Category Archives: Finance

Shaping Up Middle East Bureaucracies

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Public servants are the butt of jokes the world over, but they are a real curse in the Middle East, according to a recent Economist report.  A routine legal name change in Iraq can tae asmany as 18 court appearances.  Starting a business in Egypt requires permits from 78 agencies.

How did this impass come to be?  Dictators and one party states have treated the bureaucracy as employment positions for family and friends.  Funding these often non-fuctioning employees drains coffers and drives productive workers to the private sector.

Merit testing for jobs and realistic measures of job performances might help get governments functioning again if there is a political will.  Tax-authority and unionized workers have protested against change.  In Lebanon it was feared that recruiting more competent workers would unbalance a fragile system.

The only answer may be making bureaucrats responsible to citizens at the local level.

 

Are China’s State-Owned Firms Credit-Worthy?

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Are China’s Big State Owned Firms Credit Worthy?  There was a time when China’s biggest state-owned enterprises were seen as the country’s crown jewels. The government cleaned up the balance-sheets of the best of the firms, and listed their shares on stockmarkets at home and abroad. The firms were dubbed “red chips”, the supposed blue chips of state capitalism, by fawning analysts.

In fact, China’s big state firms were largely a bloated, inefficient and cosseted lot. The real dynamism in the Chinese economy has long come from its entrepreneurial private firms, which now account for perhaps two-thirds of the country’s entire economic output.

Thanks to weak commodity prices, a troubled property market and slowing economic growth, the outlook for all Chinese corporations is dimmer than it was a few years ago. But debt is a much bigger problem at the largest state firms. A report released on November 30th by Standard & Poor’s, a credit-rating agency, looks at 200 public and private Chinese firms in 18 industries and warns that the creditworthiness of many big state firms has worsened significantly. S&P found that the average ratio of gross debt to earnings (before interest, tax, depreciation and amortisation, or EBITDA) at state firms rose from roughly 3 in 2008 to over 5 last year.

The worries are most acute among metals firms, such as Hebei Iron & Steel, and transport companies, such as China COSCO, a shipping line. The agency gives both of those companies a maximum financial-risk rating of 6. The main exceptions to the trend, the report notes, are state firms in industries such as telecoms and energy, which the government protects from serious competition.

Private firms are not without their problems, although the ratio of gross debt to EBITDA at such firms remains below 4 on average. The property sector and “bricks-and-mortar” retailers have been hit hard of late, and private firms with exposure to them—such as Fosun, one of China’s largest private conglomerates—are also seeing a deterioration in their creditworthiness. But most private firms are in e-commerce, consumer businesses and technology services, which are less politicised industries that are still doing well.

The conventional wisdom has long been that China’s biggest and best-known state firms will never be allowed to default, no matter how weak their finances. But doubts are now creeping in. Christopher Lee of S&P, an author of the agency’s report, says, “there is a growing sense that the weakest are not default-free.” The question for officials now, he reckons, is “how to let them go without sparking a systemic meltdown.”

China's SOEs

 

Entrepreneur Alert: Makeup for Men

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Women’s Makeup is a Very Good Business.  Kiko is having success with its men’s line.  Is there an opportunity here?

It’s a trend that clashes with Western ideas about masculinity and gender, but Korean men are spending a ton of money on cosmetics products in order to improve their skin and appearance.

South Korean men are the world’s top per-capita consumers of skincare products, with four times the purchases of runner-up Denmark, according to Euromonitor. The grooming industry is worth more than $1 billion, with projected growth of nearly 50% over the next five years.

Korean men are not just buying aftershave and lotion, either. Demand is increasing for anti-aging products, masks and mists.

Alex Taek-Gwang Lee, a cultural analyst at Kyunghee University, said that men are using more cosmetics because in South Korea, appearance is everything.

“We have a proverb,” Lee said. “If you buy something, you must choose the one which has a good appearance.”

In South Korea’s ultra-competitive society, he said that kind of decision-making also applies to people. When employers are looking to hire, for example, many of the candidates will have come from excellent universities and have similar qualifications.

One thing that can set a candidate apart is their appearance.

“If you want to have a higher salary, you must do the best for your human capital,” he explained.

Chris Hong, an business executive about to hit the big 4-0 this year, is the industry’s ideal customer. His regimen includes twice-yearly Botox injections, as well as laser treatments to smooth out imperfections on his face.

Hong freely admits that he spends more time, money and effort on beauty than his wife.

“Whenever you do more grooming you feel better,” Hong said. “I don’t want to be looked at as older.”

 

Entrepreneur Alert: Women’s Inventions Part I

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Giving credit where credit is due.

1.  The Car Heater

The Car Heater

We all owe our thanks to Margaret A Wilcox who invented the car heater in 1893!

2.  Monopoly

This popular board game was designed by Elizabeth Magie in 1904, originally called the Landlord’s Game. The purpose of this game was to expose the injustices of unchecked capitalism.  Her game was ripped off by Charles Darrow who sold it to Parker Brother’s 30 years later.  However Parker Brothers later paid Elizabeth $500 for her game. Gee Thanks!

3. The Fire Escape

The fire escape was invented by Anna Connelly in 1887

4. The Life Raft

The life saving Life Raft was invented by Maria Beasely  in 1882. (Maria also invented a machine that makes barrels)

5. Residential Solar Heating

Solar heating for residential housing was invented by Dr Maria Telkes in 1947.  Dr. Telkes was a Psychiatrist in addition to being a  Solar-Power Pioneer

6.  The Medical Syringe

The medical syringe which could be operated with only one hand was invented by a woman by the name of Letitia Geer in 1899

7. The Modern Electric Refrigerator

The electric refrigerator was invented by Florence Parpart in 1914 (Florence also invented an improved street cleaning machine in addition to the refrigerator)

8. The Ice Cream Maker

The ice cream maker was invented by a woman named Nancy Johnson in 1843. Her patented design is still used today!

9. The Computer Algorithm

Ada Lovelace is essentially the first computer programmer due to her work with Charles Babbage at the University of London in 1842. In fact her notes was an essential key to helping Alan Turing’s work on the first modern computers in the 1940s.

10. Telecommunications Technology

Some of the Telecommunication Technology developed by Dr Shirley Jackson include portable fax, touch tone telephone, solar cells, fibre optic cables, and the technology behind caller ID and call waiting.

 

Toshiba: Reinventing a Company

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Pavel Alpeyev and Grace Huang write:  Toshiba Corp. is embarking on a revamp that will leave the one-time technology pioneer a shadow of its former self. An accounting scandal has left the conglomerate in tatters, facing record losses, thousands of job cuts and potential spinoffs that may include the consumer electronics unit that made it a global player.

President Masashi Muromachi is being forced to make tough decisions after the company projected a loss of ¥550 billion for this fiscal year. Toshiba’s bond ratings were cut to junk, with restructuring costs seen outpacing previous estimates and dragging on earnings.

A household name known for making the first DVD player and the first popular laptop computer, Toshiba has clung to legacy consumer-electronics businesses that are wilting under pressure from Samsung Electronics Co. and Chinese manufacturers. As Panasonic Corp., Mitsubishi Electric Corp. and other Japan-based competitors shift away from domestic products, Toshiba has lagged behind, relying on profit from semiconductors and power generation to subsidize its TV and computer units.

Muromachi, who took over in July after the accounting irregularities were revealed, plans to announce by the end of the year far-reaching changes that may include the sale of one or more consumer-products businesses. The company said Monday it will seek a buyer for its health care unit, which makes diagnostic imaging systems such as MRI and X-ray equipment. And Toshiba is considering combining its PC operations with those of Fujitsu Ltd. and Sony Corp. spinoff Vaio, Muromachi said this month.

While such a restructuring will leave the Tokyo-based electronics manufacturer much smaller, it will give Toshiba enough breathing room to funnel more money into its mainstay memory chip division.

The chip business has been Toshiba’s most profitable, accounting for more than 100 percent of operating income in the year ended March 2015. Its lifestyle segment, which includes PCs, televisions and home appliances, yielded an operating loss of about ¥110 billion that year.

The company is also considering the sale of property and investments after earlier selling its holding in elevator-maker Kone Oyj. Other plans include accounting training, corporate governance reviews, management seminars and an evaluation system for the president and chief executive officer.

The company’s weaknesses are greater than Moody’s Investor Service and Standard & Poor’s had anticipated and may deepen in the coming months, the agencies said.

Toshiba’s earnings announcement “reflects a deterioration of business results not only in weak businesses” — including digital and white goods and home appliances and also semiconductors — “but also in the company’s core businesses,” Standard & Poor’s wrote in a statement. As a result it expects Toshiba’s earnings margin before interest, taxes, depreciation and amortization for fiscal

Still, shedding its consumer electronics unit and spinning off the power and real estate businesses could help make Toshiba an attractive chipmaker. With some ¥1.68 trillion of revenue in the latest fiscal year, the semiconductor arm as a standalone company would be a top-10 global chipmaker, data show.

Toshiba’s semiconductor business is a major player in flash memory — increasingly popular as fast, energy-efficient storage in phones, tablets and laptops.

Chipmakers

Entrepreneur Alert: XRay Vision!

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X-ray vision, a comic book fantasy for decades, is becoming a reality in a lab at MIT.

A group of researchers led by Massachusetts Institute of Technology professor Dina Katabi has developed software that uses variations in radio signals to recognize human silhouettes through walls and track their movements.

Researchers say the technology will be able to help health care providers and families keep closer tabs on toddlers and the elderly, and it could be a new strategic tool for law enforcement and the military.

“Think of it just like cameras, except that it’s not a camera,” said Fadel Adib, a researcher on the MIT team developing the device.

“It’s a sensor that can monitor people and allow you to control devices just by pointing at them,” he said.

Work began in 2012 to determine how wireless signals could be used to “see” what’s happening in another room, said Katabi, who directs the MIT Wireless Center.

“At first we were just interested . . . can you at all use wireless signals to detect what’s happening in occluded spaces, behind a wall, couch, something like that,” Katabi said.

An RF-Capture device displays the signal on a screen, where the person’s movements can be tracked in real time. It depicts the target as a red dot moving around the room, occupying a chair and speeding up or slowing down.

The wireless signals used to track a person’s motions also can measure the individual’s breathing and heart rate — and potentially identify the person based on the shape of his or her skeleton, said researcher Zach Kabelac.

“The person won’t be wearing anything on them, and the person it’s tracking doesn’t even need to know the device is there,” Kabelac said.

“If something unfortunate happens to them, like a fall, the device will contact the caregiver that they chose to alert” by generating a text message or an email, he added.

That makes health care applications especially interesting.

A company set up to market the technology, now dubbed Emerald, will spin out of the MIT lab next year, with a goal of marketing the device early in 2017, and it’s expected to sell for $250 to $300, Adib said. The team is working to make the device smaller and to develop an interface that will let users configure it through a smartphone app.

The technology raises questions about privacy rights and intrusion, and Adib said the team gave serious thought to those implications..

XRay Vision

Can Companies Be More Just?

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Brian Dumaine writes:  Famed investor Paul Tudor Jones believes that we’re headed for trouble if we don’t shrink the wealth gap. His solution? Pressure companies to be more just.

Jones, 60, who has an estimated net worth of $4.5 billion, was having coffee one day with Deepak Chopra, the holistic medicine advocate and bestselling author, who knows the Wall Street titan through Jones’s wife, Sonia, an Australian by birth who runs a yoga and wellness business. Chopra had grown deeply concerned about income inequality. “I had been going to Occupy Wall Street meetings and saw the rage but didn’t see the solutions,” he says.

During a spirited discussion with Jones about America’s disappearing middle class, Chopra, who teaches a course at Columbia Business School called Just Capital & Cause-Driven Marketing, brought up an idea one of his students had suggested in class: create a stock market index that would drive capital to companies that treated their employees and communities well. The concept of a market-driven approach appealed to Jones, the onetime cotton trader who founded Tudor Investment Corp. in 1980, became famous by predicting the crash of ’87, and today manages $13.8 billion. “I thought, Wouldn’t this be a great thing to do?” says Jones.

Jones did some quick research—and was both surprised and more than a little embarrassed to discover that taking a values-based approach to the stock market was hardly an original thought.

Then Jones had a different idea: Why not rank America’s top 1,000 companies based not on what Wall Street values—profits—but rather on what Main Street wants? If the list caught on, he reasoned, companies might someday vie to be ranked higher than their rivals. And to do so they would have to pay workers more fairly, make products more sustainably, and give more back to the community.

To put his plan into action, Jones earlier this year created a nonprofit called Just Capital. The mission is to research what makes people like or dislike corporations and then to create an annual list—which will debut in the fall of 2016—tentatively called the Just 1000. “We want to give the American public a voice where it’s never had a voice,” says Jones. “It’s going to be crystal clear and unbiased and without prejudice. And it’s going to drive corporate behavior.”

Skeptics might wonder what kind of difference a simple list can make. But Jones believes that harnessing public opinion can prove powerful—and that changing the behavior of big companies could have a cascading effect.

(To read about 51 companies already having a positive impact, see our Change the World list.)