‘New Normal’ Productivity Spells Uncertainty for Global Economy

A failure to embrace long-term structural reforms that boost productivity and free up entrepreneurial talent is harming the global economy’s ability to improve living standards, solve persistently high unemployment and generate adequate resilience for future economic downturns, according to The Global Competitiveness Report 2015-2016, which is released today.

The report is an annual assessment of the factors driving productivity and prosperity in 140 countries. This year’s edition found a correlation between highly competitive countries and those that have either withstood the global economic crisis or made a swift recovery from it. The failure, particularly by emerging markets, to improve competitiveness since the recession suggests future shocks to the global economy could have deep and protracted consequences.

The report’s Global Competitiveness Index (GCI) also finds a close link between competitiveness and an economy’s ability to nurture, attract, leverage and support talent. The top-ranking countries all fare well in this regard. But in many countries, too few people have access to high-quality education and training, and labour markets are not flexible enough.

First place in the GCI rankings, for the seventh consecutive year, goes to Switzerland. Its strong performance in all 12 pillars of the index explains its remarkable resilience throughout the crisis and subsequent shocks. Singapore remains in 2nd place and the United States 3rd. Germany improves by one place to 4th and the Netherlands returns to the 5th place it held three years ago. Japan (6th) and Hong Kong SAR (7th) follow, both stable. Finland falls to 8th place – its lowest position ever – followed by Sweden (9th). The United Kingdom rounds up the top 10 of the most competitive economies in the world.

In Europe, Spain, Italy, Portugal and France have made significant strides in bolstering competitiveness. Thanks to reform packages aimed at improving the functioning of markets, Spain (33rd) and Italy (43rd) climb two and six places respectively. Similar improvements in the product and labour market in France (22nd) and Portugal (38th) are outweighed by a weakening performance in other areas. Greece stays in 81st place this year, based on data collected prior to the bailout in June. Access to finance remains a common threat to all economies and is the region’s greatest impediment to unlocking investment.

Among the larger emerging markets, the trend is for the most part one of decline or stagnation. However, there are bright spots: India ends five years of decline with a spectacular 16-place jump to 55th. South Africa re-enters the top 50, progressing seven places to 49th. Elsewhere, macroeconomic instability and loss of trust in public institutions drag down Turkey (51st), as well as Brazil (75th), which posts one of the largest falls. China, holding steady at 28, remains by far the most competitive of this group of economies. However, its lack of progress moving up the ranking shows the challenges it faces in transitioning its economy.

Among emerging and developing Asian economies, the competitiveness trends are mostly positive, despite the many challenges and profound intra-regional disparities. While China and most of the South-East Asian countries performing well, the South Asian countries and Mongolia (104th) continue to lag behind. The five largest members of the Association of Southeast Asian Nations (ASEAN) – Malaysia (18th, up two), Thailand (32nd, down one), Indonesia (37th, down three), the Philippines (47th, up five) and Vietnam (56th, up 12) – all rank in the top half of the overall GCI rankings.

The end of the commodity super cycle has strongly affected Latin America and the Caribbean, and is already having repercussions on growth in the region. Greater resilience against future economic shocks will require further reform and investment in infrastructure, skills and innovation. Chile (35th) continues to lead the regional rankings and is closely followed by Panama (50th) and Costa Rica (52nd). Two large economies in the region, Colombia and Mexico, improve to 61th and 57th, respectively.

It’s a mixed picture in the Middle East and North Africa. Qatar (14th) leads the region, ahead of the United Arab Emirates (17th), although it remains more at risk than its neighbour to continued low energy prices, as its economy is less diversified. These strong performances contrast starkly with countries in North Africa, where the highest placed country is Morocco (72nd), and the Levant, which is led by Jordan (64th). With geopolitical conflict and terrorism threatening to take an even bigger toll, countries in the region must focus on reforming the business environment and strengthening the private sector.

Sub-Saharan Africa continues to grow close to 5%, but competitiveness and productivity remain low. This is something countries in the region will have to work on, especially as they face volatile commodity prices, closer scrutiny from international investors and population growth. Mauritius remains the region’s most competitive economy (46th), closely followed by South Africa (49th) and Rwanda (58th). Côte d’Ivoire (91st) and Ethiopia (109th) excel as this year’s largest improvers in the region overall.

“The fourth industrial revolution is facilitating the rise of completely new industries and economic models and the rapid decline of others. To remain competitive in this new economic landscape will require greater emphasis than ever before on key drivers of productivity, such as talent and innovation,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.

“The new normal of slow productivity growth poses a grave threat to the global economy and seriously impacts the world’s ability to tackle key challenges such as unemployment and income inequality. The best way to address this is for leaders to prioritize reform and investment in areas such as innovation and labour markets; this will free up entrepreneurial talent and allow human capital to flourish,” said Xavier Sala-i-Martin, Professor of Economics at Columbia University.

Jersey: Annual economic indicators highlight finance industry growth

The latest figures on the performance of the economy in 2014 provide a welcome boost and once again highlight the role of the finance industry as the major contributor to future prosperity, according to Geoff Cook, CEO of Jersey Finance.

The survey, ‘Measuring Jersey’s Economy GVA and GDP 2014’, published by the statistics unit of the States of Jersey, recorded that Jersey’s economy, as measured by GVA (Gross Value Added) grew by 5% in real terms in 2014, driven by real term growth of the finance sector.

There was a 9% increase in economic activity in the finance industry year on year, the highest percentage rise of any industry sector, as a result of a real term increase in GOS (Gross Operating Surplus) of almost a fifth. The survey also recorded that financial services accounted for 44% of the overall economic activity in the Island, by far the largest component. Geoff Cook added:

“These annual figures also sit well with other surveys that have been published recently and help paint a relatively positive picture for the financial services sector. The Survey of Financial Institutions indicated a rise in profits for the industry overall in 2014 with an optimistic forecast regarding employment opportunities and the more recent business tendency survey also pointed to a strong long term outlook for the industry.

“However, it’s clear that there is no room for complacency and that the economy as a whole is not close to the peak of economic activity in 2007 prior to the financial crisis. Nevertheless, this is the first year since then that economic activity overall has increased, led by the performance of the finance industry, and it’s extremely encouraging as the industry seeks to build further new business in markets around the globe.

“Furthermore, the buying power of a strong finance sector in turn supports the growth of other island industries.”

Mauritius Times - The BAI case: Why it is proving so intractable

The first move to deal with the BAI group was made by the Bank of Mauritius in early April this year, notably with the revocation of the licence of its commercial bank, the Bramer Bank. This was followed up by the decision by the Financial Services Commission (FSC), the regulator of non-bank financial services, to place the British American Insurance, the insurance arm of the group, under conservatorship.

Mauritius Times

Walking quieter routes to work can avoid peaks in air pollution

Commuting to work by walking on quieter side streets rather than main roads can help people avoid exposure to peaks in harmful air pollution, according to new research presented today at the European Respiratory Society's International Congress, 2015.

Black carbon is one of the components of air pollution, and comes from incomplete combustion by diesel vehicles. It is known to be associated with a range of respiratory diseases, such as asthma, as well as with cardiovascular diseases.

Mrs Lee Koh, a researcher at the Blizard Institute at Queen Mary University of London (London, UK), used a hand-held monitor to measure levels of black carbon particulate matter while walking between Whitechapel in the east of London to Moorgate, which is nearer to central London, between 16.00-19.00hr using main roads. She then used an urban walking route planner (www.walkit.com) to plan a quieter route that might, potentially, have lower levels of air pollution.

"We know that short-term exposure to black carbon is associated with increased hospital admissions due to respiratory symptoms, and that long-term exposure is associated with exacerbations and increased prevalence of asthma. Since London is one of the most polluted cities for black carbon in Europe, ways that people might be able to reduce their own exposure are of interest, and we wanted to see whether walking quieter, side-street routes might help to do this," said Mrs Koh.

"We found in this small study that people could avoid peaks in black carbon if they choose to walk a quieter route."

Walking the busy route six times between February and May produced measurements of black carbon that averaged 3339-6995 ng·m-3 for every five minutes (nanograms of black carbon per cubic metre per five minutes). When walking the quieter routes six times at the same time of day, the measurements ranged from 2555 to 5854 ng·m-3 for every five minutes, which, although slightly lower than the busy route, was not a statistically significant difference.

Mrs Koh found that there was a statistically significant difference in the peaks of exposure to black carbon between the two routes.

"The peaks are when a much higher levels of pollution are present. For example, when you stop to cross a busy road and so you are subject to a higher level of pollution compared to when walking away from the traffic," she explained.

There were no peaks in black carbon exposure on the side-street route, while on the busy route there were three occasions when the levels of black carbon exceeded 10,000 ng·m-3 for every five minutes, ranging between 10,209 to 10,454 ng·m-3 for every five minutes.

To put these figures in context, the UK's Daily Air Quality Index [1] has suggested that exposure to fine particles of air pollution known as PM2.5 (particulate matter that measures approximately 2.5 micrometers or less in diameter, of which black carbon is a constituent) should not exceed 35,000 ng·m-3 over a 24-hour period.

Mrs Koh concluded: "Our study suggests that, in London, it is possible to reduce exposure to peaks of black carbon particles (mainly from diesel soot) by choosing to walk a less polluted route. Government action will be required to further improve the general air quality around us."

Évasion fiscale - Dans l’arrière-boutique du wealth management

Plongée dans les coulisses d’une officine de «gestion de fortune» proposant des «solutions» aux fraudeurs. Où l’on croise des comptes à Nassau ou à Maurice, une banque dépositaire au Luxembourg et la filiale d’un PSF aux Bahamas.

Tax Havens Are Turning The U.S. Into An Unequal Aristocracy

To Gabriel Zucman, protégé of rock star French economist Thomas Piketty, the United States is starting to look a lot like Europe in the late 1800s.

“There’s been this great reversal where, in the 19th century, the U.S. was much more equal than Europe, and thought of Europe as being way too unequal,” Zucman, a native Parisian, told The Huffington Post in an interview on Tuesday. “Now, the U.S. is unequal and many people think Europe is too equal.”

Maurice: AfrAsia Bank affirme que les démissions n'ont rien à voir avec les enquêtes en cours

La direction d’AfrAsia Bank, dans un communiqué vendredi après-midi 25 septembre, explique que la démission de son Chief Executive Officer (CEO) James Benoit et de son Deputy CEO Kamben Padayachy n’ont rien à voir avec les « enquêtes en cours » et « rejette toute allégation l’associant à des produits d’investissement illégaux ».

Defi Media

Mauritius: Communiqué - AfrAsia Bank Limited

AfrAsia Bank Limited wishes to inform its clients and the public that the resignation of James Benoit and Kamben Padayachy bears no relation to current investigations. The Bank also strongly denies any type of alleged association with illegal investment products.

AfrAsia Bank Limited operates within a rigorous corporate governance framework as well as strict parameters set forth by local and international regulators. The Bank reiterates its commitment to principles of integrity and transparency in all its dealings.

With a strong capital base of MUR 4.9 billion as at 30 June 2015 and trust from its major shareholders, namely GML Investissement Ltée, National Bank of Canada, Intrasia Capital Pte Ltd and PROPARCO, AfrAsia Bank is well positioned for future growth and to meet its ambitions for regional and international expansion.

AfrAsia Bank Limited

25 September 2015

Mauritius: New Invest Hotel Scheme

Cabinet has agreed to the new Invest Hotel Scheme to assist hotels in reducing their debt burden, and restructuring and financing major refurbishment and renovation works. The Scheme will bring in additional Foreign Direct Investment and apply to existing hotels. 

Why Do Governments So Often Disappoint?

With some notable exceptions (e.g., Singapore, Abu Dhabi, some Nordic countries), trust in government has been declining; to the point where it is one of the least trusted institutions globally. A sense of "permanent underperformance" pervades sentiments about government, from the way it delivers public services to the way it supports the economy. 

The declining level of trust in government may reveal as much or more about our evolving conception of progress as it may about the role and contribution of government. During a recent symposium on Government and Progress at INSEAD’s Europe campus in Fontainebleau, France, academics, policymakers, business leaders and consultants debated why this may be the case.

INSEAD Knowledge 

Zimbabwe: Creditors rescue AfrAsia Capital Management

AfrAsia Capital Management (ACM) creditors on Tuesday voted in favour of saving the company from liquidation saying it should divest from parent company, AfrAsia Bank.

NewsDay

Maurice: Les deux dirigeants d’AfrAsia Bank démissionnent

AfrAsia Capital Management (ACM) creditors on Tuesday voted in favour of saving the company from liquidation saying it should divest from parent company, AfrAsia Bank.

NewsDay

Business Today: Black and White

A story of shell companies, trusts, hawala, tax havens, consultants and money routing

AfrAsia: Resignation of Chief Executive Officer, Mr James Benoit, and Deputy CEO, Mr Kamben Padayachy

The Board of Directors of AfrAsia Bank Limited announced today the resignation of its Chief Executive Officer, Mr James Benoit, and its Deputy CEO, Head of Global Banking, Treasury and Markets, Mr Kamben Padayachy.

Mr Thierry Vallet, who has worked as General Manager and Head of Private Banking within AfrAsia for 8 years, will be the acting CEO of the bank, subject to regulatory approval.

The Board has initiated the process for the recruitment of a new CEO, who will be tasked to spearhead the reorganization of the bank’s internal structure to better serve its banking and non-banking clients. With this organisational transformation, the ABL franchise will be well positioned to reinforce its foothold in its various markets and create more value for its shareholders.

The Board wishes to thank Messrs Benoit and Padayachy for their contribution.

Mauritius: FSC issues Circular Letter on Procedures for Registration of Prospectus

The Financial Services Commission, Mauritius (the "FSC") refers to the Consultation Paper CP/26052015 issued on 26 May 2015 in relation to "Registration of Prospectus". Pursuant to Section 68(1 )(b) of the Securities Act 2005 (the "Act"), no person shall make an offer of securities to the public unless the offer is made in a prospectus that complies with Part V of the Act which concerns "Offers and Issues of Securities". In this respect, the FSC is informing all stakeholders of the procedures for registration of prospectus which will henceforth be applicable with immediate effect.

Inside the tax havens that are helping the 1 percent steal trillions of dollars

Is Planet Earth in hock to Mars to the tune of $7.6 trillion? When economist Gabriel Zucman went digging into the world's national accounts, that seemed to be the case — total world liabilities exceeded world assets by about that much.

The Week

Global Financial Centres Index (GFCI 18) - London Back On Top But Only Just - Competition From Asia Intensifies

Today in Shenzhen, China, Z/Yen Group publishes the eighteenth Global Financial Centres Index (GFCI 18) sponsored by the Qatar Financial Centre Authority. The Index rates 84 financial centres.

London has moved ahead of New York to reclaim the number one position. London climbed 12 points in the ratings to lead New York by eight points. The GFCI is on a scale of 1,000 points and a lead of eight is thus fairly insignificant. We prefer to see London and New York as complimentary rather than purely competitive. It is noticeable that assessments for London have been higher since the general election in May 2015.

London, New York, Hong Kong, and Singapore remain the four leading global financial centres. New York, in second place is now 33 points ahead of Hong Kong in third. Tokyo, in fifth place, is 25 points behind the leaders.

Western European centres show signs of recovery. The leading centres in Europe are London, Zurich and Geneva as in GFCI 17 and Frankfurt has moved up into fourth place just ahead of Luxembourg. Of the 29 centres in this region, 23 centres rose in the ratings with Dublin doing particularly well. Liechtenstein appears in the GFCI for the first time and is ranked 60th. Reykjavik continues to reverse some of its recent decline.

Eastern European and Central Asian centres prosper. The leading centre in this region is now Warsaw in 38th place, just ahead of Istanbul. The top seven centres all saw an increase in their ratings but the largest decline in this region was St Petersburg.

Twelve of the top 15 Asia/Pacific centres see a rise in their ratings. With the exception of Hong Kong and Singapore, the top Asia/Pacific financial centres have all seen their ratings increase in GFCI 18. Hong Kong, Singapore, Tokyo and Seoul remain in the GFCI Top 10.

All North American centres are up in the ratings. However, due to continuing rise of some Asian centres, San Francisco, Chicago, Boston, Vancouver and Calgary and suffered small declines in the ranks. Toronto remains the leading Canadian centre and is now the second North American centre behind only New York.

Sao Paulo and Rio de Janeiro rise strongly. Sao Paulo remains the top Latin American centre in GFCI 18, and along with Rio de Janeiro, made significant progress in the ratings and rankings. Mexico was the only centre that fell in the GFCI ratings. The Cayman Islands and the Bahamas also showed good improvements.

Mark Yeandle, Associate Director at the Z/Yen Group and the author of the GFCI said "Whilst London and New York still lead the field, the next four centres are all Asian. We are launching GFCI 18 in China to mark the success of the Chinese centres in becoming more competitive."

GFCI 18 Top Ten Centres

1	London	796
2	New York	788
3	Hong Kong	755
4	Singapore	750
5	Tokyo	725
6	Seoul	724
7	Zurich	715
8	Toronto	714
9	San Francisco	712
10	Washington DC	711

Audit: KPMG, une révocation à gros risques

La licence de KPMG pourrait-elle être suspendue ? La question divise spécialistes et associés du Big Four (KPMG, Deloitte, Ernst & Young et PricewaterhouseCoopers). Mais tous sont d’avis qu’une telle éventualité aurait des conséquences désastreuses sur la réputation de Maurice comme centre financier crédible.

L'Express

Central-bank bosses - Caste iron

In most countries a stint at a big international bank is no disqualification for a top job at a central bank. Mark Carney of the Bank of England (ex-Goldman Sachs), Mario Draghi of the European Central Bank (Goldman again) and Bill Dudley of the Federal Reserve Bank of New York (yes, Goldman too) are three prime exhibits. Yet the nomination of François Villeroy de Galhau, until recently a senior executive at BNP Paribas, as the new governor of the Bank of France has prompted an unusual rumpus.

The Economist

Risk-weighted capital - Whose model is it anyway?

A simple way to judge the solidity of a bank is to compare the amount of money it can afford to lose without keeling over to the size and riskiness of its business. After the financial crisis, regulators sensibly worked to boost the first figure: banks now fund their lending less with money they borrow themselves, often from depositors, and more with capital belonging to their shareholders. That was the easy bit. Trying to get to the bottom of how risky banks are, and so how much capital each requires, is now top of regulators’ minds. Beyond further denting the sector’s profits, the outcome of their review threatens to introduce risks of its own.

The Economist

Mauritius 1st on Global Innovation Index for Sub-Saharan African region

Mauritius is ranked first in Sub-Saharan Africa on the Global Innovation Index (GII) 2015 and positions itself 49th globally.

The GII ranks the innovation performance of 141 countries and economies, that represent 95.1% of the world’s population and 98.6% of the world’s GDP (in current US dollars), and is based on 79 indicators.

The 2015 index highlights that in recent years, three Sub-Saharan African (over 32 countries) have reached positions in the upper half of the GII rankings: Mauritius is on the 49th this year; South Africa is 60th; and Seychelles is 65th.

Switzerland, the United Kingdom, Sweden, the Netherlands and the United States of America are the world’s five most innovative nations, while China, Malaysia, Vietnam, India, Jordan, Kenya, and Uganda are among a group of countries outperforming their economic peers.

The GII 2015 looks at ‘Effective Innovation Policies for Development’ and shows new ways that emerging-economy policymakers can boost innovation and spur growth by building on local strengths and ensuring the development of a sound national innovation environment.

It is recalled that the Mauritian Government has identified innovation as a key focus area in its strategy to drive the economy and create employment.

GII 2015

The index, in its 8th edition this year, is co-published by Cornell University, INSEAD, and the World Intellectual Property Organisation, a specialsed agency of the United Nations.

The GII 2015 explores the impact of innovation-oriented policies on economic growth and development. High-income and developing countries alike are seeking innovation-driven growth through different strategies. Some countries are successfully improving their innovation capacity, while others still struggle.

FT Special Report: Investing in Mauritius

Despite slowing growth and a sense of uncertainty following political and financial scandals, the Indian Ocean nation is looking to reinvent itself. It aims to attract investment in new industries and more high end tourists as well as fulfill its aim of becoming a regional hub serving Africa.

Nation needs to reignite growth

A lacklustre economy and corruption scandals dominate the agenda

Need for both investment and reforms

Infrastructure is inadequate and there are worries about inequality

Political scandals undermine Mauritius

Critics say a government-led ‘clean-up’ campaign is really about settling political scores

Country vies with neighbours to be a hub

As demand stagnates in Europe, Mauritius wants more links with Africa

Country boosts financial services

Mauritius is keen to capitalise on a Africa-focused wave

Calls to boost tourism sector

Visitor numbers are up, but the Maldives and Sri Lanka still have more

Sugar producers seek a sweeter future

Diversification is vital, as prices continue to fall and costs rise

Ameenah Gurib-Fakim set to make her mark

Profile of Mauritius’s new president

Textile company is upbeat despite hurdles

RT Knits has positioned itself to compete with European manufacturers

Shadow of ‘reggae riots’ still lingers

Latent tensions persist between Mauritius’s diverse communities

The Hidden Wealth of Nations - The Scourge of Tax Havens

We are well aware of the rise of the 1% as the rapid growth of economic inequality has put the majority of the world’s wealth in the pockets of fewer and fewer. One much-discussed solution to this imbalance is to significantly increase the rate at which we tax the wealthy. But with an enormous amount of the world’s wealth hidden in tax havens—in countries like Switzerland, Luxembourg, and the Cayman Islands—this wealth cannot be fully accounted for and taxed fairly. No one, from economists to bankers to politicians, has been able to quantify exactly how much of the world’s assets are currently hidden—until now. Gabriel Zucman is the first economist to offer reliable insight into the actual extent of the world’s money held in tax havens. And it’s staggering.

In The Hidden Wealth of Nations, Zucman offers an inventive and sophisticated approach to quantifying how big the problem is, how tax havens work and are organized, and how we can begin to approach a solution. His research reveals that tax havens are a quickly growing danger to the world economy. In the past five years, the amount of wealth in tax havens has increased over 25%—there has never been as much money held offshore as there is today. This hidden wealth accounts for at least $7.6 trillion, equivalent to 8% of the global financial assets of households. Fighting the notion that any attempts to vanquish tax havens are futile, since some countries will always offer more advantageous tax rates than others, as well the counter-argument that since the financial crisis tax havens have disappeared, Zucman shows how both sides are actually very wrong. In The Hidden Wealth of Nations he offers an ambitious agenda for reform, focused on ways in which countries can change the incentives of tax havens. Only by first understanding the enormity of the secret wealth can we begin to estimate the kind of actions that would force tax havens to give up their practices.

Zucman’s work has quickly become the gold standard for quantifying the amount of the world’s assets held in havens. In this concise book, he lays out in approachable language how the international banking system works and the dangerous extent to which the large-scale evasion of taxes is undermining the global market as a whole. If we are to find a way to solve the problem of increasing inequality, The Hidden Wealth of Nations is essential reading.

Harneys expands into Bermuda

Harneys is delighted to announce that it has established a presence in Bermuda.

Chairman Peter Tarn said that Harneys has combined with Bermudian firm Hurrion & Associates. Sarah-Jane Hurrion will be Managing Partner of the resulting full-service legal and fiduciary services business, to be known as Harneys Bermuda.

Harneys further announced today the appointment of Michael Burns, a former Senior Equity Partner of Appleby, as its Global Group General Counsel. Michael will be based in Bermuda and will also serve as Managing Director of Fiduciary Services and Head of the Corporate Department of Harneys Bermuda.

“Bermuda is a blue chip jurisdiction with a strong international reputation and diverse product range; clients have been telling us for some time that Bermuda is a place where Harneys needs to be. In particular, Harneys’ strength and deep roots in Latin America and Asia provide the perfect platform to grow Bermuda’s presence in these key and emerging markets,” commented Peter Tarn.

“Harneys is committed to building a leading full-service Bermuda legal and fiduciary services practice and we are extremely pleased to be doing so in partnership with Sarah-Jane and Hurrion & Associates. For us, choosing to partner with Hurrion was not only about technical expertise but also a belief that Sarah-Jane shares our long term ambitions and vision of how lawyers should contribute to the society in which they operate; we consider ourselves lucky to have Sarah-Jane and her outstanding team joining us,” Tarn continued.

Sarah-Jane Hurrion commented: “Hurrion & Associates is pleased to be joining forces with a firm of Harneys’ calibre and reputation. Our firms have an outstanding cultural fit and a great deal to offer each other, to the benefit not only of our clients and staff, but also of the broader Bermuda legal market, economy and profile.”

“I am also excited to welcome Michael Burns to Harneys. Mike brings 25 years of experience as a corporate lawyer to Harneys Bermuda and I am delighted that he will be part of the leadership team to drive this firm forward in the years to come,” Hurrion commented.

Ross Webber, CEO of Bermuda BDA commented: “The BDA has been in discussions with Harneys for several months and we look forward to welcoming the firm to Bermuda. It is encouraging the jurisdiction is being regarded as a place for growth and a centre that is open for business. We strongly believe this will result in healthy competition within the Bermuda marketplace, and that the presence of Harneys here will attract more business.”

The rebranding of Hurrion & Associates as Harneys Bermuda will take place in October 2015.

ALB: Does South Africa want to be Africa’s international arbitration hub?

Paul Stothard, Chiz Nwokonkor, and Giles Harvey of King & Wood Mallesons consider recent actions taken by South Africa to reinvent its position in the international system of arbitration. How credible are the alternative solutions it has identified for investors, with South Africa’s potential status as a key regional arbitration hub for Africa at stake?

Barclays Bank Seychelles discontinues offshore banking services

The Central Bank of Seychelles (CBS) says it is engaging with Barclays Bank Seychelles to ensure that clients have sufficient time to shift their deposits in their offshore bank accounts, following a recent decision by Barclays to discontinue its banking services for non-residents in foreign currencies.

While Barclays refused to comment on the decision to SNA, the CBS issued a press statement jointly with the Seychelles Ministry of Finance, Trade and the Blue Economy, Financial Services Authority (FSA) and Financial Intelligence Unit (FIU) on Friday last week.

“Following a remediation exercise, Barclays determined that the level of risk arising from its offshore banking activities is not in line with its risk appetite, which refers to the level of risk that the bank is prepared to take," read the statement. "However, as a result of global tightening in the regulatory environment and large fines imposed on international banks, financial institutions are increasingly restricting business relationships with high risk clients or categories of clients to avoid the risk of sanction."

The financial authorities acknowledged the difficulties faced by the clients given Barclays’ decision. According to information provided to SNA by CBS, all of Barclays’ offshore clients were informed about the decision and the date of the service closure is October 31, 2015.

“International standards for risk management in financial services identify offshore banking as a higher category of risk in view that most of the customers do not have a presence in the jurisdiction in which the bank operates which makes it more difficult to apply Know Your Customer procedures and consistent monitoring,” said the joint statement.

Closure has 'shaken the industry'

Barclays, which was the first commercial bank to set up operations in Seychelles in 1959, ventured into offshore banking in 2004, and together with the Bank of Muscat International Offshore (BMIO) were until now the main institutions providing offshore banking facilities in the Indian Ocean archipelago.

SNA contacted some companies offering services to offshore clients in Seychelles to find out how the industry is being affected with Barclays’ decision to cancel its offshore banking facilities.

One company that responded, although it preferred not to be named, said that the industry was aware of Barclays reviewing its policies although it acknowledged that the decision has indeed shaken the industry with less banking options left for clients.

The company’s representative added that many clients were however already looking for alternate solutions outside Seychelles including in the neigbouring island of Mauritius “due to various factors not only with more stringent or complex solutions coming from the available offshore banks.”

“For a country that is thriving to push its financial services sector it might be a struggle for us to offer a one stop shop solution to our clients if they don’t have any banking options in the country,” the company’s representative told SNA.

For another company the development is being viewed as one that has not helped "an already fragile sector," adding that affected customers having to find another banking option mainly outside Seychelles, would certainly mean an exit of bank deposits formerly held in the Barclays offshore banking unit to foreign banks.

"In more general terms, without having quality banking options to support the 'high value' products that the Government, regulators and Corporate Service Providers desire to move toward, it will be exceedingly difficult for the industry to move forward and beyond the current back office, wholesale IBC model which is not sustainable long term."  

Too early to tell if offshore clients will jump ship, says FSA

The Seychelles Association of Offshore Practitioners and Registered Agents (SAOPRA) is of the view that with clients often preferring to have their company’s bank account in the country of incorporation “the lack of a reputable brand may cause clients to lose confidence in our jurisdiction.”

“Those clients with offshore accounts will have to make provisions to open their account with other banks, other than Barclays. As an Association, the SAOPRA has expressed concerns that existing high valued products are not being given priority. This is of paramount importance as one of the product will bring a 1.5% tax in our economy. Also these products are transparent as it has to produce annual returns with the tax authorities,” SAOPRA’s Vice Chairperson Ina Laporte told SNA in an emailed response.

It has not been possible to find out what percentage of offshore bank accounts were registered with Barclays and according to the Financial Services Authority, FSA, it is too early to predict if this will mean a flight of money away from Seychelles.

“Having offshore banking facilities in the Seychelles facilitates activities and would provide an attraction to individuals wishing to have certain structures in Seychelles. However with the inability to open such accounts clients will seek for alternatives abroad, something which was being done even BBS had been offering the service….At this juncture it will be difficult to say given Barclays formally announced its decision recently following their remediation exercise. The FSA cannot at this juncture comment on the issue of capital flight from the Seychelles owing to the business decision made by the bank to discontinue its services,” FSA told SNA.

The high risk factor of offshore banking also impacted BMIO last year. In November 2014, CBS took control of BMIO after the latter’s banking relationship with its foreign correspondent broke down. The foreign transactions became operational again in December and the bank continues to offer offshore banking services while a reorganization plan is being implemented.

Prior to December 2011, the Central Bank of Seychelles was issuing two types of licences. While banking business licences allowed banks to provide services in all currencies to residents and non-residents, offshore banking business licence catered for banking business with non-residents in foreign currencies.

Amendments to the Financial Institutions Act 2004 in December 2011, allowed for the introduction of a single licensing regime, which allows for one licence to be issued under which both domestic and banking business that gives rise to foreign sourced income may be conducted.

“Apart from BMIO, Al Habib is currently the only bank conducting solely offshore banking activities. All other banks such as Nouvobanq and the Mauritius Commercial Bank (MCB) also conduct ‘offshore’ banking activities in addition to ‘domestic’ banking activities,” CBS told SNA in an emailed statement.

Seychelles has around 140,000 international business companies (IBC) in its offshore sector compared to the 650 when it started in 1996.

Concerns were raised in 2013 by the Organisation for Economic Co-operation and Development (OECD) over Seychelles jurisdiction with regards to tax transparency rules which resulted in amendments made to its 1996 International Business Companies Act to bring it in line with international standards.

According to the CBS joint statement, Seychelles has also addressed its non-compliant status through other channels, adding the country has a “commitment to the OECD’s Automatic Exchange of Information; and Seychelles entering into the Inter-Governmental Agreement for the Foreign Accounts Tax Compliance Act (FATCA).”

Seychelles authorities say they are receiving assistance from external partners such as the International Monetary Fund, US Treasury and the World Bank, in order to ‘build capacity within the financial services sector.’

Mauritius: Investment Promotion and Protection Agreement signed with UAE

The Minister of Finance and Economic Development, Mr Vishnu Lutchmeenaraidoo, has signed during the week end an Investment Promotion and Protection Agreement with the government of the United Arab Emirates. This agreement is of strategic importance as significant economic exchanges are planned with the United Arab Emirates (UAE) for major development projects, in particular the Maritime Hub of Port Louis. 

The Finance Minister had working sessions with the UAE authorities to discuss about employment opportunities for Mauritians in Dubai as well the development of an investment corridor between Dubai and Africa via Mauritius.

Minister Lutchmeenaraidoo and his delegation held extensive discussions with DP World, the UAE port operator which currently manages 65 ports around the world, in regards to the development of the Maritime Hub, including the setting up of a free port in the area of Jinfei at Riche Terre. A delegation of DP World is expected in Mauritius on September 28 to have further discussions on the Maritime Hub and the free port.

The Mauritian delegation also had meeting with potential investors, such as Allana Group, the UAE Exchange and Pure Gold Group, who have expressed interest to invest in Mauritius in the sectors such as manufacturing, financial services and the free port among others, or who want to use Mauritius as a platform to invest in Africa.

Mauritius is positioning itself as an international financial centre that aims to connect the African continent with the largest financial centers in Asia, the Middle East, Europe and the United States.

Mauritius current account deficit widens in second quarter

Mauritius' current account deficit widened in the second quarter of this year from the same period last year partly due to lower tourist earnings, data from the central bank showed on Monday.

Reuters

Mauritius ranked 6th on annual Economic Freedom of the World report 2015

Mauritius is the 6th most economically free jurisdiction in the world with an 8.08 rating, according to the Fraser Institute’s Economic Freedom of the World 2015 Annual Report.

The report measures economic freedom by analysing the policies and institutions of 157 countries and territories.  The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to enter markets and compete, and security of the person and privately owned property.

The top 10 most economically free jurisdictions, based on 2013 statistics (which is the most recent year of available data), are: Hong Kong, Singapore, New Zealand, Switzerland, United Arab Emirates, Mauritius, Jordan, Ireland and Canada, with the United Kingdom and Chile tied for the 10th ranking.

42 distinct pieces of data points are used to measure the degree of economic freedom in five broad areas.

For these five areas, Mauritius ratings, on a scale of 10, are as follows:

• Size of Government: expenditures, taxes, and enterprises - 7.87
• Legal structure and security of property rights - 6.55
• Access to sound money - 9.67
• Freedom to trade internationally - 8.49
• Regulation of credit, labour, and business - 7.82

According to the Report, nations in the top quartile of economic freedom had an average per-capita GDP of $38,601 in 2013, compared to $6,986 for bottom quartile nations.  Life expectancy is 80.1 years, compared to 63.1 years.

The rankings of some other major countries are the United States (16th), Japan (26th), Germany (29th), South Korea (39th), Italy (68th), France (70th), Mexico (93st), Russia (99th), China (111th), India (114th), and Brazil (118th).

The 10 lowest-ranked countries are Angola, Central African Republic, Zimbabwe, Algeria, Argentina, Syria, Chad, Libya, Republic of Congo, and Venezuela.

The Fraser Institute produces the annual Economic Freedom of the World report in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in 90 nations and territories.

Developments in Seychelles’ Financial Sector

The authorities, (Ministry of Finance, Trade and the Blue Economy, Central Bank of Seychelles (CBS), Financial Services Authority (FSA) and Financial Intelligence Unit (FIU)) wish to comment on ongoing developments in Seychelles’ financial sector.

It has recently been announced that Barclays Bank Seychelles Ltd (BBS) has taken a strategic decision to discontinue banking business that gives rise to foreign sourced income; commonly referred to as ‘offshore’ banking business. This refers to banking activities conducted with non-residents in foreign currencies, a service which has primarily been conducted by BBS and BMI Offshore (BMIO).

Following a remediation exercise, BBS determined that the level of risk arising from its offshore banking activities is not in line with its risk appetite, which refers to the level of risk that the bank is prepared to take.

Risk is inherent in banking business and Central Banks require banks to adopt adequate risk management practices. This includes banks setting their risk appetites and ensuring that they have the capacity to operate within these set parameters. However, as a result of global tightening in the regulatory environment and large fines imposed on international banks, financial institutions are increasingly restricting business relationships with high risk clients or categories of clients to avoid the risk of sanction. International standards for risk management in financial services identify offshore banking as a higher category of risk in view that most of the customers do not have a presence in the jurisdiction in which the bank operates which makes it more difficult to apply Know Your Customer procedures and consistent monitoring.

Given BBS’ decision, CBS acknowledges the difficulty for the bank’s affected clients and is engaging with BBS to ensure they are provided with sufficient time to shift their deposits.

On a general level, local authorities in Seychelles are undertaking initiatives to ensure that as well as complying with certain requirements, banks also observe best practices that are applicable across the financial services sector, as part of a strategy which is relevant to the prevailing environment.

There have additionally been notable developments to address Seychelles’ non-compliant status as rated by the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes in 2013. Important moves include modifications to the IBC Act to bring the legislation in line with international  standards; commitment to the OECD’s Automatic Exchange of Information; and Seychelles entering into the Inter-Governmental Agreement for the Foreign Accounts Tax Compliance Act (FATCA). These are positive initiatives, non-compliance to which would have adverse implications on the reputation and sustainability of the financial sector. As such, international compliance is recognised as paramount to ensure Seychelles’ success as a visible and modern international financial centre.

Further to the afore-mentioned, the authorities are receiving assistance from external partners such as the International Monetary Fund, US Treasury and the World Bank in order to build capacity within the financial services sector, including the banking component. Correspondingly, in order to develop an appropriate and modern strategy for the sector, the Government in collaboration with the private sector has sought consultancy assistance from experts in the area. This seeks to embed the characteristics required to develop Seychelles as a sustainable international financial centre and maintain recognition as a responsible and acceptable participant in the global financial services industry.

Breder Suasso, the Dutch golden age, look through companies, trusts, & roommates

The NZ registered financial service provider that tells potential clients of NZ bankrupts 'who still live in mansions; drive Ferraris owned by their trusts'

interest.co.nz

Do Banks Pass Through Credit Expansions? The Marginal Profitability of Consumer Lending During the Great Recession

We examine the ability of policymakers to stimulate household borrowing and spending during the Great Recession by reducing banks’ cost of funds. Using panel data on 8.5 million U.S. credit card accounts and 743 credit limit regression discontinuities, we estimate the marginal propensity to borrow (MPB) for households with different FICO credit scores. We find substantial heterogeneity, with a $1 increase in credit limits raising total unsecured borrowing after 12 months by 59 cents for consumers with the lowest FICO scores (≤ 660) while having no effect on consumers with the highest FICO scores (> 740). We use the same credit limit regression discontinuities to estimate banks’ marginal propensity to lend (MPL) out of a decrease in their cost of funds. For the lowest FICO score households, higher credit limits quickly reduce marginal profits, limiting the pass-through of credit expansions to those households. We estimate that a 1 percentage point reduction in the cost of funds raises optimal credit limits by $127 for consumers with FICO scores below 660 versus $2,203 for consumers with FICO scores above 740. We conclude that banks’ MPL is lowest exactly for those households with the highest MPB, limiting the effectiveness of policies that aim to stimulate the economy by reducing banks’ cost of funds.

NBER Working Paper No. 21567

Global Innovation Index 2015: Switzerland, UK, Sweden, Netherlands, USA are Leaders

Switzerland, the United Kingdom, Sweden, the Netherlands and the United States of America are the world’s five most innovative nations, according to the Global Innovation Index 2015, while China, Malaysia, Viet Nam, India, Jordan, Kenya, and Uganda are among a group of countries outperforming their economic peers.

The GII 2015 looks at “Effective Innovation Policies for Development” and shows new ways that emerging-economy policymakers can boost innovation and spur growth by building on local strengths and ensuring the development of a sound national innovation environment.

“Innovation holds far-reaching promise for spurring economic growth in countries at all stages of development. However, realizing this promise is not automatic,” said WIPO Director General Francis Gurry. He added: “Each nation must find the right mix of policies to mobilize the innate innovative and creative potential in their economies.”

The United Kingdom (UK), in second place and up from the 10^th position in 2011, hosted the global launch of the eighth edition of the GII. Baroness Neville-Rolfe, Minister for Intellectual Property and Parliamentary Under Secretary of State at the Department for Business, Innovation and Skills said: "The UK has an outstanding tradition in producing the very best in science and research: with less than 1% of the world's population we produce 16% of the top quality published research. This research excellence is a major factor in the UK maintaining its position at number two in the 2015 Global Innovation Index. The government is committed to making Britain the best place in Europe to innovate, patent new ideas and start and grow a business."

The GII, co-published by Cornell University, INSEAD and the World Intellectual Property Organization (WIPO), surveys 141 economies around the world, using 79 indicators to gauge both innovative capabilities and measurable results.

Top Ranking

As a whole, the group of top 25 performers – all high income economies – remains largely unchanged from past editions, illustrating that the leaders’ performance is hard to challenge for those that follow.

Some exceptions are: the Czech Republic (24th) is in the top 25 and Ireland (8th) in the top 10 this year. Also, China (29th) and Malaysia (32nd) show a performance which is similar to the one of top 25 high-income countries, including in areas such as human capital development and research and development funding.

In terms of innovation quality – as measured by university performance, the reach of scholarly articles and the international dimension of patent applications – a few economies stand out. The US and the UK stay ahead of the pack, largely as a result of their world-class universities, closely followed by Japan, Germany and Switzerland. Top-scoring middle-income economies on innovation quality are China, Brazil and India, with China increasingly outpacing the others.

Soumitra Dutta, Anne and Elmer Lindseth Dean, Samuel Curtis Johnson Graduate School of Management, Cornell University and co-author of the report, points out that: "Innovation quality matters. Creating world class universities and investing in research is essential for staying ahead in the global race for successful innovation."

Innovation Achievers

Economies that outperform their peers for their level of gross domestic product are designated in the report as “innovation achievers.”

A number of low-income economies are innovation achievers, performing increasingly well at levels previously reserved for the lower-middle-income group. Sub-Saharan Africa stands out, with Rwanda (94th), Mozambique (95th) and Malawi (98th) now performing like middle-income economies. In addition, Kenya, Mali, Burkina Faso and Uganda are generally outperforming other economies at their level of development.

These innovation achievers demonstrate rising levels of innovation results because of improvements made to institutional frameworks, a skilled labor force with expanded tertiary education, better innovation infrastructures, a deeper integration with global credit investment and trade markets, and a sophisticated business community—even if progress on these dimensions is not uniform across their economies.

Bruno Lanvin, Executive Director for Global Indices at INSEAD, and co-editor of the report, stresses that: “In all regions of the world, entrepreneurship, leadership and political will are making a difference regarding innovation. Barriers are falling, and innovation achievers are displaying performances higher than what their income per capita would suggest. Their experience is now becoming a basis for other countries to emulate their success and turn innovation into a truly global engine for sustainable growth.”

Effective Innovation Policies for Development

Innovation policies occupy a central role in developing and emerging economies, where promoting innovation is central to development plans and strategies and is key to addressing pressing societal problems such as pollution, health issues, poverty, and unemployment.

The GII 2015 finds that a well-coordinated innovation policy plan with clear targets and a matching institutional set-up have proven to be a tool for success. GII analysis shows that increasing business sophistication business linkages to science and its institutions, foreign subsidiaries, and the recruitment of scientists– is often the single biggest challenge in developing economies. While significant resources are often devoted to attracting foreign multinationals and investment, developing country policymakers should consider how to capture and maximize positive spillovers to the local economy.

An underexplored area in many developing countries is steering innovation and research to context-specific solutions, which may not produce frontier technologies or comprise part of existing global value chains, but which offer solutions to local challenges. Finding innovative ways to overcome developing country challenges in the area of energy, transportation, sanitation, and getting a greater return on local artisanship and creative industries are a priority.

Regional Innovation Leaders *

*  Excluding countries with high numbers of missing data points.

Central and Southern Asia

India remains at the top of the regional ranking of Central and Southern Asia this year, followed by Kazakhstan and Sri Lanka, which has significantly improved its position.

“The GII underlines the steady outperformance of India on innovation relative to its level of development”, says Chandrajit Banerjee, Director General of Confederation of Indian Industry (CII). “We applaud the new innovation policies put in place by the new Indian government, which are not yet effectively captured by the data used in the GII. Some of these measures have already had a positive impact on the build-up of innovation momentum and entrepreneurial mood in the country, and we expect this trend to grow in the coming months and years.”

Central and Southern Asia has yet to reach its full potential: Most countries in the region remain outside the top 100 of the GII. However, the economies at the top of the regional rankings can serve as models of good innovation policies with stronger institutions that will help stimulate higher levels of innovation-driven regional development in the coming years.

Europe and North America

Overall, innovation remains strong in Europe, with a strong showing of European countries in the top 10, and positive moves of large European countries such as Germany (12th) in the top 25. A number of eastern European countries like Bulgaria (39th), or Montenegro (41st) display dynamism and an upward trend. In North America, The United States of America (5th) remains the top innovation performer, while Canada (16th) remains in the GII top 25 after slipping from the top 10 in 2012.

Johan Aurik, Managing Partner and Chairman of the Board of A.T. Kearney, says: “While European countries are leading the index, we see policy concerns in three areas: Adopting more forward-looking legislation for emerging technologies such as autonomous cars; Enabling companies to better anticipate new regulation; And improving regulatory harmonization so that standards are more easily adopted and upheld.”

Kai Engel, co-founder of IMP³rove – European Innovation Management Academy and Lead Partner for A.T. Kearney’s Innovation Services, adds that: “European regions have developed smart specialization strategies to focus innovation funds; the major challenge ahead of us is their efficient implementation, making use of big data approaches that increase precision and adaptability of policy measures.”

Latin America, Caribbean

Latin America and the Caribbean is a region with improving but largely untapped innovation potential. Brazil (70th), Argentina (72nd), and Mexico (57th) stand out as economies performing above the region’s GII average. The consistent over-performance of Chile (42nd), Costa Rica (51st) and Colombia (67th), in regional terms and as compared to their peers of similar economic development, is noteworthy in the region too, as is the emergent role of Peru (71st) and Uruguay (68th).

Northern Africa and Western Asia

Many resource-rich economies in the region have started to diversify and spur innovation in new sectors. This has allowed for Saudi Arabia (43rd), United Arab Emirates (UAE) (47th) and Qatar (50th) to achieve top GII positions within the region as well.

“The UAE continues to be at the forefront of innovation, with Government emphasis on diversifying the country’s economy. At du, we have worked hard to create connected ecosystems that ensure knowledge diffusion and seamless innovation,” said du Chief Executive Officer Osman Sultan.

In the region, Armenia (61st) and Jordan (75th) continue to outperform on innovation with respect to their level of development; and they are joined by Morocco (78th) this year. Israel (22nd) ranks first in the region for the third year running.

South East Asia and Oceania

With half of its economies in the top 40, South East Asia and Oceania maintains its innovation dynamism this year. While Singapore (7th) and Hong Kong (China) (11th) remain at the top of the regional rankings, the Republic of Korea (14th), New Zealand (15th) and Japan (19th) are also within the top 20. The region’s performance is also boosted by China (29th) and Malaysia (32nd), but also the positive developments in Viet Nam (52nd), Philippines (83rd) and Cambodia (91st).

Sub-Saharan Africa

Encouraging signs have been emerging from Sub-Saharan Africa since last year. Three countries in the region top the rankings of the low-income country group, namely Kenya (92nd), Mozambique (95th) and Uganda (111th), excluding countries with high numbers of missing data points. In addition to South Africa (60th), eight countries in the Sub-Saharan Africa region show notable performance above what their level of development would suggest, notably Senegal (84th), Kenya (92nd), Rwanda (94th), Mozambique (95th), Malawi (98th), Burkina Faso (102nd), Mali (105th) and Uganda (111^th).