India: Consolidated FDI Policy, Circular 2 of 2011

The consolidated FDI policy document is a single reference point for investors and regulators. The first such consolidation was released in March, 2010 after which it has been updated every six months. Circular 2 of 2011 -is the fourth edition of the consolidated policy document.

2. The significant changes introduced in this edition of the Circular are:

(i) Exemption of construction-development activities in the education sector and in old-age homes, from the general conditionalities in the construction-development sector:

FDI into construction development activities in the education sector and in respect of old-age homes has been exempted from the conditionalities imposed on FDI in the construction development sector in general i.e. minimum area and built-up area requirement; minimum capitalization requirement; and lock-in period. These conditionalities perhaps posed a constraint to FDI coming into these areas since educational institutions like schools, colleges, universities etc. as well as old-age homes have their own special requirements which do not necessarily fit these conditionalities. This step should augment the educational infrastructure in the country and bring it up to global standards. Similarly, with growing urbanisation, there is an increasing demand for old-age homes to cater to the needs of senior citizens. The physical infrastructure in this area also is short of the requirements. Hence, it has also been decided to exempt old-age homes also from the general conditionalities applicable to the construction development sector.

(ii) Inclusion of ‘apiculture’, under controlled conditions, under the agricultural activities permitted for FDI:

FDI has been allowed upto 100% under the automatic route in apiculture under controlled conditions. Apiculture is an important agro-based industry and has the potential of bringing in high economic returns with comparatively low levels of investment. Being a decentralized activity, it does not bring pressure on land and can flourish as a household activity in villages. The activity has the potential of large scale income generation with some infusion of capital and technology. This liberalization would not only provide the desired thrust to the sector but would also bring in international best practices to upgrade the product and the methods of production.

(iii) Inclusion of ‘basic and applied R&D on bio-technology pharmaceutical sciences/life sciences’, as an ‘industrial activity’, under industrial parks:

FDI, up to 100%, under the automatic route, is permitted in existing and new industrial parks. Under the existing regime, industrial parks cover specified sectors.

The coverage has been expanded to specifically include research and development in bio-technology, pharmaceutical and life sciences, given the urgent need to augment research and development infrastructure in these areas as also expand the production facilities.

(iv) Notification of the revised limit of 26% for foreign investment in Terrestrial Broadcasting/ FM radio:

The foreign investment limit for FM radio has been enhanced to 26% from the earlier 20%. This change ensures conformity of the foreign investment limit in this sector with other similar activities in the Information & Broadcasting sector.

(v) Liberalisation of conversion of imported capital goods/machinery and preoperative/pre-incorporation expenses to equity instruments:

Conversion of imported capital goods/machinery and pre-operative/pre-incorporation expenses to equity instruments had been permitted in the last Circular on FDI policy, effective 1 April, 2011. It was stipulated that such conversions must be made within a period of 180 days of the date of shipment of capital goods/machinery or retention of advance against equity and that payments made through third parties would not be allowed. This conveyed the sense that the onus of conversion is on the investor with no allowance for the FIPB process involved. This has been clarified through the present amendment, under which the time limit for making applications for such conversions will be 180 days. Further, payments for pre-operative/incorporation expenses can now be made directly by the foreign investor to the company or through a bank account, opened by the foreign investor, as provided under the FEMA regulations.

(vi) Introduction of provisions on ‘pledging of shares’ and opening of non-interest bearing escrow accounts, subject to specified conditions:

The policy has been amended to provide for pledge of shares of an Indian company which has raised external commercial borrowings, or that of its associate resident companies for the purpose of securing the ECB raised by the borrowing company, subject to conditions. The policy also now provides for opening and maintaining AD Category – I banks without the prior approval of RBI, non-interest bearing Escrow accounts in Indian Rupees in India, on behalf of non-residents, towards payment of share purchase consideration and/or for keeping securities to facilitate FDI transactions, subject to the terms and conditions specified by RBI. This will streamline the process for bringing in FDI and provide the investors with options.

3. The sectoral section of the policy has been re-arranged, to provide for grouping of services under ‘financial services’, ‘other services’ and ‘information services’. The Circular has also been re-organised, with a view to grouping of similar subjects under common chapters. This is expected to significantly rationalise the organisation of the material in the Circular and further facilitate comprehension and readability.

SEC Staff Releases Credit Rating Agency Examination Report

The staff of the Securities and Exchange Commission today issued a report summarizing the staff's observations and concerns arising from the examinations of ten credit rating agencies registered with the SEC as Nationally Recognized Statistical Rating Organizations ("NRSROs") and subject to Commission oversight.

The report notes that despite changes by some of the examined credit rating agencies to improve their operations, Commission staff identified concerns at each of the NRSROs. These concerns included apparent failures in some instances to follow ratings methodologies and procedures, to make timely and accurate disclosures, to establish effective internal control structures for the rating process and to adequately manage conflicts of interest. The report notes that the staff made various recommendations to the NRSROs to address the staff’s concerns and that in some cases the NRSROs have already taken steps to address such concerns.

“This report demonstrates the SEC’s enhanced oversight of credit rating agencies,” said Carlo V. di Florio, Director of the SEC’s Office of Compliance Inspections and Examinations (OCIE). “We have recruited experts and strengthened the overall monitoring and examination process to better protect investors, ensure market integrity, and facilitate capital formation.”

The Commission staff conducted the examinations as required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection, which imposed new reporting, disclosure and examination requirements to enhance the regulation and oversight of NRSROs. Among other things, the Dodd-Frank Act requires the Commission staff to examine each NRSRO at least annually and issue an annual report summarizing the essential findings of the examinations.

“We are today issuing the first of the Commission staff’s annual reports on the examinations of the NRSROs,” said Norm Champ, the Deputy Director of OCIE. “We expect the credit rating agencies to address the concerns we have raised in a timely and effective way, and we will be monitoring their progress as part of our ongoing annual examinations.”

Examination staff from the Commission’s Office of Compliance Inspections and Examinations and NRSRO monitors from the Commission’s Division of Trading and Markets conducted these examinations. The following staff made significant contributions to these examinations: Abe Losice, Rina Hussain, Jon Hertzke, David Beaning, Kenneth Godwin, Said Rafat, Natasha Kaden, Harriet Orol, Alan Dunetz, Diane Audino, Scott Davey, Kristin DeVitto, Ethan Allfree, Jennifer Fournier, Lisa Jordan, Kenny Sabogal, Bernard Bujack, Shanti Radkar, Jackie Sturgill, William Beggs, Scott Follin, Trinita Love, Jason Wentworth, Shipra Wells, Linda Heaphy and Steven Gilchrist.

2011 Summary Report of Commission Staff's Examinations of Each Nationally Recognized Statistical Rating Organization

FSA: Credit creation and social optimality - a speech by Lord Turner

Ensuring greater financial stability may require policy makers to make judgements about the right level of credit in the economy, and about the relative value of different categories of credit created by the banking system, said Adair Turner, chairman of the FSA at a speech yesterday evening.

Speaking at a European conference on banking and the economy at Southampton University, Lord Turner said that the financial crisis had in part derived from new features of the financial system, such as trading in complex credit securities and derivatives, and argued that further regulatory action to address the risks created by these activities was still required. He highlighted further changes to the capital regime for trading activities, and the international Financial Stability Board’s project to identify required actions in relation to “shadow banking”. But he stressed that banking crises and harmful swings in economic activity can also be produced by volatility in the core functions of the banking system such as extending loans to customers. In the case of the major banks which had failed in the UK, failures in plain old fashioned banking were as important as failures in new trading activities.

Lord Turner said:

''Alongside thinking out our response to what was new in the latest crisis, we must ensure that we have thought deeply enough about the drivers of excessive credit growth in the upswing, and the problems created by deficient credit growth in the post-crisis period, and about possible policy responses.''

Lord Turner set out theoretical and empirical reasons that suggest that if credit supply to the economy was left to its own devices it could result in harmful booms and busts in credit extension. He suggests that a combination of static micro-prudential regulation (constant capital and liquidity rules) and interest rate policies cannot be sufficient to ensure the level of credit supplied to sectors of the economy is optimal from a social point of view.

He argues that macro-prudential policy levers, such as those for which the new Financial Policy Committee would be responsible, could therefore be vital in creating the optimal level of credit in the economy. Lord Turner suggests these tools could include counter-cyclical capital requirements or loan-to-value ratios on mortgages varying over the cycle. While recognising that further detailed design work was required, he argued that it was likely that tools could be developed which would effectively lean against the upswing of credit booms and asset price cycles.

The more difficult question, he suggested, was whether macro-prudential levers could help address the current priority; the need to stimulate the economy rather than to restrain it, or whether macro-prudential policy like interest rates policy was ''pushing on a string.''

Lord Turner said:

''A crucial issue at this point in the cycle is, therefore, whether macro-prudential policy has a role to play in stimulating rather than constraining credit supply and demand, whether it can be used to ''push'' as well as to “pull''. The answer is unclear. But what is clear is that if we are to use macro-prudential policy levers to push, we may need to get far more involved in the details of credit capacity within the economy and even of the sectoral allocation of credit, than we have for several decades.''

Lord Turner concluded:

''We should be very cautious of expecting too much of macro-prudential policy: if it manages to dampen the excesses of the upswing of the credit cycle, that in itself will be a major achievement, making future downswings less harmful. But we certainly need to base macro-prudential policy and other aspects of policy on realistic assessments of the extent to which private credit creation processes can be relied upon to be socially optimal.

''The fundamental question which I have asked is: how confident can we be that the quantity of credit supplied and demanded will be socially optimal. The answer is not very confident. That implies that macro-prudential policy must be based on judgements about the optimal aggregate quantity of credit creation and that we need to consider carefully how far we can and should, make judgements about the economic value of different categories of credit, which in the recent past we have largely avoided.''

Read the full speech

Pepper Hamilton: Top 10 Lessons Learned from the Vodafone, Aditya Birla and Other Tax Cases in India

Lessons Learned from Vodafone and Recent Tax Cases in India and How They Affect the Corporate and Tax Structuring of India-U.S. Cross Border M&A Transactions and Investments

Conyers hosts 10th Annual Offshore Law Forum in New York

Conyers Dill & Pearman hosted its 10th annual Offshore Law Forum on September 15th at the Four Seasons Hotel in New York. This year’s forum featured an in-depth look at offshore funds litigation arising out of the global financial crisis.

A senior delegation from across Conyers’ jurisdictions addressed a large audience drawn from New York’s legal, financial and professional services community. Well over 100 attendees were present, including senior partners of AM Law 100 firms, fund managers, directors, bankers, administrators, accountants and financial executives.

The forum featured Conyers lawyers Robert Briant, Anthony Whaley, Alex Potts, Maree Martin, and Director of Business Development Ross Webber, and showcased the firm’s expertise in Bermuda, the British Virgin Islands, the Cayman Islands and Mauritius.

One of the highlights of the forum was a discussion by Alex Potts of recent high-profile fund disputes in the courts of Bermuda, the British Virgin Islands and the Cayman Islands. Despite the unprecedented nature of many of these cases, the courts of each jurisdiction have proven themselves prompt and efficient in resolving fund disputes, both at first instance and on appeal.

The panellists also discussed the signing of TIEAs, recent activity in IPOs, asset backed securitisations, and catastrophe bonds; the growth of Islamic financial services, and the extension of Bermuda’s Tax Assurance Act to 2035. The BVI’s new Commercial Court and Securities and Investment Business Act was also examined, as well as the impact of the EU Funds Directive on the offshore funds industry, and developments in Mauritius, where Conyers has acted on several headline transactions this year including the listing of the first Mauritius entity on NASDAQ.

Speaking after the event, Conyers Director Anthony Whaley said: “As the effects of the global financial crisis continue to manifest themselves, industry players are looking for greater insight into issues arising in the major offshore jurisdictions. We are pleased to provide an interactive forum which fosters the exchange of ideas and facilitates practical discussion of regulatory developments in the offshore world.”

Conyers is internationally recognised as the go-to firm for large and complex transactions and fields one of the most experienced offshore teams worldwide. The firm specialises in corporate and commercial law advice, including a leading investment funds practice, and also specialises in commercial litigation and private client matters.

India: Finance Minister’s Remarks at ADB & OECD Anti-Corruption Initiative for Asia-Pacific Region

Following is the text of the Union Finance Minister, Shri Pranab Mukherjee’s remarks at ADB and OECD Anti-Corruption Initiative for Asia-Pacific Region, here today:

“It is my pleasure to be here at the concluding day of the 7th Regional Conference on the theme “Building Multidisciplinary Frameworks to Combat Corruption.” I understand that this conference has brought together policy makers, experts, legal specialists and practitioners from the public sector, the private sector and the Civil Society from several countries and that you have had fruitful deliberations.

Let me start by congratulating all delegates and experts for their contributions to this conference. I would also like to commend the Department of Personnel & Training Government of India, the ADB and OECD for the efforts put into organizing this event. I appreciate the relentless and persistent efforts of this ADB/OECD initiative in joining the global fight against Corruption and their goal to address all aspects of the universal convention of United Nations Convention Against Corruption (UNCAC).

I am happy to learn that this conference has helped focus on issues such as framework for multi-jurisdictional investigations, Public Procurement and the role of private sector and citizens in combating corruption. I have been told that the conference has discussed the challenges that countries face in securing effective mutual legal assistance to address trans-border corruption in the Asia Pacific context. I have also been told that the Steering Committee had considered and recommended acceptance of the request of the Government of ‘Timor Leste’ to join the initiative thus paving the way for its formal admission as the 29th member.

Corruption is a multifaceted problem. It has diverse manifestations, from petty bribery in the delivery of public service to major scandals involving large organizations and even nations. It requires a multifaceted approach to address it. There has to be a framework for prevention of corruption in the public and the private domain. There has to be a legal framework recognizing the act of corruption as a crime, supported by an effective enforcement machinery. There is also an awareness aspect on the issue, which has to be addressed by empowering individuals who are the ultimate victim of corruption, directly or indirectly.

In today’s globalised context of our economies, effective international co-operation has become a sine qua non of any framework against corruption. We need to engage with each other at different levels to effectively block all physical escape routes for those blatantly propagating corrupt practices. Moreover, given the pervasiveness of this phenomenon, it is a war that has to be fought on all fronts and in a concerted and coordinated manner by all stakeholders. Symptomatic solutions to the problem only present temporary results. To be effective, any framework against corruption has to be comprehensive.

Our efforts to tackle this menace have been unceasing and we are committed to the goal of achieving ‘Zero Tolerance’ against corruption. India has a sound legal framework to address corruption. It includes the Prevention of Corruption Act 1988, Money Laundering Act 2002, the Companies Act; and the Criminal laws of IPC and Cr. PC, which provide, in adequate measure, the tools to enforce the law against the guilty. The Anti-Corruption institutional infrastructure consists of the Central Bureau of Investigation, Central Vigilance Commission, Directorate of Enforcement, Serious Frauds Office; police machinery at the State level; and, the elaborate vigilance administration mechanism setup both at the centre and state levels, which forms the framework to handle corruption, at the domestic and trans-border levels. There are well established institutional mechanisms for transparent and fair selection of public servants, implementation of code of conduct and Disciplinary Rules, Constitutional bodies and mechanism of oversight. Our country is also privileged to have an independent and vibrant judiciary as an able watchdog, means of legal redress and a guardian of justice.

This does not mean that we are free of corruption. Indeed, corruption is widespread and deep routed in our society. There are issues of slackness in implementation of existing laws, ineffectiveness of some laws, lack of coordination between different agencies that have overlapping mandates, policy gaps such as in the area of election funding and governance failure in several areas of public services delivery, that have contributed to the pervasiveness of this phenomenon.

On the positive side, we are a free society with rich democratic traditions where the freedom of expression is highly valued. If citizens are able to make their voice heard and the media is able to project the will and wish of the people, a vibrant judiciary working for the cause of justice is invariably able to deliver justice.

The Government of India has taken an all-encompassing initiative with a Group of Senior Ministers being entrusted with the task of formulating and putting in place a roadmap for strategizing and spelling out measures to tackle corruption in public life. The Group was constituted in early January this year and has already submitted its first report. The specific areas which the committee has been looking into are state funding of elections; fast tracking of all cases against public servants accused of corruption; ensuring full transparency in public procurement and contracts, including enunciation of public procurement standards and a public procurement policy; taking away the discretionary powers enjoyed by Ministers at the Centre; introduction of an open and competitive system of exploiting natural resources and other administrative issues. The first Report spelling out various recommendations regarding administrative and disciplinary measures has already been accepted.

We have recently ratified the United Nations Convention Against Corruption (UNCAC) in May 2011. We are required, as a part of our obligations emanating from the Convention, to undertake an assessment of the state of domestic laws. Our domestic laws are substantially compliant with the mandatory requirements of the Convention. With the ratification of the UNCAC, we hope to secure effective international co-operation in addressing trans-border corruption.

A bill titled ‘The Prevention of Bribery of foreign Public Officials and Officials of Public International Organizations Bill 2011’ was introduced in March 2011 in the Indian Parliament. This would cover the requirement of criminalization of bribery of foreign public officials as mandated under the United Nations Convention Against Corruption. A process has also been set in motion to consider criminalizing bribery in private sector through an amendment in the Indian Penal Code.

The Government has also taken a number of significant legislative initiatives, in parallel to the exercise of ratification of the convention, which include the introduction of the Public Interest Disclosure and Protection to Persons making the Disclosures Bill, 2010; Lokpal Bill, 2011; and the Judicial Standards and Accountability Bill, 2010.

As a measure to tighten the control over black money, the Government has made significant progress in the recent year. There have been 16 new Tax Information Exchange Agreements (TIEAs) with focus countries like Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Isle of Man, Jersey, Gibraltar, Monaco, etc. have been concluded. A process of re-negotiation of Double Taxation Avoidance Agreements (DTAA) with 75 countries to broaden the scope of the Article concerning Exchange of Information to specifically allow for exchange of banking information has been taken up. Negotiation has since been completed with 22 countries. In addition, 18 new DTAA negotiations have been completed which provide for effective exchange of information. Government has signed amendment to tax treaty with Switzerland and the Swiss Parliament has accorded its approval to the treaty recently. As soon as Switzerland completes its internal process, the treaty shall come into force and will allow India to obtain banking information from Switzerland in specific cases for the period starting from 1st April, 2011.

We are committed to making progress in our fight against corruption. It is also important that other stakeholders, including the private actors and the civil society come forward in shouldering some responsibilities and contribute to the efforts of public agencies in this endavour. At the same time we are one with the global community in sharing the responsibilities in our collective efforts to address this issue in its international dimension.

Let me conclude by thanking you all for your valuable contributions towards making life of each global citizen corruption free. I hope all the delegates will be carrying with them a resolve to further the efforts of this Initiative in tackling corruption. I hope you have enjoyed your stay in India and carry back fond memories from here. Have a safe journey as you return to your countries.”

Jersey remains top offshore centre and climbs into top ten centres globally for wealth management in latest GFCI

Jersey has climbed two places, retained its position as the highest rated offshore international finance centre and enhanced its global reputation, according to the latest Global Financial Centres Index (GFCI) released on Monday 26th September 2011.

Overall, Jersey is placed 21st in the competitive rankings, which are published every six months, ahead of Guernsey in 31st, the Isle of Man (40th), Cayman Islands (46th) and Malta (70th).

In addition, Jersey has climbed into the top ten locations in the world for wealth management and private banking services, being named in eighth position, and is the fifth highest ranked location overall in Europe, only behind major city centres London, Zurich, Geneva and Frankfurt.

Jersey has also moved from being categorised as a ‘transnational specialist’ to a ‘global specialist’ centre, becoming the only offshore to achieve a ‘global’ profile, listed alongside centres such as Beijing, Dubai and Geneva. The Index also scores Jersey well in terms of stability and as the 16th highest ranked centre globally in terms of reputation - the only offshore centre to appear in the top 20 centres by reputational advantage.

Noting that confidence amongst financial professionals has risen since the last index for virtually all centres, the report comments that Eurozone centres, such as Dublin, Luxembourg and Malta, have suffered in the rankings. It also states that offshore centres ‘are now recovering’ as respondents ‘recognise the contribution these centres can make to global finance’, and that ‘Jersey and Guernsey are working to change perceptions and to ‘rise above’ the status of offshore specialist centres by being seen as more diversified’.

London is named as the number one centre overall in the rankings again, marginally ahead of New York and Hong Kong.

Geoff Cook, chief executive of Jersey Finance Limited, commented:

“Jersey has performed extremely well in this latest Index, holding on to its position as the top offshore centre, which it has now held for five consecutive Indexes. To be listed ahead of major European centres such as Paris, Munich and Luxembourg, confirms that Jersey is incredibly well regarded on the global stage.

“This is particularly pleasing when you consider that Jersey is one of the only offshore centres to have improved its global ranking and is now referred to as a global player and one of the top centres worldwide for wealth management services. That Jersey’s stability is also emphasised is extremely positive in the current climate, whilst the fact that the Index recognises Jersey’s reputation is testament to the hard work that goes in to promoting Jersey both at home and in key foreign markets.

“It is interesting that the Asian centres are continuing to consolidate their position in the rankings. Both Hong Kong and Shanghai remain in the top five, emphasising how important it is that Jersey continues to maintain its marketing efforts with overseas centres like Hong Kong and Greater China in order to drive Jersey’s future success.”

UK: Foreign Office invites public views on Overseas Territories strategy

The Foreign Office has launched a consultation on a new strategy for the Overseas Territories.

The strategy aims to:

• strengthen the engagement and interaction between the UK and the Territories.
• work with Territories to strengthen good governance arrangements, public financial management and economic planning where this is necessary; and
• improve the quality and range of support available to the Territories.

The consultation, which will run until 31 December 2011, will seek views from people in the Overseas Territories and the UK on implementing the goals of the strategy.

Comments and responses can be made online, through email or by post. These will help inform the strategy as the Government prepares for the publication of a new White Paper in 2012, which will set out in detail this Government’s approach to the Overseas Territories.

Speaking before the launch of the consultation, Minister for the Overseas Territories Henry Bellingham said:

“Since we came to Office in May 2010, this Government has worked hard to re-invigorate the UK’s relationship with the Overseas Territories. This consultation is an important part of that approach as we move toward a new White Paper on the Overseas Territories next year.

There are many people and groups who have an interest in the future of the Overseas Territories and can provide us with insight into how to develop the UK’s relationship with them. I look forward to receiving their ideas.”

The UK Government’s overall vision is for the Overseas Territories to be vibrant and flourishing communities, proudly retaining aspects of their British identity and generating wider opportunities for their people.

You can take part in the consultation by the following means:

Online, by leaving a public comment on this site under any or all of the questions (comments will be checked against our moderation policy before publication)

by private email or by post to the Foreign Office in London

Comments will be accepted until 31 December 2011; the website will remain available for reference until 1 July 2012.

PwC and Duke University’s Offshoring Research Network Find Global Service Providers Are Expanding Service Offerings Among Intense Competition

Outsourcing service providers are taking steps to diversify service offerings in order to stay competitive in today’s marketplace, according to “The ever-changing global service-provider industry” report released today from PwC US and the Center for International Business Education and Research’s (CIBER) Offshoring Research Network (ORN) at Duke University’s Fuqua School of Business. The third annual Service Provider survey is part of ongoing research into the effects of offshoring trends on the economy and reflects changes in the provision and consumption of global sourcing in recent years.

PwC and Duke surveyed 620 service providers at 1,850 companies from over 50 countries and found that the shift in the outsourcing industry is having an impact on incumbent India-based and U.S. firms that are caught in the “perfect storm.” Today’s competitors are entering new markets with both low-end, commoditized services with few market-entry barriers, and also with high-end, value-added services that drive higher margins but where market entry is more challenging.

“Given the current market condition, the days of relying only on low cost and labor arbitrage is no longer a successful strategy,” said Dr. Charles Aird, U.S. and Global Leader of PwC’s Shared Services and Outsourcing Advisory Practice. “To gain a competitive edge in today’s dynamic and increasingly global marketplace, it is critical that providers go beyond the third-party service-delivery relationships of the past and find ways to become valued business partners.”

According to the report, there is a driving trend toward nearshoring, with service providers expanding their global footprint to move closer to their clients. The areas where most large buyers are located – the U.S., Western Europe and Japan – are especially attractive nearshoring target locations. Thirty-six percent of respondents say they have headquarters located in North America, while 26 percent report headquarters in Western and Eastern Europe. The survey also found that China, Latin America and Eastern Europe are quickly emerging as new magnets for outsourcing firms looking to expand.

To address the need for frequent interaction with clients and extensive use of collaborative technologies in fields such as innovation services, firms are seeking offshore locations closer to their clients’ headquarters. “U.S. firms may be saddled with the legacy effect of early offshore locations in India, before closer Latin American locations were established,” said Arie Lewin, professor of strategy and international business at Fuqua and director of CIBER.

As noted in the survey, the importance of workforce skills and training has increased since 2009, becoming the most vital criteria in the client’s decision making around the selection of service providers. Companies are planning to make aggressive investments in training centers for internal staff – especially in functions involving a high level of client-specific knowledge and frequent interaction with clients, such as R&D and design services – enabling them to get closer to the client’s core competencies.

“The global sourcing industry is undergoing significant changes,” said Lewin. “Clients expect providers to contribute value beyond just cost savings. Global sourcing is becoming a more competitive environment all the time. Service providers now must offer more than just cost savings; they must add value to their client’s business processes.”

Further notable findings in the report include:

• Internal training and development of staff for client-specific capabilities - More than 56 percent of providers plan to invest in new areas of expertise with Cloud or Service Oriented Architecture (SOA) and Centers of Excellence (COEs) as their main focus.
• Seventy-seven percent of service providers rated innovation services as being highly sensitive to specialized knowledge and skills, while only 57 percent cited time-zone dependency.
• Growing organically and/or by M&A - Seventy- four percent of service providers indicate plans to continue growing organically, primarily through increasing the scale and scope of their services. Mergers and acquisitions account for 13 percent of service providers’ plans over the next three years. Further, seven percent of service providers indicate a desire to become an acquisition target.

“Going forward, providers need to make a conscious decision about which markets they want to enter,” continued Lewin. “To that end, they should focus on growing markets where demand for a given service is strong, and where they have superior capability and a competitive advantage over their rivals.”

“As providers seek new ways to increase the scope and scale of their service offerings and expand their global footprint, we are seeing both organic growth and growth by acquisition,” added Dr. Aird. “We expect the M&A trend to continue over the next few years. Leading providers are preparing today to win in the marketplace of tomorrow.”

PerTrac: Impact of Fund Size and Age on Hedge Fund Performance

This study is the fifth annual version of PerTrac's analysis of how Size and Age affect hedge fund performance. This year’s study looks at all of 2010 and the first half of 2011. The study analyzes:

• Whether young funds, mid-age funds or tenured funds generate the highest performance
• The impact of fund AUM on performance
• A look at return/risk measures for funds by both Age and Size
• Trend comparisons since 1996 and much more...

Qatar Top Financial Centre in Middle East in Latest GFC Index

The latest Global Financial Centres Index (GFCI 10), covering 75 financial centres and sponsored by the QFC Authority, was published by the Z/Yen Group today.

The major changes from GFCI 9 in March 2011 are:

• In the Middle East Qatar stays in 30th place but rises 39 points to rank as the leading centre in the Middle East for the first time;
• Nordic and Eastern European centres - now getting strong support. Centres such as Tallinn (up 118 points in the ratings), Istanbul (up 86 points), Moscow (up 75 points), Helsinki (up 72 points), Copenhagen (up 55 points) and St Petersburg (up 50 points) all demonstrate strong increases in competitiveness;
• The Eurozone – capital cities of the weaker Euro economies are clearly suffering. Examples include Madrid down 11 places in the rankings, Dublin down ten places and Milan down nine places;
• More Clarity in Asia - the strongest centres are strengthening and consolidating their positions. Hong Kong is up 11 points, Singapore is up 13, Shanghai is up 30 points and Seoul is up 28. Certain Asian centres are now perceived as weaker - Tokyo, Beijing, Taipei and Shenzhen have all fallen in the ranks;
• The three top centres are now only four points apart (there was a gap of 16 points between first and third in GFCI 9). There is no significant difference between London, New York and Hong Kong in the ratings;
• Offshore centres – beginning to recover reputations - Guernsey has risen 28 points, the Isle of Man, Hamilton and the British Virgin Islands have all risen 27 points and Jersey has risen 26. The Cayman Islands and Gibraltar have also risen. Jersey and Guernsey remain the leading offshore centres.

GFCI 10 - Top Ten:

Centre	GFCI 10 Rank	GFCI 10 Rating	GFCI 9 Rank	GFCI 9 Rating	Change in Rank	Change in Rating
London	1	774	1	775	0	-1
New York	2	773	2	769	0	4
Hong Kong	3	770	3	759	0	11
Singapore	4	735	4	722	0	13
Shanghai	5	724	5	694	0	30
Tokyo	6	695	5	694	-1	1
Chicago	7	692	7	673	0	19
Zurich	8	686	8	665	0	21
San Francisco	9	681	13	655	4	26
Toronto	10	680	10	658	0	22

Professor Michael Mainelli, Executive Chairman of the Z/Yen Group, said:
“Most industries are sensitive to production factors, but finance seems to be increasingly sensitive to regulation. This tenth edition of the Global Financial Centres Index shows the increasing divorce of the financial services industry from today’s economies, but increasing entanglement with the turbulence of today’s governments. A good example is the Euro-zone crisis hitting financial centre ratings while Europe outside the crisis does well.”

Shashank Srivastava, Acting CEO of the QFC Authority, added:

“I am delighted that Qatar has been recognised as the leading financial centre in the Middle East for the first time by the GFC Index. Qatar’s latest rise of 39 points in the GFC Index also strongly maintains its existing world ranking of 30th and consolidates its earlier impressive rise of four places in the world rankings from 34th to 30th in March this year.

The GFC Index is a highly relevant and well-followed indicator reflecting the views and opinions of executives all over the world. These latest results demonstrate how Qatar continues to strengthen its position as a financial centre at a time when other regional markets have stagnated or declined. Qatar’s economy continues to perform exceptionally well against a documented backdrop of international and regional pressures while its business environment is increasingly recognised for the highest standards of transparency and quality of regulation – increasing its regional and global profile as a result.

These excellent results, together with Qatar’s recent rise of three places in the latest World Economic Forum Global Competitiveness Report to rank 14th in the world, the highest ranking of any state in the GCC, reinforce my belief that the Qatar Financial Centre offers financial services firms a uniquely attractive platform from which to grow their business both in Qatar and the broader GCC region.”

GFCI 10 uses 28,604 financial centre assessments completed by 1,887 financial services professionals. Since 2007, well over 100,000 assessments from over 6,000 respondents have built the index. GFCI is updated regularly and ratings change as assessments and instrumental factors change.