seemed unable to formulate a distinct, coherent policy for the region for years. Unlike Beijing’s economic expansion or Moscow’s military ties, Washington’s Central Asian policy, if one appears, often comes across as an afterthought.

That’s not to say efforts haven’t been made to bring a policy to bear. Earlier this week, Deputy Secretary of State Antony Blinken spoke at the Brookings Institute, attempting to provide a sketch of Washington’s current regional plans. But in lieu of innovation or revamp, Washington appears content to continue along the muddled path it’s followed prior, with stale plans and retread ideas bundled once more.

For instance, Blinken cited the New Silk Road initiative, which has had little impact on the ground in its four years of existence. Pointing to attempts at “helping develop the region’s connectivity,” Blinken cited the CASA-1000 project, which will “help bring surplus hydro-electricity from Kyrgyzstan and Tajikistan to Afghanistan and Pakistan.” The CASA-1000 project, as it is, stands as one of America’s foremost efforts at regional integration – but makes little sense when Kyrgyzstan is a net electricity importer, as it experienced during 2014. Washington hasn’t attempted to explain just how the CASA-1000 will function with Tajikistan as the sole provider of surplus electricity. Blinken didn’t offer any explanation, either.

Blinken also cited Washington’s “three important objectives” in the region: strengthening partnerships to advance mutual security; forging closer economic ties; and advancing and advocating for improved governance and human rights.” The ordering – security foremost – speaks louder than the content. Blinken later reiterated the primacy of security, noting that “our policy in Central Asia [is] founded on two distinct ideas:  US and Central AsiaEveryone Competes for Central Asis

Dutch Banks

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The Economist:  Misreading the public mood can be costly when the government owns your bank, as the directors of ABN AMRO found out last week. The bank has been in the hands of the Dutch state since it was bailed out in 2009 as part of the global financial crisis that also dumped Royal Bank of Scotland in the laps of British taxpayers. The Dutch government had hoped to begin privatising ABN AMRO this autumn—until the news broke that the bank’s directors had awarded themselves a salary bump of €100,000 ($107,000) a year. An outcry in parliament led the directors to forgo their raises and Jeroen Dijsselbloem, the Netherlands’ finance minister, to postpone indefinitely the bank’s return to the markets.

The directors’ error of judgment is perhaps understandable. As in Britain, public sentiment in the wake of the collapse was furious with fat-cat bankers. But the Dutch board had been correspondingly cautious. The directors receive no bonuses, and their raise had been approved by parliament in 2011 but renounced each year until now.

Why, despite the good economic news, is the Dutch public mood still sour? Partly because of a problem that many European governments face: they have not delivered the policies their constituents were promised. The Dutch government, like the German one, is a centrist, two-party grand coalition. In the 2012 election, leftists voted for the largest centre-left party, Labour (PvdA), in opposition to austerity and the dismantling of the welfare state. Conservatives voted for the largest centre-right party, the Liberals (VVD), in opposition to redistribution, Europe and immigration. What they got instead was a Liberal prime minister, Mark Rutte, at the head of a hybrid government whose horse-trading led to an unsatisfying mix of policies.

That Dutch government has carried out a series of far-reaching reforms which have left nobody entirely happy.

Confusingly, voters have scattered in all directions.

It all chimes oddly with a brightening economy. The government’s reforms, disruptive at first, have started working, says Dimitry Fleming, an economist at ING Bank. “People feel we have seen the major necessary reforms, so policy uncertainty is diminishing.” House prices and residential investment are rising. Exports are up. The tulips are sprouting. Maybe public enthusiasm will too.

Dutch Banks

Diane Morris TIWA Award Recipient

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TIWA announces:  Diane Morris has been named the 2015 recipient of the  Mandy Goetze 21st Century Award. 

A graduate of the London School of Economics for whom she was the inaugural Chair of the Female Alumni Network, Diane has a marketing background, originally working in consumer magazines and advertising for IPC Women’s Magazines and Gillette in the UK, moving into international business media with BBC World, TIME and Fortune Magazine during the ten years she spent in Asia. She moved into conferences with DNMstrategies who were the producers and managers of the BusinessWeek conferences in Asia. Her experience of working in Africa, USA, and Asia has recently led to an invitation to become a tutor in International Marketing with the Institute of Export and International Trade.

Since returning to London, she has been granted the Freedom of the City of London, and is a Court Assistant and the Fellowship Chairman of The Worshipful Company of Marketors, and a Liveryman of The Worshipful Company of World Traders. These Liveries are highly influential in the City of London.

In parallel to her career, Diane has been very active in women’s networks, as President of Foreign Executive Women (FEW Tokyo)  joining TIAW in 1994, and Programme Director of PrimeTime Business and Professional Women’s Association (Singapore). She moved back to London in 2001, joining City Women Network (CWN) on the recommendation of TIAW. She was responsible for the TIAW programme in London in 2003, successfully promoting its Women on Boards’ programme to become part of the UK Government’s policy to encourage women into the boardroom. She is a Past President of CWN, and also a Past President of TIAW, 2008 -2010. She is a co founder of the TIAW World of Difference 100 Awards, and serves on TIAW’s Finance and Board Nomination Committees.

She is also the Chairman of the Judging Panel for the European Union Women Inventors and Innovators Awards and a mentor with the Cherie Blair Foundation.

Diane Morris