Month: October 2012

Tiny nations like twin-islands St. Kitts and Nevis, a short chain of lush green volcanic cones set in an azure sea, have felt the shocks of the downturn and credit crunch as keenly as the winds and seas that lash them every summer.

Their high dependence on tourism, remittances, investment flows, imports and commodity prices makes them all the more vulnerable to recent worldwide economic tremors that have shaken giants like the United States and China.

Shock has followed shock. First, soaring oil prices last year pushed up energy and food import bills and swelled inflation. Then, recession in the United States and Europe cut tourism and investment flows.

The International Monetary Fund forecasts real 2009 GDP for the eight member Eastern Caribbean Currency Union (ECCU), which includes St. Kitts and Nevis, will contract by 2.5 percent “reflecting a sharply-slowing global economy, declining tourist arrivals and foreign direct investment flows, and increased financial sector stresses.”

“It’s been difficult, it’s not without pain, and we have gotten wet,” said Richard Skerritt, St. Kitts and Nevis’ Tourism Minister, citing a 12 percent January∞April drop in visitors from the United States.

Tourism
Since the local sugar industry closed in 2005, tourism has taken over from “King Sugar” as the economic mainstay on the twin-island state of 40,000 people and now contributes an estimated 40 percent of gross domestic product.

Any dip in visitor activity is painful. The January-April visitor fall-off forced the country’s biggest resort, the St. Kitts Marriott, to lay off 100 employees.

“That was a shock, because in a small country, lay-offs hurt everybody,” Skerritt said.

Nature too has taken its toll on the former British territory. Hurricane Omar, which pummeled St. Kitts and Nevis last year, forced the closure in October of the Four Seasons, the biggest resort on Nevis, which has still not reopened.

“Weathering the storm”
To the east, Antigua and Barbuda’s hotels suffered a 30 percent decrease in occupancy and government revenue fell by 25 percent, Antigua Prime Minister Baldwin Spencer said.

St. Kitts’ Skerritt said his government was fighting back. It had removed some duties and taxes to shield consumers from price rises in basic food, introduced stimulus measures for small hotels and negotiated hard with airlines and big resort operators to try to keep visitors coming.

“We are weathering the storm better than most,” Skerritt told Reuters. St. Kitts was banking on the Christophe Harbour project, a big new hotel, marina and golf course development on its southeast peninsula, to attract new visitors.

Skerritt said the new resort was already impacting the local economy and had created some 100 new jobs.

Citing another encouraging sign, he said St. Kitts’ cruise passenger arrivals had increased by 150 percent in the last three years, from 200,000 to 500,000, thanks to the Port Zante cruise terminal which now had more than 50 shops.

But spending by cruise visitors was sharply down across the Caribbean, retailers and tour operators said.

“It’s the same story in Jamaica, the Cayman Islands, all the big retailers are down,” said Avi Sippy of Diamond Island Jewelers in Port Zante.

In St. Lucia, whose 170,000 population is one of the largest in the eastern islands, the government is putting a brave face on the situation.

“Tourism arrivals remain fairly buoyant although there is a fair degree of discounting (of prices),” Foreign Affairs and Trade minister Rufus Bousquet told Reuters.

“I’m not suggesting it’s a rose garden, but we’re paying our bills.”

Financial shocks, social strains
At a June summit in St. Kitts of the Venezuelan-backed regional energy alliance PetroCaribe, Jamaican Prime Minister Bruce Golding warned that the recession could stoke social tensions and inequalities.

“Poverty that had been reduced, we are in danger of that poverty returning… We fear a real danger that we will come out of this crisis with the gap between rich and poor countries widening,” Golding said. He demanded “a seat at the table” for small developing countries at global groupings like the G20.

Fraud scandals
Some analysts see the cumulative shocks straining Caribbean unity. “There is a growing sense of every country for itself,” said David Jessop, executive director of the UK-based Caribbean Council, that specialises in Caribbean trade issues.

“We’re now a year, a year and a half into the global economic crisis and the Caribbean hasn’t actually been able to agree a strategy,” Jessop added.

Compounding their troubles, recent high-publicity fraud scandals and financial collapses have pummeled the region’s financial sector.

Analysts say the case of Texas billionaire Allen Stanford and his Antigua-based banking operation, charged in the United States with running a “massive Ponzi scheme,” is another black eye for the Caribbean’s offshore finance sector.

The charges have implicated Antigua’s top financial regulator, adding force to critics who say the region’s financial sector lacks adequate control and oversight.

Similarly, the collapse earlier this year of the Trinidad-based Caribbean business conglomerate CL Financial has sent shock waves through the Eastern Caribbean’s financial system, the IMF says.

“High government exposures, credit risk and liquidity risk present major threats to ECCU banking system stability,” the fund said in a report published in May.

ECCU members are Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines.

Many regional governments view calls from the developed world for the Caribbean to clean up its tax havens as unfair. But some are moving to sign multiple bilateral tax treaties to meet demands for more financial transparency and oversight.  “It’s a good way to show transparency and to generate business,” said St. Lucia Foreign Minister Bousquet.

Floating in 8,000 feet of water in the Gulf of Mexico, Anadarko’s Independence Hub continues to produce enough clean-burning natural gas each day to heat or cool more than five million homes, more than two years after initiating production. This first-of-its-kind facility continues to serve as an unmatched feat of collaboration, engineering and visionary courage. It’s also a perfect example of the commitment Anadarko has made to finding and developing the energy resources vital to the world’s health and welfare.

This year, Anadarko expects to spend between $4bn and $4.5bn in capital – more than $1bn above its total net income in 2008. During a year where most independent oil and natural gas companies significantly slashed their budgets, Anadarko maintained its commitment to exploration and the development its three international mega-projects.

“We’re continuing to invest in exploration to capitalise on the tremendous opportunities we have in our portfolio,” Anadarko Chairman and CEO James Hackett said. “We have financial flexibility as the result of maintaining a healthy balance sheet and prudently managing our capital spending during times of higher commodity prices. Following the unprecedented simultaneous acquisitions of two peer companies in 2006, we built a high-graded portfolio of opportunities through the acquisitions and subsequent divestitures.”

Anadarko’s exploration programme has uncovered two of the world’s largest deepwater discoveries during each of the last two years. The first discovery was made offshore Ghana at the Jubilee field in 2007. Since that time, Anadarko and its partners have drilled six additional successful wells offshore Ghana, and Anadarko has significantly expanded its acreage position to more than eight million gross acres along the Cretaceous trend offshore Ghana, Sierra Leone, Liberia and Côte d’Ivoire.

In 2008, Anadarko became the first foreign operator to make a deepwater pre∞salt discovery offshore Brazil at the Wahoo prospect. The company plans to drill another exploration well on the same block later this year and conduct multiple drillstem tests to gather additional data and information on the area.

In addition, Anadarko has announced four oil discoveries in the deepwater Gulf of Mexico in 2009. Several of the discoveries are near existing infrastructure, enhancing the company’s development options following additional
appraisal drilling later this year and into 2010.

“While our exploration programme has had an excellent run of success, we’ve also continued to keep a focus on increasing production in our existing fields and moving forward with the development of our mega∞projects offshore Ghana, in the deepwater Gulf of Mexico and in Algeria,” added Hackett. “Even though we anticipate spending between 12 to 25 percent less capital in 2009, we still expect to be able to grow our sales volumes by two to four percent from a base production of 206 million barrels of oil equivalent. This is a great example of Anadarko’s commitment to delivering on our near-term goals, while continuing our work to position the company for top-tier performance in the future.”

“Our world is going to continue to need increasing amounts of energy. It is fundamental to human existence, and it’s important that we continue to invest in finding and developing additional resources,” continued Hackett. “Technology continues to advance, creating the potential to recover resources from tighter formations and underneath deeper water than previously thought possible. Independence Hub may have been the first of its kind; however, with access, innovation and investment, our industry can reach even
greater heights in the future.”

Further information: www.anadarko.com

Unscathed by conflict or political instability, Cape Verde has quietly become a middle-income nation and looks set to be one of few in Africa to meet any of the Millennium Development Goals set for measuring progress in improving livelihoods. Yet it has loftier ambitions.

In return for special deals on economic and political cooperation with Europe, it increasingly plays a trouble-fixing role on the more unruly mainland some 400km away.

It hopes to turn its location to its advantage by becoming a springboard for business in West Africa. And it thinks tourist numbers could soon match the country’s population.

“The fact that we don’t have resources has made us be creative,” Fatima Fialho, Cape Verde’s minister for tourism, industry and energy, says. “We are an economy in transformation – moving from one of aid to one of production,” she added, detailing plans for a service-based economy focusing on shipping and fisheries, providing a hub for technology, finance and tourism.

Economic growth for 2010 will be 5-6 percent, she says. The country is not without its challenges. The lack of rain still means over three quarters of its food is imported. Cape Verde’s response to the financial crisis has been to accelerate its public investment programme, known locally as the nation’s “air bag”. This has delivered an impressive upgrade of infrastructure, but also rising debt levels.

Fitch ratings said in May a fiscal deficit of 12 percent of GDP in 2010 and 2011, and central government debt at 78 percent of GDP by the end of next year, should ensure long-term growth but will increase pressure for sound management.

Poor, but successful
After other African nations with similarly small populations but far higher revenues, mainly from oil, failed to use vast sums of money to benefit the country outside a tight-knit elite, the nation is being heralded as a non-resource success story. In April, the African Development Bank (AfDB) called Cape Verde the first African case of “policy induced graduation”.

“Here is evidence that no matter how bad the initial conditions, with good governance, solid institutions, and a peaceful political and social climate, take-off is possible,” Donald Kaberuka, AfDB group president, said during a visit.

Ahead of elections next year, Jorge Santos, deputy head of the MpD opposition party, is quick to express confidence in the political system, saying there is no comparison in the region. Donor aid has played a key role in its success.

But so too have payments from its diaspora – believed to be double the 500,000 Cape Verdeans living at home. Many left the country due to hardship there and, spread out across the globe, send millions to families back home every month.

Even after taking a hit from the global crisis, remittances amounted to $172m in 2009, having averaged 12.3 percent of GDP between 1999-2008, according to the AfDB.

But Fialho said that tourism has just overtaken remittances as the biggest contributor to the economy at around 20 percent of GDP: “This is an important shift.” Ever since Italian dictator Benito Mussolini built the first airport on the island of Sal, Italians have dominated tourism there. Charter flights from around Europe jet in to a number of gleaming new airports, ferrying most of the 330,000 tourists in 2009 to all-inclusive hotels on sun-blessed beaches.

Some in the industry grumble that vast hotels, like a 4,500∞bed all inclusive resort being built for Spanish firm Riu on Boa Vista, are wrecking the charm of the islands. “This is not very good for local communities – they only stay in the hotels. They don’t learn about our cultures… we must not move too fast,” said Lindorfo Olivio Marques Ortet, who owns a hotel for walkers in mist-shrouded hills above Praia.

But Fialho argues that mass tourism was essential to get the country on the map, and the focus is now on improving services to meet a target of 500,000 visitors a year by 2012.

Link to the region
Uninhabited until it was discovered by Portuguese mariners in the 1450s, the country’s population is a mix of settlers and former slaves, a combination that means tribalism is not an issue. Yet many speak of Africa as a separate continent and have far more links with Europe or the Americas. The national airline, for example, flies directly to Brazil, the United States and a number of airports across Europe, but just one in Africa.

The islands, however, are becoming an increasingly important strategic partner for the African mainland but also for outsiders looking to strengthen their African links. “What Cape Verde can bring to the region is a bridge,” according to Foreign Minister Jose Brito.

A visit by Brazil’s President Luiz Inacio Lula da Silva in July highlighted the role Cape Verde could play as a springboard into West Africa. But Europeans and the United States also see the country as a barrier against the flow of drugs and people. Cape Verde was the first West African nation used to transit cocaine headed to Europe, and has since been widely praised for cracking down on corruption and improving law enforcement.

In July, it helped the United States by receiving a Syrian prisoner from Guantanamo Bay. The country is also increasingly active in seeking to resolve African conflicts, such as in Guinea-Bissau. In return, Praia has secured a special partnership with Europe and is the first country to be made eligible for a second round of funding from the US Millennium Challenge Corporation.

Brito said it was in Europe’s interests to have a special relationship with Cape Verde, especially in having a real partner in fighting crime, and the country would seek to meet EU standards, but was not looking to join the institution. “We are an African country… Cape Verde cannot be alone, separate from what is happening in (the region).”

Despite two decades of hardship, war and a loss of markets, Matko Jasprica has kept his Croatian fish farm alive and now hopes to start exporting sea bass and sea bream to the European Union.

With a small team, Jasprica runs the Plankton farm situated 1.5 miles (2.4 km) out to sea from the picturesque fishing village of Drace, on the Peljesac peninsula in the southern Adriatic. The farm is hidden from sight and screened from the northerly wind by a tiny island.

The fish, grown in dozens of square and round cages, can be detected only by bubbles on the sea surface. The farm produces around 120 tonnes a year.

“Our plan was to adjust our standards and start exports to the European Union, as demand on the local market is small,” said Jasprica. “We must be ready when Croatia joins the EU – we can’t beat big producers but we can be competitive with new technologies.”

Experts say demand for seafood is set to rise as the world population grows and wild fish stocks decline. The EU, which produces 1.2 million tonnes of seafood and consumes 25kg per person per year on average, has to import 65 percent of its needs.

“We expect the world population to increase to nine billion in years to come and there are some expectations that we need to double food production by 2030,” said Torgeir Edvardsen of the European Aquaculture Technology and Innovation Platform.

“A lot of this production cannot come from terrestrial sources. We’ll have to farm the sea much more than we’ve done up until now,”

Growing business

Fish farms produced 51.7 million tonnes of fish worldwide in 2006 with an estimated value of $78.8bn, according to figures from the UN Food and Agriculture Organisation (FAO).

Some scientists say farmed fish production has reached 70 million tonnes since then, coming close to the 80 million tonnes of wild fish caught in open seas – a maximum that cannot be exceeded due to restrictive fishing quotas to protect species.

“There is no question – aquaculture is the way of the future,” said Marshall Gilles, head of the Canadian government’s agriculture and fishery division, adding that farmed fish will probably account for 60 percent of available world stocks by 2030.

Gilles said his government fully supported the industry, which can provide permanent employment for the coastal population, most of which depend on seasonal jobs in tourism.

Fish farming output, which has grown consistently by 10 percent a year for the past 20 years, is expected to reach nearly 120 million tonnes by 2020, said Branko Glamuzina, who teaches aquaculture at the University of Dubrovnik.

“Aquaculture is the fastest growing agro-business,” Glamuzina said. “It actually represents the only serious business that can provide enough seafood for the ever-growing population.”

Investment opportunity

Despite a long seafood tradition, Croatia lags behind in the technology and development needed to compete in the EU fish and mussels market with other Mediterranean countries such as Italy, Greece and Spain, Glamuzina said.

It should rather go for niche markets, such as growing oysters. “We have farms, must improve standards and need investors,” he said.

While Croatia still has plenty of potential fish farm sites, most of its developed competitors have run out of available space near the coast and are forced to move farms further offshore.

This involves increased costs for transport and cages but it remains the only viable option for key fish producers, such as Norway, which accounts for nearly half of Europe’s total production of fish, mainly salmon.

“Aquaculture definitely has to move further and further from the sheltered coastal waters because of society’s urge to protect tourism, protected sites and species,” Edvardsen said.

Offshore farming poses new technological challenges and environmental risks, and industries and researchers are exploring methods to address them.

“The more you move from shore, you get more waves, more current, more energy,” said Arne Fredheim of the Norway-based CREATE research centre for aquaculture. “You have to have all kinds of equipment, you have long distances to travel, and you have to have permits to fish finfish.”

Some environmentalists warn about the negative impact of fish farms’ waste on nutrients at the seabed. They are also concerned about interbreeding of escaped fish species with wild fish and the use of large quantities of wild fish to feed farmed fish.

The conservation organisation WWF generally supports aquaculture as an ever∞growing source of seafood but insists on setting standards to minimise harm to the environment.

“The rapid expansion of the aquaculture industry has not come without impacts. However, when done responsibly, aquaculture’s impact on wild fish populations, marine habitats and water quality is minimal,” WWF said in a statement.

Dusko Zmijanjac, a manager at the Plankton fish farm, believes that farmed fish is safer for human consumption.

“Farmed fish is healthier than wild fish which gets everywhere, including into polluted areas,” he said. “Tests have never revealed the presence of heavy metals in our fish.”

Introducing goods and services tax and cutting subsidies
Malaysia was supposed to cut its fuel subsidy bill from May this year as part of the 2010 budget to tackle its budget deficit which in 2009 hit a more than 20 year high of 7.4 percent of GDP. That measure was withdrawn as it was “unpopular” with voters.

Similarly, plans to debate a goods and services tax (GST) in the current parliamentary session were withdrawn due to the risk of hurting the government’s popularity as were proposals for electricity price hikes.

These measures are unlikely to be implemented before the next general election that must be held by 2013 at the latest, but could come in 2011.

An early election with early implementation by a government with a strong two-thirds majority in parliament would be positive for investors. If the government fails to win back the two-thirds parliamentary majority it lost in the 2008 polls, unpopular measures such as these could be delayed again.

There are no firm pledges on fiscal reform.

Economic growth targets are ambitious at 6.5 percent by some unspecified timeframe. In its “Vision 2020” drive to win developed nation status, then-premier Mahathir Mohamad projected seven percent annual growth. The outcome from 1998-2008 was 5.5 percent. Malaysia is Asia’s third most trade dependent economy relative to its size. Any targets could be rendered meaningless if there is a double dip global recession or if demand for commodities or oil declines.

Reforms to social system and support for Malays
The most controversial area of reforms. How far will Prime Minister Najib Razak go in unwinding the linchpin of Malaysia’s political and social system that gives a wide array of benefits to the 55 percent Malay population?

Although the proposals say that social support will shift to the poorest 40 percent of families after subsidies are cut, the issue of how far the rest of the social safety net for Malays will change has been fudged.

The “New Economic Model” planned by Najib is being marketed as the successor to the decades old “New Economic Policy” introduced by his father, Malaysia’s second prime minister, Abdul Razak Hussein, in the wake of race riots in the 1960s.

To please reformers and win back ethnic Chinese and Indian voters who deserted the National Front in 2008, Najib will have to embrace deep reform. In doing so, he would alienate Malays who are the core voters of his United Malays National Organisation (UMNO), the linchpin of the National Front coalition.

So far, Najib’s reforms have been welcomed by investors but have not gone far enough. Najib’s political style was described as at best “pragmatically cautious” by Bridget Welsh, a Malaysia expert at Singapore Management University.

Najib already faces a growing tide of Malay concern that has focused on religion and rights.

“Zero tolerance” on corruption
Malaysia has long pledged to eradicate corruption, one of the reasons that voters deserted the government in the 2008 polls. Najib has made some efforts to clean up vote buying in UMNO by enlarging the franchise in party polls, but there have been no major arrests on graft charges.

Malaysia has fallen to a record low of 56th place among 180 countries in anti-graft watchdog Transparency International’s 2009 corruption perception index.

A billion dollar scandal over a port free trade zone that has rattled bondholders has seen a few minor company officials charged.

UMNO recently ran a state legislature candidate who was a former cabinet minister suspended from the party in 2004 for corruption, a move critics said showed it was business as usual for cronyism.

High quality education for all
Crucial to Malaysia’s bid to win a stake in the global knowledge economy is its education system. At present, it turns out tens of thousands of graduates a year who learn by rote and are ill-equipped for the new economy.

Malaysia’s tertiary education enrolment ratio lags both Singapore and Thailand, according to UN data. A report from investment bank Morgan Stanley said its gross tertiary enrolment ratio and gross tertiary completion ratio are seven percent and six percent lower than the average of economies with its level of GDP per capita.

Education has become increasingly politicised with the abandonment of a policy of teaching maths and science in English instead of Bahasa Malaysia.

It is also an issue that could trigger a racial backlash against the government.

Montenegro has had its fair share of political ups and downs in recent years. Now fully independent it is welcoming foreign direct investment with open arms – and the opportunities, for those in the know, are mouth-watering. Legal expert Ana Kolarevic has represented the interests of leading foreign investors in Montenegro for some time. The list of her clients extends to more than 80 percent of foreign companies and individuals who’ve started business and investments in Montenegro. The high proportion of businesses relying on her judgement stems from the fact that there are few lawyers as experienced as Kolarevic in this fast-changing part of Europe.

Wide range of legal expertise
Kolarevic specialises in all types of corporate and commercial law, not to mention civil and administrative transactions. So who’s a typical Kolarevic client? Typically Kolarevic says it’s a domestic or foreign client launching a new greenfield project – a project that has to pass through all the legal and administrative hurdles until operation can commence. “That includes all the stages of privatisation, tendering, negotiations, contracting, company formation, etc. Personally I tend to agree with the thesis that the best attorney is one whose clients are not involved in litigation. It’s an art of resolving a problem while providing good protection to your client and not exposing him to court expenses. That counts for a lot,”  she says. Her office has an excellent team of external collaborators who are experts in finance, taxing, architecture and land surveying, to name but a few specialties. But Kolarevic’s essential unique selling point has to be her experience in operating inside a country where few outsiders are naturally confident. “I think my clients appreciate the security I give them. They always know how they stand and always have reliable, impartial information on the basis of which they may assess their risks. These are necessary ingredients to proper decisions.”

Although overseas law firms are slowly starting to penetrate Montenegro themselves, home-grown expertise with an intimate knowledge of the country’s legal byways and culture is irreplaceable and unique, especially in a country whose infrastructure is still way behind most EU states. Yet foreign legal firms are also making inroads into the country. “I welcome foreign competition. It’s an excellent driver for better performance and more creative ideas towards the improvement of legal services generally. Also, it can mean good cooperation with other foreign legal offices in Montenegro. It’s a good thing.”

The Kolarevic advantage
• Court representation and production of constitutional documents and drafting internal corporate contracts;
• Organising shareholder meetings and supplying advice regarding the application of the Companies Act;
• Assisting in entering into funding agreements and preparing related security;
• Organising share purchase procedures;
• Legal assistance in labour relations, including obtaining of work and residence permits for non-residents;
• Preparation of contracts required for operation
of business organisation including privatisation
and due diligence, and;
• Transactions and activities related to urban planning and development.

Why invest in Montenegro?
It’s a good question. But the answer is simple. Montenegro is on the move. The overall investment and business climate in the country is startlingly better than it was even just two years ago, despite the current global recession. “The main priority is to improve the environment to such an extent that it becomes attractive to as many investors as possible and makes them decide to stay in Montenegro as long as possible,” says Kolarevic. “The legislative framework is being upgraded, with good prospects to follow the timeframe established in the National Plan of Integration with the EU.”

Although Montenegro only became independent in 2006, the country has achieved significant improvement results according to recent evaluations of foreign observers and EU agents. “In all fields too,” says Kolarevic. “Even during the time of war conflicts in the region, the transition process and all other related phenomena, Montenegro has been perceived as a politically extremely stable state in the Balkans during the previous two decades. Although a small territory, due to its multiethnic harmony and stable state system, Montenegro has become an important factor of stability in the region.”  

Recent EU 2006 and 2007 statistics point to:
• Montenegro being a European leader in FDI per capita and FDI share in GDP;
• Increasing FDI due to rising levels of privatisation;
• Low customs duties, simple incorporation procedure and low corporate income tax continue to attract investors, and;
• Significant opportunities in tourism, and a new, recently liberalised regime of capital and current transactions are all helping drive internal and external investment.  

Low taxes and EU membership en route
Ana Kolarevic knows foreign investors always favour countries fully committed to market-based reforms. Foreign companies in Montenegro have equal legal treatment as local ones she confirms. “A foreign investor may operate in Montenegro as a corporate entity or as an individual; there is no restriction on the amount of capital invested, which can be invested in any branch of industry. Financial and other resources may be freely transferred, including profit and dividends. Also, a foreign investor may acquire a title on real estate.”

The Montenegrin tax regime has also become one of the most competitive ones in Europe says Kolarevic, with corporate taxes of just nine percent. That means foreign investors have plenty of opportunity to maximise operating gains from their investment. And with EU membership only a matter of time, the investment case is hard to ignore. “The EU criteria is very strict. But Montenegro has worked hard. The European perspective of West Balkan countries is of crucial importance for the stability and progress of the region and the EU. Institutional reform was one of the key steps on that path, and Montenegro is currently focused on the reform of the state administration and judiciary.”

Taking the rough with the smooth
Although economic legislation has spurred investor interest, Kolarevic warns that the application of law still remains inconsistent. Montenegro, she reminds investors, is still undergoing the growing pains of most Eastern European economies switching to a market economy. “That is why regulatory risk is still relatively high in Montenegro. EU experts have warned Montenegro that public consultation should be mandatory for all the laws, which would increase the transparency in the work of institutions. Also, there is still work to be done in the parliamentary supervision of the quality and coherence of laws.”

Kolarevic meanwhile says she is not someone who makes big promises. She says she knows that what eventually counts for all her clients without exception is the end result. “That is why I try hard not to disappoint them. That is my strength. At the start, I am realistic and frank with clients, without being a pessimist. But I believe it is better to work diligently towards the achievement of the goal rather than making over-optimistic promises at the start. Often I can get a much better outcome then expected.”

She adds that she is always delighted to welcome foreign investors to Montenegro. “The foundations of my law office are firm. They lie in my extensive experience in judiciary, my knowledge, professionalism and the need for justice.”

With a son back in Ecuador, he says he will probably return home to Guayaquil rather than scrape a hand-to-mouth living from employers who dodge social security costs by giving him work under the table. But most migrants, faced with hardship in Spain or worse in places like Senegal or Bolivia, seem to be choosing the former.

“What lots of them do is to stay in Spain, working in the black economy,” said Vicente Marin, a lawyer specialising in immigration in Granada, southern Spain.

Spanish visa rules often deny renewal requests if migrants become unemployed and fail to make sufficient social security payments. So a side-effect of the economic contraction that has continued for seven straight quarters has been the growth of an illegal underclass.

Beyond boding ill for social harmony, this could also impose an extra financial burden, draining tax revenues and productivity from a country whose weak competitiveness and high unemployment have already lured speculators betting against its government debt.

The black economy, estimated to account for almost a quarter of Spain’s gross domestic product, costs the government up to 25 billion euros a year in lost tax revenue and also traps workers in low-skill, low-pay occupations.

Already, large numbers of migrants survive by providing labour for cash in hand, no questions asked. You often see little hand-written signs posted around Madrid offering to refit your house or fix your plumbing for bargain-basement prices.

Besides acting as a safety net for migrants banned from legal jobs, the black economy reinforces barriers between recent arrivals and native Spaniards.

First crisis for multi-ethnic Spain
Five million migrants arrived during Spain’s decade of heady economic growth from the mid-1990s, finding work on mushrooming construction sites, in shops or as domestic helpers.

There are no official figures but Carlos Gomez Gil, head of the Immigration Observatory at the University of Alicante, estimates as many as 300,000 could have lost their papers during the economic crisis.

“This novel, extraordinarily rapid and profound crisis is going to have a big effect on Spain’s recently arrived immigrant population, which still hasn’t had time to settle down here and is still politically, socially and economically fragile,” Gomez Gil wrote in a recent paper.

“This is the first crisis Spain has ever experienced with an immigrant population,” he said.

Things were very different when Wilson first came in 2003. Work was easy to find in a construction boom, for wages many times higher than back home around the mangrove swamps of Guayaquil.

“There’ve been ups and downs, it hasn’t been easy, but I’ve got used to it here,” said Wilson, 29, who prefers not to reveal his surname for fear of provoking the immigration authorities. He expects his visa renewal request in July to be refused.

Cast-offs from construction
Like Wilson, a large proportion of the newly illegal migrants are male manual workers from Latin America or North Africa – cast-offs from the building sites.

“About 40 percent of immigrants have only been educated to primary school level, and, as those in the construction sector lose their jobs, there is a big problem finding them new employment,” according to Josep Oliver, professor of applied economics and the Autonomous University of Barcelona.

He sees a tougher future for such unskilled migrants in a sustained period of stagnation, where the main hope for economic growth is in industries such as renewable energy that require a more highly trained workforce.

“If the government does not provide continual retraining and education they run the risk of becoming a structurally unemployed population,” he said.

Of course, Spain could never have had its property boom without these foreign workers. They were also a vital ingredient in the cycle of speculation and credit that inflated construction and related activity to an unsustainable 25 percent of its GDP.

Besides building the houses, migrants bought many of them too, contributing to the country’s 600 billion euros in outstanding mortgages. Spanish banks funded many of these by issuing bonds in Germany.

Climate hardens
Despite the speed with which Spain became an ethnically mixed society, it has so far avoided the tensions associated with immigration seen in other European countries.

“One of the principal forces for the integration of foreigners into Spanish society is work,” said Marin.

The Socialist government held an amnesty for 600,000 illegal immigrants in 2005, granting them visas if they could show proof of employment. And like left-of-centre politicians elsewhere in Europe, Prime Minister Jose Luis Rodriguez Zapatero welcomed immigration as a way to make Spain more tolerant and diverse, and to ensure an ageing population would be able to continue to afford its social security system.

The government once spoke of how immigration could increase Spain’s population by 50 percent to 66 million.

Now unemployment is around 18 percent – and 10 percentage points higher among foreign workers – it is changing its tune.

It has drastically cut back on working visas, tightened rules on family reunification and offered money to migrants wanting to leave Spain. In a stark departure from its previous talk of diversity, the government put up billboards featuring dark-skinned people and the question “Thinking of going home?”

The climate has also hardened outside Madrid.

In January, the Catalan town of Vic decided to restrict access by illegal immigrants to healthcare. While it was criticised by the government and forced to back down, several leading members of Spain’s conservative opposition came out in favour of the move.

Resilient women
But while men with low levels of education are struggling, female immigrants in service industries and as housekeepers are finding their jobs resilient, according to Joaquin Aguilar of the Spanish Commission for Assistance to Refugees (CEAR), a non-governmental organisation that helps migrants find work.

“In 2007, we used to see 35 percent men and 65 percent women, and now it’s the other way round. It’s basically because of the construction effect, because the African or Latin American men who worked in construction and didn’t have any other skills have lost these jobs,” he said.

He added that he was hearing anecdotal evidence of rising domestic violence among immigrant communities as men struggled to come to terms with the new economic reality.

Cleonice da Rocha, a middle-aged Brazilian woman who came to Spain to work as a housekeeper, said her husband had gone back to Brazil after failing to get work.

After renewing her visa at government offices in Madrid overlooked by the barbed wire fences of a psychiatric hospital and the ruins of a notorious Franco-era prison, she said her job meant she was staying in Spain with her young daughter.

“I want to go back too,” she said.

Since its foundation in 1896, the Banco de la República Oriental del Uruguay has been highlighted because of its commitment in fostering the economic growth and development of Uruguay.

As a commercial and development bank, it faces every day challenges in generating profitability levels in accordance with the fulfilment of its key objective: to honour its social commitment to promote the financial inclusion, investments, production and exports of Uruguay.

The excellent management of the company allowed it to be in the position of the main financial institution of the country, with a market share over 44 percent. Recognised by its soundness, reliability and efficiency, the Banco República has consolidated its social role in recent years, incorporating the concept of sustainability as the main gauge of its performance.

In 2009, the Banco República adhered to the United Nations Global Compact. This initiative of the UN has the objective to ensure that the world’s nations adopt the 10 main principles related to Human Rights, Labour Rights, Environment Protection and the struggle against corruption. This commitment represents for the bank the responsibility to disseminate and locally promote the principles of the Global Compact.  That is why, the bank is presenting proposals to work together with customers and suppliers in order to collaborate and further the awareness about the concept of sustainability in the Uruguayan population, and, at institutional level, in the implementation of a Environmental System that includes the control of indirect impacts generated by the financial activity through the granting of loans and the financing of investments, as well as the direct impact produced from the internal processes of the institutions.

First, the banks channel funds for investment projects with a direct impact on social, economic, and environmental welfare levels. The Banco República has as one of its main objectives the promotion of productive investments, focusing on those presenting economic, social and environmental sustainability conditions. With this guideline, the bank was first in the line in the ranking of financial institutions of the country, becoming the first Uruguayan bank to subscribe the Equator Principles. The inclusion of these principles which constitute a series of requirements to be taken into account to finance projects over $10m, guarantees that the main projects financed by the bank be those managed with social responsibility and integrating the best practices to manage social and environmental risks.

Nevertheless, a sustainability analysis should also be applied to projects of lower amounts, as those of the SME, which are key anchors for the sustainability of Latin American countries. In this regard, in order to evaluate the lower value productive projects, the Banco República considers important features such as: the incorporation of clean technology systems or quality/traceability systems, giving important benefits to those reaching higher standards of development. Likewise, it offers assistance to enterprises to adopt the best eco-efficient practices.

The adoption of the best “eco-efficient” practices in the internal processes of banking companies is a recent process in expansion, which implies the inclusion of ecological considerations in social responsibility policies, such as the energetic consume, the selection of suppliers, the debris handling, the ecology in offices and the internal awareness of the environmental problem.

In 2010 The Banco República approved its Institutional Policy of Energetic Efficiency and Environmental Care, which has as objective to balance the bank’s activity with the multiple aspects included in the Environment pledge. In general, the main guidelines refer to: respect for human health, ensuring the total balance of the bank’s activities with the preservation of physical and mental health of anyone involved, and the effects that those activities generate on the environment, health, and security.

The institutional awareness and program, tries to integrate all levels of the organisation to fulfil the policy, as well to promote the active participation of employees to suggest additional proposals and to implement actions involving all the population in environmental protection.

Energetic efficiency is recognised as an essential requirement for sustainable development. A special effort has been put on the implementation of a program that attempts to acquire technology which can lead to energy and efficiency savings and the further monitoring and control of the results.

The environmental care section includes a set of definitions and actions, such as: the acquisition of products compatible with environmental sustainability and energetic efficiency, the development of processes oriented to the reduction, re-use and recycling of paper and the design of mechanisms minimising the production of debris.

Finally, with the emergence of environmental issues at a global and national level, it is necessary that banks go forward to the creation of green financial products and orientate their business to the promotion of investments with higher environmental value. Furthermore, banks should aim to develop an environmental engineering program allowing to advise and train other companies to identify and reduce environmental risks.

Therefore, the Banco República provides specific assistance with conditions that directly affect companies in processes such as the incorporation of cleaner production mechanisms, as well hiring technical consultancies and advisors. This line also covers financing for the implementation of clean production systems, consultancies in order to detect opportunities, relocation for environmental reasons, compliance with environmental legal provisions and the generation of energetic efficiency projects.

Recently, we entered into an agreement with Sumitomo Mitsui Banking, from Japan, aiming at entering the carbon offsets market, to foster the environmental commitment of Uruguay’s companies with the quantification of emissions. Uruguay is still in a very early stage in regards measuring and calculation of the carbon footprint, therefore this agreement is hugely significant.

Recently, the Banco República and the Union of Exporters of Uruguay (UEU) decided to start working together on the creation of a program to provide support to companies, by means of advisory, financial and business opportunity detection services. The main objective is to help companies progress in incorporating environmental topics in their activities and start to implement procedures and mechanisms for calculation, measurement and later certification of environmental quality.

This year, there is a plan to increase awareness by holding sessions to provide information about the best eco-efficient practices, measurement and certification mechanisms, as well as looking at the change in regulation at a national and international level, and its impact on companies’ competitiveness. Banco República has progressed significantly towards positioning itself as a sustainable bank in regards of financing eco-efficient projects as well as converting some internal processes in the institution towards environmentally friendly practices.

At an institutional level, the bank has the priority to advance the measurement of its emissions, in order to know the exact effects generated from the use of energy or vehicles, thus being able to adopt the most efficient measures. At the same time, we have carried out some improvements to the existing building infrastructure in accordance with a higher environmental protection, together with the construction of new eco-friendly branches.

The bank has also started work on projects to reduce paper consumption and incorporating more recycled paper as well as the replacement of IT equipment with computers that are more environmentally efficient.

The bank’s commitment with sustainability has resulted in the international recognition of Banco República as Sustainable Bank of Uruguay in 2009 and 2010, with this being the first time that a national institution has achieved such recognition.

For more information: (598 2) 1896 -2710; www.portalbrou.com.uy

Trust is the main ingredient to the financial sector, because it ensures a constant capital flow into the sector. To maintain confidence in the banking sector banks need to fully restore the trust put in them not only by customers, but by all stakeholders of these institutions. This means that banks should take into account all direct and indirect stakeholders when defining and implementing their strategy. The underlying idea is that the banking sector should not only focus on the causes of the financial crisis, but should also consider the impact of the climate crisis and the food crisis on society.

Environment
Many economic analyses look at how western societies can return to the economic growth of before the crisis as soon as possible by making some adjustments in regulatory and remuneration policies. However, more fundamental changes are needed in bankers’ economic thinking and acting. It is essential that they take the boundaries of growth as a starting point and take into account the impact of production on the environment and depletion of natural resources. Our national product should not just be measured in economic terms, but should also consider the costs for the environment. Sustainability is good business.

Banks Must Go Back to Basics
Attract money from new customers and channel it in a responsible way to businesses that contribute to a sustainable society. Many banks still focus on compliance to formal regulations. A big step forward would be if banks would see sustainability as good business and would integrate sustainability within the company. To achieve that, a shift from the short to the longer term is necessary when reviewing investment opportunities and risks. Banks can in their policies make a significant and proactive contribution to sustainability by selecting companies that produce in a durable way, offering products which stimulate sustainability, only providing loans if companies meet certain sustainability criteria and offering lower interest rates to companies that provide a positive contribution to a sustainable society.

Credit
In the developing countries and emerging markets where FMO (the Netherlands Development Finance Company) is active, access to financial services is still very limited. By focusing on the provision of services (credit and savings) to entrepreneurs, for example small and medium sized enterprises, and to low income groups in their country, banks can directly contribute to reducing poverty and improving living standards.

The financial crisis made many banks in Europe and the US decide to withdraw from developing countries, causing a negative effect on the economies of those countries and access to credit. It is of great importance to developing countries in Latin America, Africa, Eastern Europe and (Central) Asia that the international banks return to these regions and thus make a contribution to sustainable economic growth. Development banks such as FMO can play a catalytic role in the process of becoming agents of change.

The Netherlands Development Finance Company (FMO) is the international development bank of the Netherlands. FMO invests risk capital in companies and financial institutions in developing countries. With an investment portfolio of €4.2bn, FMO is one of the largest bilateral private sector development banks worldwide. Thanks in part to its relationship with the Dutch government, FMO is able to take risks which commercial financiers are not – or not yet – prepared to take. FMO’s mission: to create flourishing enterprises, which can serve as engines of sustainable growth in their countries.

Further information: www.fmo.nl

       
Whereas all the signals in the financial markets from autumn 2008 onwards at the latest were set to insecurity and crisis, customer demand at the GLS Bank in Germany rose by leaps and bounds. If in the equivalent period of the previous year the financial institution processed 2,500 calls per week, that number rose to 5,000-6,000 after the start of the crisis.

“Something which this small cooperative bank can manage should also be possible for other financial institutions,” the newspaper Süddeutsche Zeitung demanded in August 2008. The Ruhr Nachrichten newspaper noted: “The GLS Bank is growing and growing and growing.”

In recent years, the bank has grown by 20 percent, but in the crisis year 2008 it recorded growth in the balance sheet total of more than 27 percent and thus crossed the billion line for the first time in its history. Corresponding growth of 25 percent was also recorded by the GLS Bank in the field of loans and deposits. The GLS Bank is continuing its successful course without interruption, with growth of more than 30 percent in 2009.

So on what is this consistent success based? In Germany, a rethink is evident among investors. Instead of solely pursuing the aim of the highest return, increasing numbers of investors are readjusting their objectives. Growing numbers of investors want to know the social and ecological effects of their investments in the real economy and have a say in how their money is used. There are good reasons for such a rethink:

First, the financial crisis has sharpened the awareness both of the effects which investments have and of the consequences of the decoupling of the financial sector from the real economy. Since the volume of financial losses and the large number of affected financial institutions worldwide has become known, since the rule “too big to fail” was not applied, distrust of the banking sector is rife among investors. The awareness has grown that banks were involved in financial transactions, some of which were complex and lacking transparency. Customers are questioning the hunt for the highest returns in which money is earned with money in an abstract way. They feel that they have not been properly informed and want to know for what possibly speculative transactions the banks are using their money.

Second, increasing numbers of people see themselves as being obliged to take personal responsibility in the face of the growing challenges to society brought about by social problems and advancing climate change. The number of consumers of organic food, green electricity or clothing produced in an ecologically and socially compatible way is steadily growing. Such a “Lifestyle of Health and Sustainability” (LOHAS for short) also includes taking account of sustainability criteria in financial investments. Investors see their investments as a lever to promote the sustainable development of society. For some it also represents a political statement.

The current situation makes clear that long-term confidence of investors in banks can only exist if customers are given a real basis on which to assess banking products through a transparent way of working and are thus enabled to make an informed decision which takes all aspects of a financial investment into account. In addition, it is clear that there is growing demand for socially, ecologically and economically sustainable investments. That is precisely the gap in the banking world which the GLS Bank fills with its products.

Transparency and Sustainability
The GLS Bank was established in 1974 as the first social and ecological bank in Germany. The aim of its business activities is the sustainable development of society. The GLS Bank sees money as a means to make things happen in society. On that basis it focuses the whole of its business activity on services which combine the individual benefit for its customers with a social and ecological benefit for society. It addresses people who wish to produce non∞material added value in addition to their financial added value and makes financing available in accordance with strict criteria exclusively to businesses and projects which serve social objectives in the ecological, social and cultural field.

From the perspective of the economy, the function of banks consists of supplying the real economy with a medium of exchange and capital. The GLS Bank focuses on precisely these core tasks – deposit and loan transactions. With banking services from current accounts through savings products and asset management to old age pensions and financing, the GLS Bank offers the most comprehensive range of sustainable banking products in Germany. Together with its current 73,000 customers, the bank is at present putting into practice more than 6,600 forward-looking enterprises and projects in regenerative energies, ecological agriculture, ecological building finance, natural food, independent schools and kindergartens, facilities for people with disabilities and housing projects.

This utilisation-oriented concept of the GLS Bank includes comprehensive transparency unequalled in Germany as well as an open communication policy. The bank is transparent about the way it uses resources and informs customers about the enterprises and projects financed: it regularly publishes all new loans in its customer magazine Bankspiegel, specifying the institutions receiving the loans as well as the amount and purpose of the loan. In this way investing customers can see at all times in which enterprises their money is being invested.

In addition, the GLS Bank offers its customers for all bank products – starting with opening a current account – the opportunity to decide the sector in which their money is to be invested. In this way customers can support specific areas of society. This exemplary transparency does not stop at the publication of its own investments either. Everyone can inspect the GLS Bank’s own investments on its website. In order to separate the sustainable from the non-sustainable sectors, enterprises and business activities, the GLS Bank works with rigorous positive and negative criteria. The 15 excluded criteria in total include, among others, nuclear energy, the arms industry and child labour. The bank refuses to work with enterprises which are tangent to these sectors because meeting the criteria is the prerequisite for loans being granted by the GLS Bank. It applies equally to the bank’s own investments.

In order to guarantee the highest quality and a consistent sustainable investment universe, the GLS Bank has implemented a two- stage research process. To this end it works together with the experienced rating agency Oekom Research AG as a first step, which also includes ecological and social criteria in its company analyses alongside the economic ones. On the basis of the values suggested by the agency, the in-house GLS investment committee examines in detail which businesses can be included in the GLS investment universe. The committee consists of internal and external experts who meet several times per year and routinely monitor the investment universe.
 
In questions of transparency and the strict implementation of a sustainable banking strategy, the concept of the GLS Bank sets standards. It provides investors with a sound basis on which to take decisions and makes the GLS Bank’s transactions verifiable and assessable. Furthermore, it offers a high degree of protection, something that is a central investment criterion specifically in times of crisis. Protection is also assured through the GLS Bank’s membership of the Volksund Raiffeisenbanken’s guarantee scheme, which guarantees all deposits to 100 percent, as well as a business policy which strictly excludes speculative financial transactions.

That the concept of the GLS Bank creates sustained confidence and proves convincing is shown not only by the enormous growth in the deposit and loan business but also by the increased number of customers. If the Bank had about 62,000 customers in 2008, this has risen to 73,000 in 2009. And growth is continuing. The GLS Bank clearly reflects the spirit of the times.