Banking on progress

As a result of recent accomplishments, CGD has cemented its position as a leading market institution and regularly benchmarks the best and most effective practices in the Portuguese financial sector. The bank is firmly committed to sustainable development and currently boasts the most comprehensive and structured sustainability programme in Portugal’s finance sector. The programme has been recognised by outside organisations, both nationally and internationally, in terms of the monitoring and auditing performed by the firm and through the recognition and awards the programme has received. Sustainable performance – underpinning CGD’s 135-year history – is reflected in the voluntary adoption of a set of economic, environmental and social commitments that extend far beyond its legal obligations and needed compliance. The obligations aim to engender an overall positive impact at the level of economic and sustainable development by enhancing competitiveness, internationalisation, the innovation capacity of companies, job creation, financial inclusion and the promotion of responsible consumption and renewable energy.

In 2011, CGD strengthened its commitment to sustainability by publishing the first ‘Carbon Neutrality Report’, which also constitutes the first report of its kind in the Portuguese financial sector.

Building an environment
2012 is aiming to be the international year of ‘Sustainable Energy for All’; CGD will continue to implement projects aimed at boosting the institution’s energy efficiency and reducing its own level of carbon emissions.

Initiatives include a focus on renewable energies, the adoption of low∞carbon technologies in buildings, innovation in business processes, mobility, efficient management of the solar thermal station at CGD’s head office in Lisbon and the installation of photovoltaic solar panels in 90 branches of the bank’s network. In addition to appropriate waste management, based on ‘energy efficiency’ (trying to consume less), ‘renewable energy’ (diversify power sources) and ‘environmental impact’.

CGD has been developing the ‘Caixa Carbono Zero’ (Caixa Zero Carbon) programme since 2007, which consolidates Caixa Geral de Depósitos’ strategy for combating climate change, which entails both internal action – taking responsibility for quantifying, reducing and offsetting its own emissions – and by its actions in the market and social sphere, thereby helping to contribute to a low carbon economy in Portugal.

Under this programme, CGD has been providing, since 2006, an annual inventory of greenhouse gas emissions (GHG), in relation to banking activities in Portugal, formulated in accordance with the ‘Greenhouse Gas Protocol’ methodology, which is currently the most recognised international standard for preparing vast corporate emissions inventories.

The establishment of internal measures and goals to reduce emissions is essential for implementing the strategy to combat climate change, for which CGD has defined quantified objectives for reducing greenhouse gas emissions and energy consumption for the period 2011-2015.

CGD acknowledges the need to develop coherent environmental management practices, based on the best international standards available, among which include: the ‘International Statement’ by several financial institutions on the environment and sustainable development, the ‘Carbon Disclosure Project’ (CDP) and UNEP-Finance Initiative (Innovative Financing for Sustainability) and the ‘Charter for Responsible Business’ from WSBI/ESBG.

At the same time, CGD continues to provide financial products that contribute positively to the environmental impact of economic activities. These include a shift in communications with customers – particularly via bank statements – to digital formats; promoting more responsible behaviour, such as the “Guia Dia-a-dia Carbono Zero” (day-to-day zero carbon guide) and offering customers the ‘Carbon Calculator’, for the purpose of supplying information on each person’s carbon footprint, showing the amount of carbon dioxide and other greenhouse gas emissions associated with day-to-day activities.

Care within the community
CGD’s responsibility is not just limited to its ability to achieve good financial results. Part of its history is to constantly promote the best practices in addressing the challenges of Portuguese society during different times and situations, always striving to provide direct support to various social responsibility initiatives.

Therefore, in its recognition that community involvement (internal and external) is one of the pillars of its sustainable trajectory, CGD’s commitment to the community is based on an innovative and comprehensive form of social intervention. The firm promotes financial inclusion and centres its own actions on social entrepreneurship, microcredit and microfinance, as well as social innovation, with the need to be at the forefront of meeting the many challenges emerging in Portuguese society. In 2011, CGD joined the London Benchmarking Group (LBG), an association of more than 100 international companies committed to measuring the social impact of their investments in the community.

CGD participates in an innovative and ongoing manner, encompassing a wide variety of areas, making a contribution to society in terms of more than just its financial knowledge. By promoting financial inclusion and literacy – as well as environmental goals – with the aim of providing information to nurture financially responsible behaviour.

CGD’s commitment to the community is based on constant and committed support to activities in different areas, supplying answers to the real needs of society and meeting the expectations of ordinary citizens.

An inclusion solution
In acknowledgment of the growing importance of background material for the responsible management of personal finances, CGD has developed initiatives that help educate citizens about the requirements imposed by the diversity of financial products (www.saldopositivo.cgd.pt) and developed the “Educação + Financeira” campaign (education + financial programme).

‘Saldo Positivo’ is CGD’s financial literacy programme. Launched in 2008, it represents a pioneering initiative in Portugal, which falls under CGD’s community involvement policy. It seeks to provide individuals with access to personal finance knowledge that will equip them to make more mindful and enlightened financial decisions, thus preventing over-indebtedness. The next steps for ‘Saldo Positivo’ is the creation of a venue for financial literacy and management for SMEs – an effort that reflects Caixa’s emphasis on the economy and Portuguese companies which it deems to be a priority in the coming years.

Educação + Financeira is a financial literacy exhibition, developed by Caixa in partnership with the University of Aveiro. This ongoing initiative has just entered its second year and focuses on helping educate consumers to be appropriately informed on their banking accounts, more aware of financial realities and better prepared to face the difficulties and challenges of everyday life.

The project, which last year reached more than 14,000 young people, will once again travel throughout the country ending in April 2012. Its goals are to bring – especially to the younger population (from seven to 17 years of age) – different content and games related to financial issues that everyone faces in day-to-day life.

Time for change: Russian transfer pricing

The original transfer pricing rules introduced in 1999 neither recognised the OECD Transfer Pricing Guidelines nor allowed for Advance Pricing Agreements (APAs), which caused considerable consternation for multinational companies doing business in Russia and giving rise to a number of double taxation issues that would have directly affected investment.

Accordingly, in an attempt to resolve the issues and to encourage greater investment, the Russian government has ratified new transfer pricing rules that now closely follow the OECD guidelines and the majority of which have applied since the start of 2012 (although some minor aspects have been delayed until 2014).

The main elements:  
There are now five primary methods – ‘Comparable Profitability’ and ‘Profit Split’ methods have been added to the previous three methods: ‘Comparable Uncontrolled Price’ (CUP), ‘Resale Minus’ and ‘Cost Plus’ – but if none of the methods are appropriate, the market price of a one∞off transaction may be determined through an independent appraisal. A CUP is where it is possible to find a similar transaction, ideally with an unconnected party, with similar terms and conditions to that of the transaction with the connected party. Internal CUPs remain the preferred method to be applied for most businesses.

Related parties include – somewhat surprisingly – an ownership threshold of only 25 percent, although the courts retain the right to treat parties as related irrespective of ownership levels.

All cross border transactions are included, but for those transactions that involve goods traded on commodity markets only where values exceed RUB 60m. A similar amount applies to transactions with residents of jurisdictions on the Ministry of Finance’s blacklist.

Domestic transactions are caught if the aggregate annual income from connected parties exceeds RUB 3.2bn in 2012, RUB 2bn in 2013 and only RUB 1bn for 2014 onwards. The rules will also be applied if the transaction volume exceeds RUB 60m per calendar year and one of the parties does not pay profits tax; one of the parties is a resident of a special economic zone (2014 onwards); mineral resources are involved; or where the volume exceeds RUB 100m per calendar year and one of the parties pays unified tax on imputed income or unified agricultural tax. Transactions between members of a consolidated taxpayer group can also be exempt (even though, currently, there is no law permitting consolidation).

Upward only adjustments to the tax base are usually applicable unless the adjustment arises through a transfer pricing audit.

For comparability purposes, only Russian information is to be used. Data on foreign corporations can only be used if Russian sources are not available – hence European results may be irrelevant. From 2014 a penalty of 20 percent of additional tax payable will be applied rising to 40 percent in 2017 if there is no documentation.

Proper documentation
Companies must maintain specific documentation if the total volume with the same connected party exceeds RUB 100m in 2012 falling to RUB 80m for 2013. No monetary limit applies thereafter. There is a detailed list of specific documentation that must be maintained and supplied to the tax authorities within 30 days of a request by them if made before June 1 of the following year.

Information on all controlled transactions must be filed by the company by May 20 of the following year. For 2012 and 2013, notification is only required if the amounts fall below the limits mentioned above.

For the first time, APAs will also be allowed but only for those major companies paying annual tax in excess of RUB 1bn or with annual revenue/assets exceeding RUB 20bn. The tax authorities will only have six to nine months to review an application. Once granted it applies for three years with the taxpayer’s option of extending it for a further two years. Furthermore, tax audits may cover a preceding three year period but for 2012 the period in which investigations may be made only lasts until 31 December 2013 and for 2013 until 31 December 2015.

Issues still remain
Multinational companies will welcome the fact that the new rules answer many of the criticisms of the previous rules and may also alleviate certain double taxation issues, but there remain some concerns. For instance; there is no actual law on consolidated taxpayer groups, the courts can ignore ownership tests, comparability must only be based on Russian companies, and from 2014 all companies will have to maintain documentation irrespective of the size of transaction. However, considerable progress has been achieved and hopefully the rules will be refined as other issues arise if Russia is to encourage further investment.

The obvious fact, though, is that with a more documented approach, the risk of audits and tax authority challenges will undoubtedly increase. Multinational companies will be watching developments carefully and those operating in Russia should consider whether their global pricing policies would be acceptable or would need tailoring for use in Russia.

For further information
Les Secular is a Partner at True Partners Consulting (UK) LLP
Tel: +44 207 868 2431
Email: les.secular@tpctax.co.uk

Comprehensive development: Mexican steel

Villacero is a privately owned Mexican company with subsidiaries mainly serving the steel and financial sectors in Mexico. On one hand, the company is involved in the processing, manufacturing and marketing of steel products, while also providing financial services to the Mexican market through Afirme Grupo Financiero, which offers insurance, investment fund management, banking services, warehousing, factoring, leasing and pension fund management.

Founded in 1955 in Monterrey, Mexico – an industry-based city located 200km south of the US – Villacero has grown from being a small distributor of steel products, primarily serving the construction and manufacturing industries in Monterrey – to become the Mexican market leader in processing, servicing, marketing and distributing steel products.

Villacero has the largest commercial network of steel products in Mexico, including the largest distribution and service centre in Latin America. The company has service centres in every significant consumption centre in Mexico and is the only site that can ensure the delivery of any kind of steel product to any location in Mexico. This is accomplished through the company’s huge network of logistics suppliers, including specialised road transportation companies, maritime port facilities and in-bond warehousing. These services are offered not only to the steel sector, but also to numerous other sectors like the automotive, agriculture products, and chemical product sectors among many others.
The commercial operations of Villacero are further supported by a vast network of processing and manufacturing facilities. Raw materials are processed in these facilities to produce painted and galvanised sheets and coils, welded small and large pipes and tubes, metal strips, structural profiles, deck and wiring products.

Across the world
Internationally speaking, Villacero has a history of over 30 years. In the late 1980s and early 1990s Villacero developed distribution and manufacturing operations throughout Texas. Today, the Texas Valley is fully integrated into the company’s domestic operations. In 2006, Villacero acquired a participation in Adelphia Metals, the third-largest independent distributor of steel rebar in the US. Adelphia has its administrative headquarters in Minnesota and Pennsylvania, and primarily services the east coast markets. It has a wide network of service centres across the US to provide quick and efficient service to its customers.

One of the most important steps Villacero has taken in its globalisation expansion happened in 1999 when the company grew its operations towards Europe, specifically Germany, where a partnership with Coutinho Caro & Co. was established in order to expand its sourcing capabilities globally. It did so through the establishment of CCC Steel, one of the main independent traders of steel products at the time.

This globalisation process was consolidated in 2008 when Villacero entered into an agreement with two important German companies in order to merge their steel trading activities to create Coutinho & Ferrostaal (C&F), a world∞class independent steel trading company. Even though C&F could be considered a relatively young investment, the existence of its former parent companies can be traced back to 1894.

C&F has sales offices and trading operations throughout the world in countries like Mexico, US, Canada, China, Singapore, India, Brazil, UK, Germany and Colombia, among others. The company is managed mainly through administrative hubs in Houston and Hamburg that provide important financial, logistical and administrative support to the trade network.

Villacero is a strategic element in the global steel industry’s value chain. The members of the financial sector view the company as an excellent business partner due to its vast experience in the steel sector. Furthermore, the relationship can be seen as a means to venture into new business, either through the creation of a financial link with Villacero’s current or potential customers, or through the penetration of new markets within the steel industry. This of course can be achieved with a lower risk factor than if done independently. Steel producers find Villacero to be a strategic partner with an extensive network of commercial outlets, and with the logistic and financial capabilities to access regions and markets that were formerly out of their reach. Finally, end users have confidence that, through Villacero, they will find comprehensive solutions to their steel-related needs, as well as a wide array of value∞added logistics and financial services that allow them to meet all of their requirements

Moving forward
This strategy to be present in the global market has achieved significant results. Last January, Expansion Magazine, a Mexican financial media outlet, ranked Villacero 11th on its list of the most globally established Mexican companies currently in the market.
Alongside its consolidation as a leading company in the steel market, Villacero has an ongoing commitment to the community. The most important activities in terms of social responsibility are carried out through Fundación Villacero, a sponsorship organisation created in 1998 to contribute to the ongoing development of Mexican society by promoting a better quality of life for its citizens. This organisation aims to create optimal business environments and employment opportunities for locals, supporting education, culture, social welfare and promoting civic values through the creation, sponsorship or support of institutions that promote these activities along with other cultural, research, and health development initiatives.

As part of its effort to promote the arts, the Fundación Villacero has organised cultural exhibitions in different countries to exhibit the work of prominent international artists. All these exhibits have had steel-worked sculpture as the central theme, in order to emphasise the versatility, sustainability and cost∞effectiveness of steel. In the past seven years, Fundación Villacero has organised 14 steel sculpture expositions in eight countries including: Germany, Turkey, Brazil, Mexico and Argentina.

Thanks to its dedication and hard work throughout its existence, in February 2012, Villacero received The New Economy’s ‘Corporate Citizen Award 2012’. This award is in acknowledgement of Villacero’s experience and dedication to emphasising the importance of the steel sector to the world, and has brought about a renewed commitment to work even harder to continue to fulfil its goals as a leader in the steel sector.

Changing the gears

If Henry Ford could have lived long enough to see Hyundai’s car assembly plant at Ulsan in South Korea, it’s safe to say he would have been dazzled by its speed. The inventor of the automotive assembly line, Ford was able to turn out a Model T in 93 minutes, a huge improvement on the 14 hours it had taken before the great inventor figured out it was much faster to bring the car to the worker instead of the other way around.

But not even Ford could have envisaged a car coming off the line every 13 seconds, the speed Hyundai achieves at its most advanced plant. Out of this single facility roll, 5,600 brand new vehicles are created a day, making a grand total of 1.52m a year. It’s numbers like these that send fear into the hearts of European and American manufacturers who have watched with alarm as Hyundai and Kia, South Korea’s other big automotive companies, have steadily moved their brands upmarket and developed a reputation for quality.

Confined mainly to its domestic market for most of its commercial life, Hyundai now sells in 193 countries and is growing fast. Last year the company manufactured over four million vehicles, up by over 12 percent on its 2010 numbers, from its South Korean and other plants in the US, China, Czech Republic, India and Russia. In the mass production league table Hyundai now lies fourth behind Toyota, GM and Volkswagen.

But it’s the Ulsan plant that symbolises the brand’s fast-growing power in the global marketplace. In scale as well as technology, the factory is epic. Every day 34,000 workers pour in and out of the gates. Also on site is a fully equipped hospital and several schools. While the original Ford factories were seen as dark and grim places in which to work, the Ulsan plant sets the standard for environmental sensitivity with water-recycling and other sustainable infrastructure. It’s even set in the middle of a vast, man-made forest.

Its assembly lines represent the apotheosis of a 100-year evolution. After Ford figured it was much faster to have the man standing beside a table with his nuts and bolts at the ready while the car did the moving, the next big breakthrough came from more efficient delivery methods of the parts under just-in-time methods that have been continually refined. These days delivery trucks and trains pour in and out of vehicle assembly plants all day, saving on warehouse costs.

The next development in manufacturing was “modular assembly” with separate or parallel lines for chassis, body and interior that fed into the final assembly line. Thus several processes could take place simultaneously.

In the early eighties, Swedish companies Volvo and Saab pioneered team-style production to humanise the assembly line. In this methodology, a group of workers followed one vehicle from the start to the end of the line, taking ownership of it.

Finally, robots began to take over from the eighties. It was the conversion of programmed machines to the process of assembling cars that led to today’s phenomenal speeds. With robots, a single “cell operator” could handle three or four quite different tasks at once.

Much maligned by unions at first who feared wholesale job losses, robots actually released workers from highly repetitive tasks. Whereas Henry Ford’s assembly-line pioneers could spend years handling a single screw or bolt, machines were doing all the donkey work of welding stitching and other tasks.

The irony is that the high speed of the Ulsan plant owes much to Henry Ford. When the factory was first established 45 years ago, it relied heavily on the expertise of Ford’s assembly-line engineers.

Sunflower power

At first – or even at second glance – the Fermat spiral doesn’t seem to have much to do with solar energy. It’s what mathematicians see when they study the mesh-type arrangement of the florets on a daisy or sunflower. For the truly initiated, the exceptional mesh of spirals occurs in Fibonacci numbers.

But here is where science begins to learn from nature. On a sunflower each floret is turned at an angle of about 137 degrees to its neighbour in what’s known as the “golden angle”. And this angle could turn out to be pure gold for the future of solar energy.

Concentrated solar power plants – vast parks of mirrors, or heliostats, known as CSPs – reflects the sun to a single high tower that then converts the energy into electricity.

Usually, one heliostat produces around enough energy to power ten homes and, according to researchers, CSPs could keep the entire US in power all year round without resorting to harmful/non-renewable forms of power generation like coal and gas.

The trouble is there’s not enough space, as the Solar Energy Journal points out. Each mirror takes up the equivalent of half a tennis court. To put just 600 mirrors together as in the PS10 site in the desert of Andalucia just outside Seville, one of several CSPs around the world, it requires a lot of free space.

However, the technology is so promising that MIT and Germany’s RWTH Aachen University have recently collaborated to try to reduce its energy footprint. Using a process known as numerical optimisation, they organised the mirrors in a way they hoped would prove more far more efficient then normal practices.

Subsequent tests showed they were on the right track. But the researchers found that the rearrangement bore similarities to the pattern of spirals on a sunflower. The team led by MIT engineer, Prof Alexander Mitsos, decided to take things a step further and mimic nature using the “golden angle”. In short, a mesh of spirals.

Measurements showed the sunflower-based arrangement not only gathered more energy for the same number of mirrors but reduced “blocking and shading” as the sun moved during the day. Thus the space required for CSPs fell by 20 percent, improving the long-term prospects for these plants. “Concentrated solar thermal energy needs huge areas,” explains Mitsos, “so we’d better use them efficiently.”

This unexpected application of the Fermat spiral doesn’t surprise proponents of biomimicry, the replication of nature in science. As India’s Dr A Jagadeesh Nellore, an authority in wind power, commented on the research: “The diversity of nature can help in many aspects of engineering and solve problems of mankind”. As an unknown poet once wrote: “Like a single sunbeam on a warm summer day, there is an exuberance and brilliance in a sunflower.” And of course, heat.

Plucking crackberries

When the Blackberry hit the scene in 2003, it appeared as a novel slice of multi tasking genius: business folks proudly admitted to being mildly addicted to their shiny “crackberries”. The gadget, a brainchild of Canadian company Research in Motion, seemed invincible. Today we know differently. The past few years have proved taxing for the Blackberry and the triumphant advance of its arch rival the iPhone has deemed it unfashionable in comparison. Last summer’s riots in London soiled the reputation of the brand name further, as Blackberry’s free BBM messenger service was the favoured tool of communication between looters and troublemakers.

As a result of unfortunate associations and mounting competition, Blackberry sales have plummeted dramatically, which is partially to blame for RIM’s disastrous losses; the company suffered a net loss of $125m (£78m) for the three months to March 2012, while it took home a profit of $934m the previous year. The decline of individual consumers has certainly contributed to the company’s shortfall, but the most significant blow has been the drop in orders from big corporations, entities that that now prefer to equip their staff with iPhone or Android devices.

In a desperate attempt to win back its quickly diminishing corporate clientele, the company’s new CEO Thorsten Heins has confirmed that Blackberry will be returning to its foundations and target business customers above all. To realise the plan, the launch of the latest version, the Blackberry 10, is expected to launch later this year, along with a new operating system that is well overdue. Time will tell if these steps will help to turn RIM’s fortunes around.

The UK Biobank launches

Although research and development has suffered drastic cuts in the last few years, the situation seems to have become somewhat rosier. A positive step in the right direction, the UK Biobank has been unveiled. Being the most comprehensive health study in the UK, the institution has gathered about 20TB of securely stored data on 500,000 people. The data will be used to improve prevention, diagnosis and treatment of a plethora of different conditions, ranging from cancer and heart disease to diabetes.

Mega prosecution

When the FBI ordered the arrest in New Zealand of founder Kim Dotcom and other principals of the Megaupload file-sharing site, the raid did a lot more than send its 150m subscribers into deep mourning. The FBI’s case sets the scene for a once-and-for-all debate – legal and otherwise – about how original creative content can be used on such sites, if at all.  The issue in a nutshell is whether there are any rules at all for proprietary material in the cyberzone.

Megaupload is – or rather, was – a “cyberlocker” site. That is, a place for hosting content it did not create. Supporters call them digital lockers or open file-sharing sites but the FBI describes Megaupload, the grandaddy of them all, as a criminal enterprise. Not surprisingly, there are a veritable plethora of websites based on much the same principle.

Their attraction is that users – and Megaupload had 50m of them every day – can get to see millions of files without having to go anywhere or paying much, if at all.

Megaupload’s problem was that most of its content and profits (more than $175m in the last five years, according to prosecutors) came from copyright-breaching, pirated content. Megaupload’s principals have also been charged with racketeering, money-laundering and a variety of other grave charges, all of which raise the risk of “serious jail time”, as lawyers point out.

With the vigorous support of the owners of the creative content, the FBI had been working on the Megaupload case for two years while Kim Dotcom, an obese 38 year-old giant with multiple residencies and citizenships, and his associates lived the high life near Auckland, New Zealand’s biggest city. Infamous for hurtling around the neighbourhood in a stable of high-powered luxury sports cars with in-your-face number plates like “Guilty”, “God”, “Mafia” and “Hacker”,  they brought retribution down on themselves, according to many observers.

The raid was a globally coordinated exercise involving agencies in America, Hong Kong, Britain, New Zealand, the Philippines, the Netherlands, Germany and Canada. Yet its timing surprised many dwellers in the cyber zone because it seemed to some as though the enterprise was trying to go legit. According to Dotcom (who has several names including Kim Schmitz), Megaupload had been withdrawing content whenever rights-holders complained, which was all the time.

The founder had even appealed to PayPal to boycott opposition sites that, he wrote, “are known to pay uploaders for pirated content.” He liked Megaupload to be thought of as a “file-hosting” site.

However the FBI charges that all this was just an elaborate smokescreen and their prosecutors provided examples of numerous communications between Megaupload employees that reveal, they said, a systematic mining of all kinds of proprietary content.
Ultimately it’s an intellectual property issue and the hugely powerful Motion Picture Association of America, a particular victim of the site, has no doubt that the law is on its side. It describes Megaupload as: “the largest and most active criminally operated website targeting creative content in the world.”

Yet one interesting argument raised by supporters of open file-sharing sites is that owners of creative content should make it more easily available and at reasonable prices. They cite with approval, music-sharing sites such as Spotify for which subscribers can pay a monthly fee. As web technology site TechCrunch pointed out, such sites are convenient and affordable. “People who care about their time don’t bother to download illegally.” If that ever happens though, it’s almost certain that Megaupload won’t have any involvement.

Funding Palestine with Hashim Shawa

Tell us about the state of the banking sector in Palestine.
Palestine’s banks have traditionally had limited exposure to global markets, and have applied conservative lending practices domestically; which ultimately meant that Palestine’s banks weren’t significantly affected by the global financial crisis.
Over the last decade, the banking sector in Palestine has witnessed some tremendous growth, despite the instability in the region. Assets increased by 87.4 percent, deposits by 94 percent, credit facilities by 110 percent and owner’s equity by 338 percent. The banking sector in Palestine has a high growth potential. Palestine is ‘under-banked’ compared to its neighbouring regions. For every 100,000 adults, Palestine has nine bank branches, whereas Israel has 20 and Jordan has 18.

How does the Bank of Palestine compare to other banks within the country?
There are eighteen banks operating in Palestine, eight of which are Palestinian (two of these are Islamic banks). Another eight are Jordanian, one Egyptian, and one is a branch of HSBC. We are the first and the largest Palestinian bank with 47 branches out of a total of 213 branches. Established in 1960, BoP has a paid-up capital of $120m, and assets of over $1.6bn. It has more than 1,100 employees – which makes it one of the largest private employers in Palestine – and has more than half a million customers.

Our board of directors and the executive team are based in Palestine; this gives BoP a significant competitive advantage, and enables us to know and understand our clients and the local business environment better. We also have a young, innovative management team; something particularly important in Palestine, with around 75 percent of the population under the age of 35. Not only are we present in all the main cities of Palestine, but we’ve also pioneered the opening of branches in unbanked and rural areas. These rural communities have proved to be really important sources of deposits and offer great potential for SME loans and micro loans.

BoP is the sole issuer and acquirer of Visa and MasterCard in Palestine. This gives the bank a significant competitive advantage, because it owns the Point of Sale network in Palestine (which acquires the cards), it is able to develop special BoP cards that meet the needs of its clients, such as BoP’s ‘EasyLife’ card, which is a local instalment card. BoP has played a pioneering role in improving access to finance to businesses of all types, including micro, SME, large projects and syndicated loans. The bank has established specialised micro and SME units in order to better understand the needs and serve these clients effectively. The bank has even recognised the necessity to cater to the needs of the emerging young, entrepreneurial Palestinian population.We’re also providing Palestinians living outside Palestine with an extensive range of financial services, through the recently established ‘Diaspora Unit’ at the bank, with a team dedicated to connecting and strengthening bonds with Palestinians living in the Diaspora. In the past few years, we’ve established an excellent relationship with the Palestinian Diaspora in Latin America, specifically Chile (where there are 500,000 Chileans of Palestinian origin). The bank is also establishing excellent relationships with the Palestinian Diaspora in other countries and regions, such as the US, the Arabian Gulf, and other countries in Latin America such as El Salvador, Honduras, Guatemala, Peru and many others.

What is your role within the bank?
Well, to be frank I don’t like sitting behind my desk, so I’ll always take up any opportunity to get out and visit clients and branches. I really enjoy seeing the bank in action in all its areas of activity and I also greatly enjoy seeing and understanding the needs of all types of clients from the micro entrepreneur to the mid-size family business to working on a hugely important $100m utility company-syndicated loan.

I like to bring innovation and a competitive edge to the bank, while establishing and pursuing a long-term vision and making sure that every employee understands the vision and knows precisely what their role is in bringing that vision to fruition. I also actively promote the role of women in the bank, especially in more senior positions and we are always trying to improve the percentage of women employed overall.I see myself as on something of a mission to bring Palestine, and BoP, cutting-edge technologies that can offer maximum competitive impact. In fact, my father started the Point of Sale (POS) network in Palestine in 2000, although at the time many thought it was too early for Palestine to have such a network.  This was and still is part of the bank’s overall vision

How does BoP follow up on Corporate Social Responsibility (CSR) initiatives?
We believe that true progress begins with social and economic development on a community level. As the first and largest bank in Palestine, social and environmental responsibility has been central to business since our founding in 1960 and we believe that: “It pays to do good”.

Without a sustainable community, we can’t have sustainable businesses. BoP has consistently revised its strategy to integrate sustainability into its core businesses operations. We dedicate around five percent of our net profit to CSR. In 2011 alone, BoP’s CSR budget exceeded $1.7m, and covered several sectors including: Youth and sports, education and entrepreneurs, health, arts, culture, tourism, and other humanitarian work.
We have also started a widespread national programme called the ‘Zamalah Fellowship Programme’, which aims to raise the calibre of education in Palestinian universities through building the capacity and increasing the exposure of university professors by sending them to academic and other professional institutions for a period ranging between one semester to a full year. BoP is also working on expanding this programme by inviting other private sector companies and individuals to contribute to the fund.

What role have banks in Palestine played in leading economic initiatives for the progress of the region?
The banking sector in Palestine has played a proactive role in several key economic initiatives. Most importantly these include: Microfinancing, syndicated loans (we are the market leader) and large project financing, developing the mortgage industry and working to instigate the first private pension fund in Palestine, and finally, trying to attract the best foreign investment possible for the region.

What regulatory changes have affected the Palestinian financial sector? What have been the key developments concerning the implementation of Basel II?
Since 2007, the Palestine Monetary Authority (PMA), which was established in 1994, has made notable progress in institutional reform, which has enabled it to fulfil the core functions of a Central Bank.

These functions include the application of a rigorous banking supervision and regulatory framework, providing a strong credit and payment infrastructure, and monitoring compliance with a governance code and an anti-money laundering law. The PMA has advanced towards the implementation of Basel II standards, and was one of the  first in the region to integrate an electronic credit scoring system into the credit registry in 2010.

This has been an important contributor to the rise in Palestine’s bank credit to the private sector. The system has also contributed to the decline in bounced cheques by 25 percent.
Furthermore, an electronic payment system was also installed in 2010, including a ‘real-time gross settlement’ system, which has significantly raised the bank’s payments efficiency and reduced its liquidity risk. An Anti-Money Laundering Law has also been enforced in line with international standards.

What does the Bank of Palestine do to stay ahead of regulatory changes and how is this reflected on its clients?
In relation to risk management and corporate governance, BoP was not satisfied by limiting itself to implementing the systems required by the Palestine Monetary Authority (PMA) and the Palestine Capital Market Authority (PCMA). The point is that the bank is aiming to implement risk management systems that meet international best practices. So, in the past few years – and in co-operation with the International Finance Corporation (IFC) – BoP has developed comprehensive risk management structure systems, procedures and processes, as well as promoting and strengthening corporate governance practices that now meet international best practices.

Tell us about BoP’s leading role in encouraging local environmental partnerships.
BoP is considered the leading ‘green’ bank in Palestine, as it was the first bank to implement an all-encompassing sustainability strategy. However, this strategy was not created just to enhance the brand, B0P strongly believes that to achieve greater long-term value, it is important to go beyond written policies and put strategy into action.

This is why BoP has committed special resources and teams to monitor the implementation of the strategy, training employees and increasing awareness along the entire supply chain. By continuously developing the strategy, products and services, it can meet the changing needs of its customers, environment and region.

What’s next on the cards for BoP? What are you hoping to achieve within the next five years?
The company is hugely optimistic about what it can achieve in the years to come.

Currently, the bank is the only issuer and acquirer of Visa and MasterCard in Palestine. Therefore, it will be putting a lot of effort into increasing the awareness of the ‘plastic culture’ in Palestine. BoP’s credit card portfolio grew by 28 percent in the last year and fees from the existing card and POS business increased by 354 percent over the past four years. As a result, the firm expects this business to continue to significantly grow again, doubling again in three years.

In 2011 BoP founded PalPay, a company that enables clients to electronically pay different utility bills and top up their mobile credit using the bank’s POS network of around 5,000 stations spread throughout Palestine. PalPay will also enable clients to pay their bills via the internet or via mobile phones. The company has been signing agreements with different service providers, who are interested in offering this service to their clients around Palestine, and the PalPay service is expected to be fully unveiled to clients in the beginning of 2012. PalPay has received a lot of interest from international institutional investors and there are plans to take this company to other markets. In 2012, BoP will be continuing local expansion through new branches and ATMs. The bank will also focus its international efforts through connecting to the Palestinian Diaspora, as well as opening a new representative office in Chile.

The technology behind sports marketing

There was once a time when sport brands consisted of just your conventional running shoes and t-shirt. These days, the picture couldn’t be more different. Sportswear is becoming ever-more innovative, totally changing how everyone from world-class athletes to ordinary enthusiasts go about participating in sport.

Currently at the forefront of the sporting tech movement is US giant Nike, launching innovations with an impressive regularity, all of which are seemingly conceived to make athletes run faster and jump higher. One of the brand’s latest offerings is the Nike+ FuelBand – a new addition to the well-established Nike+ family of products. Not only does the contraption ooze technological prowess, it could also help Nike regain its position as a good corporate citizen as the invention inspires higher levels of activity by tracking every movement of the wearer. It has the potential to help combat the worrying ‘globesity’ epidemic, increasingly evident in America’s population.

“The Nike+ FuelBand is a way for Nike to further evolve the exciting possibilities of merging the physical and digital worlds. Nike has always been about inspiring athletes, and the Nike+ FuelBand will help motivate them in a simple, fun and intuitive way.” said Nike president and CEO Mark Parker at the Nike+ FuelBand launch event in New York in 2011.

Continuing to raise the standards of their athletes, Nike has also come up with a high-tech sensory training programme in collaboration with the scoring system SPARQ, an SAT equivalent for athletes. The result of years of research is Nike SPARQ – a performance-boosting training programme that is designed to seek out and improve any shortcomings an athlete may have. To establish vulnerable points, sportsmen are initially put through visual and sensory tests carried out inside a giant touch-screen booth, in which the individual’s every ability is monitored and tested, ranging from simple hand-eye coordination down to the time taken to make split-second decisions and react accordingly.

Using the information gathered, athletes and trainers use the data to format a specific programme. To make the training system as challenging as possible, Nike has recently added a type of lens, the ‘Nike Vapor Strobe eyewear’, which features liquid-crystal display lenses designed to cloud the vision of the wearer in order to force him or her to heighten their focus while training against specific SPARQ weaknesses. The glasses alone cost a pricey $300 but despite the hefty price tag, the system has been adopted by prestigious colleges and top sports teams, while it also extends to private athletes trying to hone their skills at home.

Another buzzed-about Nike launch is the Nike Pro Combat concept, which has been developed for the Oregon Ducks American football team. The invention has been described as the most advanced American football uniform system ever created, and features enhanced thermoregulation and a high level of durability as it has been reinforced with Nike Chainmail Mesh – a lightweight and ultra-breathable material.  The uniform has been developed in collaboration with the University of Oregon, the Ducks institution and the university for which Nike founder Bill Bowerman served as head track coach from 1948.

“Nike’s relationship with the University of Oregon represents a forward-thinking approach to innovation and design. Our goal is to help build better athletes by providing them with state-of-the-art-innovation combined with a deep knowledge and understanding of their heritage” says Todd Van Horne, Nike’s creative director for American football.

Nike may have achieved a march on its rivals, but Adidas is not lagging far behind. Feather light and weighing in at just 150 grams, the German brand’s latest football boot, the F50 adiZero, has been described by Adidas as: “prime football boots offering the pinnacle of speed, agility and stability”. However, the boot is billed as the world’s first “intelligent boot” as it is equipped with Adidas’s breakthrough ‘MiCoach’ technology. A small microchip is contained within the heel of the boot, which can be linked wirelessly to a computer or smartphone, to monitor almost everything a player does on the pitch; from the distance run to how fast a player travelled. The results can then be uploaded and analysed by coaches, team mates or even opponents.

Equally, Reebok constantly seeks to up its game in the technological stakes. The trend for footwear that tones muscles has reached fever pitch and Reebok’s ‘Easy Tone’ trainer is one popular variant of several different models which have been launched. The model features built-in balance pods with “ Moving Air Technology” which transfers air in response to the wearer’s stride to create micro-instability necessary to gently exercise muscles in the leg.

Grain of the game
So what do sports companies such Nike and Adidas gain from their inexhaustible drive to introduce state∞of∞the∞art technological products, even across product ranges that target non-athletes who are not likely to ever enter a professional football pitch or Olympic arena?

“The sports sector as a whole aims to offer sportsmen better results with the help of new innovative product ranges and materials, and these important elements seep into the consumer side of the business as well. In essence, the high tech advances offer a way to break into new markets and to create a new selling advantage,” says trend consultant Henrik Mattson. “High tech sports products represent the antithesis of second-hand and retro – it’s a way to bring the segment forward. While new inventions can help to make the product more affordable, price is rarely an issue. People buy high tech sports goods because of their added benefits, akin to the consumer trend of the car industry. The great selling points are the technological advantages and the points of difference that set the product apart from the rest. The movement is only set to become more pronounced and we’ll see an explosion of new technology in the future as its very premise is to solve problems and make the product performance better.”

Indeed, sportswear can appear advanced to such a degree that products are deemed “technological doping” in that they aid performance a little too much – an unfortunate fate swimwear manufacturer Speedo met in 2008, after its high tech LZR Racer swimsuits helped top swimmers break numerous world records. A study found that it made swimmers speed up in the water by as much as two percent. Following the eye-opening discovery, which also applied to the swimwear of other brands, new guidelines were introduced by the global swimming sports organisation Federation Internationale de Natation (FINA) in January 2010, which outlawed full-body polyurethane suits altogether.

As a result, Speedo and its fellow swimwear competitors had to establish new ways to heighten performance while staying within the parameters of the law. And so they did.
After four years of research, development and testing, Speedo launched a radical new system in time for the London Olympics that will allegedly help swimmers speed up faster than if wearing the piece deemed illegal by FINA. Aptly called ‘Fastskins3’, the wonder product consists of an impossibly advanced cap, a pair of goggles and a suit – all of which are designed to work in harmony with one another to offer ultimate power in the pool.

Poster children of the new innovation are 16-time Olympic medallist Michael Phelps and Rebecca Adlington. If Phelps and his competitors clad themselves in Speedos’ high-powered gear they will experience a catalogue of improvements to aid their race, including an 11 percent improvement in oxygen economy. “Core stability, swimming position and fatigue resistance are all optimised. From hair shaping to friction of seams and fabric finishes, our system takes a holistic approach to performance,” says Dr Tom Waller, the head of Speedo’s Aqualab development laboratory.

High visibility
Aside from demonstrating their technical prowess across various product groups, sports brands also go about boosting their reputation and brand identities via alternative means. If applied strategically, sponsorship deals are surefire ways to increase brand awareness. A sportswear sponsors’ dream in recent history was the Beijing Olympics held in the summer of 2008. The Games proved a particular draw for obvious reasons – with a population of 1.3bn, many of whom approach shopping with a fervent passion, the Chinese consumer arena is not one to be sniffed at.

Both Adidas and Nike operate thousands of stores in China already, a staggering number which they hope will increase further in the coming years. It has been estimated that China’s sportswear market will potentially worth tens of billions of pounds over the next decade. Therefore, ahead of the Olympics, western brands descended on the event to try to establish a foothold in an untapped market potentially worth a fortune.

Adidas went on to spend around £50m to secure the covetable status as the main sponsor of the games, which involved outfitting all staff and volunteers with clothing and footwear featuring the famous three stripes. This was not the first time the company parted with significant sums to sponsor a high∞profile sporting event, but the Beijing Games deal was one of its most major transactions to date.

Prestigious events like the Olympics are high on the marketing agenda for companies, be they located in the prosperous land of China or elsewhere. Nike recently announced plans to continue its involvement in the Olympics, as supporter of the US team – a programme that was initiated in 2005. The deal includes providing footwear and kit for the US Olympic and Paralympic athletes, including the medal stand uniform that will be worn on the award podium and during medal ceremonies in London 2012 and Sochi 2014, as well as Rio later in the calendar.

“The Olympic Games represent Nike’s core DNA – to provide innovation and inspiration to athletes at the highest level,” said Elliott Hill, the general manager of Nike in North America. “We are proud to support our US athletes and are excited to continue Nike’s partnership with the US Olympic Committee (USOC).” In addition, Nike will also kit out the US Youth Olympic teams for the 2014 and 2016 games, as well as the Pan∞American and Parapan∞American teams set to compete in Toronto in 2015.

Aside from sponsoring major sporting events, it can be equally fruitful for a brand to tie up a highly regarded sporting virtuoso. Last year, Jamaican sprinter Usain Bolt extended his contract with Puma until 2013, and thus signed the biggest sponsorship deal in athletics history. World record-holder Bolt is expected to be one of the major attractions of the 2012 Olympics, which would serve the German brand extremely well. Leading tennis star Andy Murray, meanwhile, went on to sign a major sponsorship deal with Adidas that came into effect in 2010. By doing so, Murray ended his longstanding partnership with Fred Perry – the company that supported him from the very beginning of his budding tennis career. Let the best man win is an idiom that is as applicable to sportsmen as it is to their very own outfitters.

Hunting for Higgs

Fifty years ago, particle physicists faced an unexpected challenge. Their best mathematical models could account for some of the natural forces that explain the structure and behaviour of matter at a fundamental level, such as electromagnetism and the weak nuclear force responsible for radioactive decay. But the models worked only if the particles inside of atoms had no mass. How could huge conglomerations of such particles – proteins, people, planets – behave as they do if their constituent parts weighed nothing at all?

Some physicists invented a clever workaround. They suggested that a type of particle exists that had never been detected; it was eventually named in honor of the British physicist Peter Higgs. For a half-century, physicists searched for the elusive “Higgs boson particle.” Now, following research conducted at CERN, the huge particle-physics laboratory near Geneva, the hunt may soon be over.

At first blush, the idea behind the Higgs boson particle sounds outlandish. Higgs and his colleagues suggested that every elementary particle really is massless, just as the mathematical models require, and hence all particles would ordinarily zip around at the speed of light. But suppose that everything around us – every single particle in the universe – is immersed in a huge, unseen vat of Higgs particles. Whenever most kinds of particles move from point A to point B, they continually bump into Higgs boson particles, slowing their motion. When we observe them, they appear to lumber along like holiday shoppers in a crowded store. From their slow motion, we infer that they have mass. While a 50-year search for a hypothetical particle reminiscent of a bizarre fairytale might seem quixotic, the Higgs boson particle stands at the centre of the “Standard Model” of particle physics. Every experimental test of the model so far has matched theoretical expectations.

In some striking examples, the agreement between prediction and measurement has stretched out to twelve decimal places, making the Standard Model the most accurate scientific theory in human history. The model successfully accounts for three of the four basic forces of nature; only gravity remains beyond its purview.

Cosmic meaning
Higgs boson particles might have played an even more substantial role at earlier moments in cosmic history. My own research, along with that of physicists around the world, has focused on what effects Higgs boson particles might have had just fractions of a second after the big bang – effects that could explain the shape of the universe.

And yet, for all that, we still have no direct evidence that Higgs boson particles even exist. According to the Standard Model, Higgs boson particles scatter off each other, so they too, should have mass. The latest research indicates that Higgs boson particles (if they exist) should be among the most massive critters of the subatomic realm, more than 120 times as massive as the familiar proton.

To produce such a particle in the laboratory requires revving up protons to nearly the speed of light and smashing them together, which the Large Hadron Collider at CERN accomplishes trillions of times per second. The energetic collisions produce all manner of debris, which physicists carefully track with huge detectors and sift with sophisticated computer algorithms.

Physicists confront two major hurdles in their hunt for the Higgs boson. First, they must identify patterns in the debris that could have come from the production and rapid decay of a Higgs boson particle. The sought-after signal is well understood in principle, given what we know about the Standard Model. So is the background noise from all of the other junk that comes flying out when two protons collide with colossal energy. Physicists searching for a few Higgs-like needles in a mind-bogglingly large haystack must comb their data for anomalies in the debris that cannot be accounted for by known processes.

The second difficulty concerns statistics. The rules of quantum theory, on which the Standard Model is built, are at root probabilistic. There will always be statistical flukes in the data, just as any series of coin tosses can produce an unexpected string of seven heads in a row. To know with confidence that the coin is ordinary, with no hidden features, one must log a sufficiently large number of coin flips and check whether the data includes equal numbers of heads and tails over the long run. After thousands of coin tosses, if the data still shows a bias toward heads, one may be justified in thinking that the coin has some rather unusual properties.

The same holds true for all of the chaff from the protons’ collisions. Before physicists can claim that their anomalies really come from Higgs boson particles, they must gather enough data to rule out flukes. At CERN, two independent teams of physicists recently announced that their data were consistent with detection of a Higgs boson particle, though there remained a 1-in-2,000 chance that the signal came from mundane, non-Higgs processes. So the teams will continue smashing protons together, gathering more and more data, and sifting for signs of a Higgs boson.

We might not have the Higgs boson in hand right now. But the latest news is the strongest indication yet that the 50-year hunt for one of the most fundamental bits of matter might well be coming to a successful conclusion. The next time the CERN teams call a press conference, it could be weighty news indeed.

David Kaiser is Professor of Physics and the History of Science, Massachusetts Institute of Technology

(c) Project Syndicate, 2012

Connectivity transformation

Long the most fragmented nation on earth, China is being brought together like never before by a new connectivity. Its internet community is expanding at hyper speed, with profound implications for the Chinese economy, to say nothing of the country’s social norms and political system. This genie cannot be stuffed back in the bottle. Once connected, there is no turning back.

The pace of transformation is breathtaking. According to Internet World Stats, the number of internet users in China has more than tripled since 2006, soaring to 485m in mid-2011 – more than three times that in 2006. Moreover, China’s rush to connectivity is far from over. As of mid-2011, only 36 percent of its 1.3bn people were connected – far short of the nearly 80 percent penetration rates seen in South Korea, Japan, and the US.

Indeed, with the cost of connectivity falling sharply – China’s mobile users are expected to surpass PC users by 2013 – and, with urbanisation and per capita incomes also rising sharply, it is not unreasonable to expect China’s internet penetration rate to cross the 50 percent threshold by 2015. That would be the functional equivalent of adding about three-fourths of all existing internet users in the US to the network.

Nor are the Chinese casual and infrequent internet users. Consistent with what the social-network theorist Clay Shirky has dubbed a society’s penchant for unlocking the “cognitive surplus” embedded in net-based activities, survey data from the China Internet Network Information Centre suggest that Chinese “netizens” log an average of 2.6 hours per day online – a full hour longer than the average 15-49-year-old Chinese citizen spends watching television.

China’s microblogs, or social networks, where usage tends to be most intense, were estimated to have approximately 270m users as of late 2011. And there is plenty of upside. Worldwide, about 70 percent of all internet users currently engage in some form of microblogging, which is the fastest-growing segment of the internet. In China, this share is just 55 percent.

Powering potential  
When it comes to analysing China, it is always easy to get carried away with the numbers – especially those driven by the country’s sheer size. But the real message here concerns the implications of connectivity, not just its scale.

A key implication is the internet’s potential to play a significant role in the emergence of China’s consumer society – a critical structural imperative for a long-unbalanced Chinese economy. With connectivity comes a national awareness of spending habits, tastes, and brands – essential characteristics of any consumer culture.

The consumption share of China’s economy, at less than 35 percent of GDP, is the lowest of any major country. Surging Chinese internet usage could well facilitate the pro-consumption initiatives of the recently enacted twelfth Five-Year Plan.

The internet could also enable freer and more open communications, upward mobility, transparent and rapid dissemination of information and, yes, individuality. China’s leadership has been increasingly vocal in raising concerns about growing inequalities that might otherwise hinder the development of what they call a more “harmonious society.” Online connectivity could be a powerful means to help China come together and achieve this goal.

Finally, there is the internet’s potential as an instrument of political change. That is hardly an inconsequential consideration for any country in the aftermath of last year’s monumental Arab Spring, which was facilitated in many countries (especially Tunisia and Egypt) by network-enabled mobilisation.

While reform of China’s single-party state has always been viewed as an important objective in modern China – from the so-called Fifth Modernisation of Wei Jinsheng in the late 1970’s to recent speeches by Premier Wen Jiabao – meaningful progress has been limited. Is this likely to change as China embraces the Internet?

China is no exception in requiring leadership, accountability and responsiveness as conditions of political stability. Its rapidly expanding internet community has repeatedly raised national awareness of tough local issues. This was especially evident in the aftermath of the Sichuan earthquake of 2008, ethnic violence in Xinjiang in 2009 and the high-speed rail crash in Wenzhou in 2011.

As the Arab Spring demonstrated, the internet can quickly transform local incidents into national flashpoints – turning the new connectivity into a potential source of political instability and turmoil. But that has been the case only in countries ruled by highly unpopular autocratic regimes.

Censoring growth  
By contrast, China’s leadership is viewed with a much greater degree of public sympathy. Their quick and direct response to the recent incidents in Sichuan, Xinjiang, and Wenzhou are important cases in point. Senior Party leaders – especially Premier Wen – were quick to lead an empathetic national response that was largely effective in countering the outpouring of concern expressed on the internet.

None of this is to deny the dark side of the Chinese internet explosion – namely, widespread censorship and constraints on individual freedom of expression. China’s “SkyNet” team (rumored to be greater than 30,000) is the largest cyber police force in the world.

Moreover, while China is not alone in censoring the internet, self-policing by many of the nation’s largest portals amplifies official oversight and surveillance. Recent restrictions on microbloggers – especially denial of access to those who use untraceable aliases – have heightened concerns over Chinese internet freedom. Such restrictions of course, cut both ways – potentially limiting personal expression, but also constraining disguised and reckless vigilante attacks.

Filtered or not, a long-fragmented China now has a viable and rapidly expanding network. The power of that network – especially insofar as economic, social and political change is concerned – is rather hard to predict. But connectivity adds a whole new dimension of cohesion to modern China. That can only accelerate the speed of its extraordinary development journey.

Stephen S. Roach is a member of the faculty at Yale University, a non-executive chairman of Morgan Stanley Asia and the author of The Next Asia.

(c) Project Syndicate, 2012