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doing business in South Africa

Friday 18 April, 2014

The Greater New York Chamber of Commerce in conjunction with the South African Consulate General hosted “Doing Business in South Africa” @ the South African consulate.

Consul General George Monyeymangene introduced Simon Barber, the US country manager for Brand South Africa, which promotes the country of South Africa as a brand. He works with stakeholders both inside & outside of government to craft a value proposition for South Africa.  South Africa is celebrating 20 years since it’s 1st open & free election.  The South African brand is embodied by Madiba, or Nelson Mandela, who exudes the essence of Ubuntu, among other things, looking out for the collective good.  In the last 20 years:

  • GDP has grown from $136B to $335B
  • inflation has fallen from 14% to 6%
  • employment has grown from 9M to 14M
  • reserves have risen from $4B to $50B
  • the LSM (Living Standard Measure) has increased from 13M to 23.5M
  • electricity has gone from serving 58% to 95% of the population
  • water grew from being available to 61% to 73% of South Africans.

Additionally, South Africa has:

  • politically stable democracy
  • free media
  • independent central bank
  • high tax compliance.

According to the World Enterprise Fund Global Competitiveness Index, South Africa ranks:

  • #1 in auditing standards
  • #1 in securities regulations
  • #2 in financial services
  • #3 in banking
  • #3 in minority shareholders

On the down side, it ranks

  • #120 as a favorite
  • #116 in terms of imposing a burden.

Former treasury minister Trevor Manuel agreed with & adopted a National Development Plan written by Goldman Sachs.

The keynote address was offered by Frank Savage, Wall St. financier & CEO of Savage Holdings, who offered the perspective of an institutional investor.  He was early to enter South Africa in 1994 when he created a $125M fund there which earned 39.4% ROE.  He met Nelson Mandela with US Secretary of Commerce Ron Brown.  Although income inequality, education, & unemployment are problems, he remains optimistic.  The African National Congress has selected Ramiposa, a successful entrepreneur, which brings the party credibility & speaks volumes about their intentions.  The government has responded well to the Goldman Sachs report.  It’s well-balanced, but tough.  They must focus on difficult social problems.  Only15% participates in the formal economy, which leaves growth on the table.  All of Africa needs South Africa to reach it’s potential.  Civil unrest & instability can’t happen.  They need to rededicate themselves to their original principles & ideals.  He feels comfortable investing in South Africa.  Foreign Direct Investment magazine named South Africa the country of the future.

Q&A

  • South Africa will aim to protect it’s unique culture.
  • A free trade agreement is bringing together a market of 600M in Africa.
  • There is a plan to establish, promote, & implement Special Export Zones.
  • The ANC is not all powerful, as there are 3 tiers & power is shared among them.  It’s power is evolving & maturing as competitors are moving out of the ANC.
  • Infrastructure development is the driver of economic development.  The Infrastructure Coordinating Committee seeks to plot it’s future.
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US-China-Japan trilateral relations

Friday 4 April, 2014

I attended this event organized by the Japan Society;  The US-Japan-China triangle: building a path to trilateral cooperation which featured a panel discussion with Gerald Curtis of Columbia U., Jia Qingguo of Peking U., Alan Romberg of the Henry L. Stimson Center, & Yoshihide Soeya of the Woodrow Wilson International Center for Scholars & Keio U.  The panel was moderated by Donald Zagoria of the National Committee on American Foreign Policy.  I arrived late & missed Jia’s talk.

Soeya put today’s situation in historical context.  In 1971-2, China asserted itself while Japan avoided the issue.  During the 1980’s, Japan invested in China to modernize the country.  Deng Xiaoping then made courageous reforms.  Recently Japan’s Abe made an exception in visiting the Yaksun Islands.  In an interview in the  June-July issue of Foreign Affairs, he said it was not a big deal & that they were entitled to a right of self-defense, exerting a nationalistic tendency.  But he can’t carry out this policy with his current agenda.

Romberg called trilateral cooperation wildly unrealistic, & perhaps impossible.  There is no resolve to manage the dynamics.  China & the US have positive & negative effects which offset each other.  Their external behavior is erratic;  while they seek peace, they will also respond if challenged.  Aggression is in the eye of the beholder.  Japan is skeptical of China’s methods.  The US-China relationship is broader & deeper.  Their national interests differ.  For example, China sees the US & Japan as limiting the opportunities to bring China’s poor out of poverty.  There are no prospects for peace if these problems can’t be resolved.  Talks should lie ahead, but won’t.  Abe won’t visit the shrine again as PM.  The US seeks to lower the heat, but won’t mediate.  US/Japan alliances are alive & well.

Curtis addressed 4 issues:

  1. The islands are a dominant issue in Chinese/Japanese relations.  No 1 wants to go to war, but accidents do happen.  Japan must recognize the dispute & be willing to talk.  The Chinese must withdraw during such talks.  There seems to be no resolution because neither side expresses a willingness to compromise.
  2. China is conducting a nonsensical propaganda campaign against Abe, but that may be backfiring.  Both sides need to back off.
  3. Yaksuni is a sensitive issue.  Abe’s visit was not in the national interest.  Visiting the shrine resulted in sending a political message.  The hope is Abe will get this over with & foster better relations.
  4. After America’s pivot to Asia, we are stronger, but relatively smaller.  Obama is weak & doesn’t support Japan-the republicans do.  The world & the US have changed & we can’t go back to the way the world existed before.

Panel Q&A

If Japan acknowledges the Sekuka Isles, they can at least start negotiations.  Japan wants China to reduce it’s patrols in the area.  The solution could be the transfer of property rights by both of them.  The fishery agreement between the 2 is a recognized issue & related.  China will continue to assert itself until stopped.

Open Q&A

Japan is different from Germany after World War II in that the Japanese never apologized for the atrocities they inflicted on others, while the Germans did.

There is a poisoned atmosphere between China & Japan, which isn’t surprising.  They need to solve these problems to build trust.

Transferring property rights to the UN is not an option because that would be viewed as surrender, which is unacceptable.

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China takes the reins…of APEC

Friday 28 March, 2014

The Asia Society organized this event APEC Briefing 2013-14: China Takes the Reins & I was there to attend.  The moderator Tom Nagorski was a no-show, but otherwise everyone else made it.  China’s year of taking over the reins of APEC has been anticipated because each change brings new priorities & potentially new partnerships.

Robert Wang brought the US diplomatic perspective.  Strong new Chinese leadership wants to work closely with the US.  They have 3 priorities:

  1. regulate economic integration
  2. promote innovative development
  3. strengthen connectivity & infrastructure development

They held a 1-day symposium & wanted to discuss all 75 regional/free-trade agreements (FTA’s), how to work together, & FTAP, an FTA of the Asia/Pacific.

Ann Weeks of Underwriters Labs (UL) brought a standards orientation to the proceedings, which affects 80% of all trade as technical regulations have replace tariffs while improving public safety.  UL serves 65K manufacturers in 100 countries, of which 21 are in APEC.  40% of UL’s revenues come from outside the US.  They focus increasingly on food safety & green buildings.

Peter Petri zoomed in on the TransPacific Partnership (TPP), which includes APEC+China, the 12 countries which are in negotiations now to weave together the architecture of Latin America together with the Asia Pacific.  This is a crucial year to put this trade bill up for a vote.  There could be big benefits to both America & Asian economies as they create a template for future agreements.   China has held conferences on TPP but is not currently in negotiations.  This is generally changing, as China has changed lots of positions in the last 6 months.  The main issue is regional economic integration.  APEC is now just a forum to discuss issues-participants aren’t yet ready to make commitments, which can still play a useful role in negotiations, sharing, joint projects, etc. making TPP & FTAP now much more realistic.

Curtis Chin addressed how involved Barack Obama should be in this process.  He is on a large stage, but should he have left during the shutdown?  It matters, but not that much, since no major decisions were made.  No 1 event matters among many.  Abe was welcomed with open arms, but the engagement of the US is key.  How will China address the media?

  • each host determines the capacity
  • China’s focus is on supply chains with the goal of reducing costs by 25% by 2015
  • they are doing peer reviews for fossil fuels
  • they’ve set a goal to double renewables by 2030

Open Q&A

  • Clinton raised this to the Head of State level
  • China has been flexible in dealing with other APEC countries:  they’ve listened & changed.
  • Lots of work has been done on HR development issues to address labor rights-it’s been a sea change.
  • Work groups have been formed around small businesses, health, & food security
  • China will actually hold an anti-bribery conference together with the OECD to enforce a code of ethics.
  • Social media freedom is not yet a focus-it’s only being addressed on a bilateral basis.  The focus is still on building out internet infrastructure.
  • TPP is down to landing zones, so they’re getting close, but since it requires trade promotion authority, there could be repercussions if fast track authority is not granted.  TPP is already absorbing rules on labor & the environment.

 

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cool japan strategy

Monday 24 March, 2014

I attended this event @ the Japan Society, “The ‘Cool Japan’ strategy:  sharing the unique culture of Japan with the world” featuring Tomoni Inada, the minister in charge of the strategy.  “Cool Japan” is a phrase used to describe Japanese commodities, contents, & cultural products that are considered “cool” by non-Japanese people.  It features films & TV programs, characters like Hello Kitty, video games, & fashion items.  The Japanese contents market is flat or shrinking.  A low % (3%) of Japanese contents revenue comes from overseas.  Japan seeks to increase the # of visitors to Japan from 10M in 2013 to 30M in 2030.

Until now, cooperation has been insufficient.  It is vital to work together to convey the appeal of Japan’s outstanding culture & products to the world & turn these into an engine of economic growth.  Inada was appointed a cabinet level ministerial position to implement this strategy & head up the Cool Japan Promotion Council.  The council has 7 private sector members, such as a lyricist, critic, & designer.  A subcommittee was formed to more effectively convey Japan’s culture from young people’s perspective.

An action plan has been created to move this forward with these action items:

  • promote cooperation among food, fashion, manufacturing, & contents sectors
  • utilize the Cool Japan fund of $485M public sector funds & $97M private funds
  • promotion by prime minister
  • encourage broad participation of Japanese people

In June, 2013 the strategy was rebranded @ the highest levels of government as a national strategy called the “Japan Revitalization strategy:  Japan is back.”  It includes food, sake, fashion, manufacturing, contents, & traditional culture.  The 1st event where this was implemented was @ the Tokyo International conference on African development (TICAD), which was attended by African heads of state.  It was also introduced @ the Tokyo Crazy Kawaii in Paris in September, 2013.  There is also a regional approach to promote boxed-lunch (Bento) culture & traditional textile art (nishijin-ori).

Design is being highlighted in porcelain, lacquer, digital signage, fashion, castles, & sky trees.

my $02:  Japan needs to start promoting this strategy online.  When I searched for it, very little relevant information showed up.

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Greek banking & tourism

Tuesday 18 February, 2014

I attended a Greek Investor Forum & learned some interesting things sitting in on sessions on banking & travel/tourism.

BANKING:  The Hellenic Financial Stability Fund has committed €40B of which €26B has been used, with a €10B buffer, which has increased investor confidence.

Banks are setting up functions to deal with non-performing loans,, but GDP must start growing 1.5-2% again.  NPL’s typically peak 1 year after the economy starts growing, which should be next year.  There is still work to be done on consolidation as this is already 1 of the most concentrated markets.  There is lots of movement in the pace of consolidation.  Regulatory reform is coming to all of Europe, not just Greece.

Recapitalization has been implemented successfully, but is that compatible with Europe?  They are ahead of others in consolidation,  taking steps to attract investment, & on track to become solid.  Non-performing loan resolution is important.  The question is to sell or rehabilitate?  This sector can perform well in the future, but it’s still far from over.

Eurobank is taking advantage of agreement with the troika (IMF, World Bank, ECB) to raise further private capital, & actually rolling this out as we speak.  Nowhere else in the EU is there such concentration.  They are optimistic that the worst is over.  Workouts accelerate as the economy improves.  Margins are widening as concentration increases & funding costs fall.

Foreign ownership is an issue.   There is no short term-a few foreigners are excited.  Institutional & portfolio investment is up.  Banking is like fashion in that it always moves in cycles.  The focus is on local-there are few global players.  The most interest is from funds.  European financial investors are interested in assets, but only when there are no constraints, which is resulting in the 1st wave of interest.  There is large & growing interest from institutional investors.  In times of great change, it’s difficult to spread out new regulations, & there are penalties for doing that. Many see changes in the regulatory structure.  Citi never left Greece.  International banks paid a heavy price.  No new entrants are seen in the forseeable future.

Greece must fully stabilize & the risks be normalized.  There is little interest in the next 2 years-Greece is no different from other stressed banks/economies.  It’s not just the stigma-it’s relative to the the regulations today.  They need to install their own national regulator.  But there is still no true bank union. There is still no M&A activity because of regulatory uncertainty.  Assessing risks, returns, values today, & valuations are impossible.   Sensitivity to buying above book values is still limited.  Greek banks trade @ a premium to book value.

In the mid-90’s Greek banks followed clients overseas, to Turkey, & elsewhere.  Now they are de-leveraging by selling non-Greek assets, but they want to keep footholds in growth, like Spain in Latin America.

There is a reluctance to write off loans.  They run a portfolio of loan exposures, use auctions to sell minority stakes, & manage/support non-performing loans to de-risk investments.  Growth is needed for a turnaround, but they don’t want to price assets @ $.50 on the $.  Better workouts are being done on the wholesale side.  With a recovery, owners will put more money into their own businesses.  Tax legislation has an impact on strategic defaults too.  Those who can pay should.  This all requires systematically viable solutions, but they are coming out of enormous stress.

TRAVEL & TOURISM:  McKinsey updated a 2 year old study found that international arrivals to Greece stagnated while travel spending per capita fell, while @ the same time these doubled in Turkey.  In 2013, travel & tourism arrivals were up 11%, comprised 17% of GDP, & 19% of employment & added 30K jobs because stability returned.  In the next 10 years, Greece should return to become a Top 10 destination.  This requires a plan.  The target is to reach 22-24M tourists by 2022 by 3.5% faster than the global growth rate.  They need to extend & smooth the tourism period, diversify the product, eliminate the seasonal disadvantage, so that they offer more than just sea & sun.

Greece has 6 core products:

  1. sun/beach
  2. nautical
  3. city break/Athens
  4. medical tourism (to neighbors)
  5. cultural/religious
  6. MICE-conferences

They need to revitalize cultural offerings by segmenting & targeting.  They will extend museum hours & raise prices.  Golf & 2nd homes will be emphasized.  Transport & connectivity should grow with airport infrastructure & local airlines.  Investors require stability, fair tax treatment, & transparency.  The state tourism organization will get a state-of-the-art website.  An aggregator platform will be built.  Municipal destinations will develop their own brands.

Air transport needs to be overhauled.  It must be functional, well-managed, & dedicated to the region.  Infrastructure will be privatized & upgraded.  They can no longer rely on a government budget.  The Greek carriers are too small, so they must consolidate, as Aegean & Olympic have now joined, but they’re still only 1/3 the size of Portugal.  Greece has the lowest % of incoming carriers.  The quality is good, but they’re too small.  They are expanding in 2013-2014, & not just in Athens.

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deutsche Frauen in der Technik

Tuesday 28 January, 2014

I checked out this event last month “Engaging Women in STEM: Perspectives from the United States and Germany,” which was sponsored by the German Center for Research & Innovation in the German consulate just across from the UN in New York. Apparently they are streaming this as long as it stays up, so I’ll just provide highlights here.

The bottom line benefit to women getting involved in STEM (Science, Technology, Engineering, Math) is that women think differently, & these disciplines could use new lines of thought.  We need disruptive ideas & more of those come from more diversity, just as we need to do a better job of translating basic research into better applied research, & then developing that into market-ready products.

Despite the Apollo effect of Kennedy’s increase in NASA’s budget resulting in more PhD’s, mostly men, it’s telling, & perhaps disappointing, that the 1st woman in space came from the USSR.

Germany’s German Aerospace Center (DLR) is the German equivalent of America’s NASA, plus energy, transport, & security.  It has a budget of 1.8B € for 32 institutes on 16 sites.  They’ve provided equal opportunities for women for the last 10 years, in which women have taken 30% of all positions, & a division to keep watch over this since 2008, & a Chief Diversity Officer who sits on the Board of Directors.

BrainGate2 was cited as a good example.

In addition to commonly-accepted mentoring by senior leaders of aspiring junior level employees, perhaps we should consider reversing the hierarchy & have juniors mentor the seniors on new technologies with which they are more familiar.

Many things are changing which should encourage women to get more involved in STEM, such as changing demographics, traditional gender roles, reconciling work & home life, a skilled worker shortage, increasing cultural diversity, & last but not least, legislation.  The potential benefits of changes in policy are increased opportunities for women, employers being viewed as more attractive workplaces, & organizations simply becoming more creative.  Structure follows strategy, so a key is changing the mindset to balance reality with innovation.  Women are underrepresented in STEM for societal, individual, & organizational reasons.  There are implementation, responsibility, & cultural issues.  Vicious circles which enforce unwritten laws or codes from dominant insiders conspire to keep women down.  Commitment to change & including all stakeholders are critical success factors.

Women have a great societal impact on engineering.  Their diversity leads to increased creativity, which encourages innovation.  Role models, mentoring, networking, non-profit associations, & starting early all encourage women in this direction.  i2e or innovation, invention, & entrepreneurship should keep students from getting distracted.  The Urban Assembly is a good example of an organization which has promoted women in this area. (The CEO of my 1st employer Xerox, Ursala Burns, is a graduate of Brooklyn Poly) The bottom line is we must change the mindset of society to make a change in this direction.

Panel Q&A

A girls-only robotics lab reached the same results as boys, but with a different approach.  Girls ask “why?”, while the boys simply break it down or destroy it to understand it.

Open Q&A

There is no magic formula, although the necessity is clear.  We need an Artemis effect for women, just as we had an Apollo effect for men.

60% of medical students are female.  German women are successful in civil engineering, but no women sit on the board of DLR.  Although other women were offered the opportunity, the panel still consisted of 2 men & 1 woman.

Women in STEM is similar to women in finance.  Families must be made compatible with work.  Women with children should no longer be stigmatized.  We need an attitudinal shift.  STEM participation is too low for both men & women.  Secondary education must be revamped.

We had this same discussion in 1978.  Women drop out of these areas early.  We need to be honest with ourselves.

Does society really value STEM?  We need to change child care so that women can come back to their jobs.  Change will come when men care for their kids.  Daughters need to ask “What can I do with technology?”  There are many piecemeal solutions @ the policy level.

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check czech tech

Tuesday 21 January, 2014

Last month I attended this event hosted by Czech Invest: Transatlantic Technology Transfer.  6 organizations made presentations, which are highlighted here:

  1. Central European Institute of Technology is an EU funded project/Center of Excellence which focuses on material & life sciences & advanced materials.  It’s comprised of 6 partners, 4 universities & 2 research institutes.  They pursue 6 research programs with 557 researchers in 61 research groups.  They have 9 core facilities funded with a 210M € budget.  It was founded in 2011 & scheduled to end in 2015.  Other foreign partners include VIB, EMBC, Imperial College-London, CTH-Zurich, TU-Wien, & AIT.  They want to attract US students & have taken on 14 new PhD students since 2013.
  2. Meopta.com was founded as an optics company in 1933 & recently opened a high-end clean room assembly & distribution facility on Long Island, & is now 90% privately held.  Most of the manufacturing is done in the Czech Republic.  They produce 850 optical & mechanical products for industrial & military applications & sports optics, such as products for aviation, semiconductors, digital projectors, binoculars, & riflescopes.  Their Czech R&D center for product engineering houses 75 scientists, 2/3 of which have PhD’s.  Their best current opportunity is with the DSIA-Defense & Security Industry Association of the Czech Republic.
  3. Cambridge Innovation Center is expanding to St. Louis, Missouri because they think that is the location with the most potential upside.
  4. Massachusetts Global Partners actually complements the Cambridge Innovation Center with their Enter Mass.-Supercluster Program.  They train/mentor/coach firms on GoToMarket strategies, technology transfer, & matchmaking. Their Czech Accelerator program offers 6 month sessions for 3 companies/session.  These started in July, 2011, so they are now in session #5.  Oscar Tech, CNS, Cathedral Software, & VentureCafe.net have come out of this program.
  5. Oscar Technologies was founded in June, 2012 in the Czech Accelerator & has expanded to Silicon Valley.  Their prototype tablet for the elderly was completed in May, 2013.  It has a meal calendar & other programs useful for the aged, & allows them to be managed remotely in Google Play.  They serve customers in 3 countries with 12 employees & are looking for distribution, advisers, investors, & a senior living facility for a pilot program.
  6. Czech Wine Imports-OK, so they’re not a tech firm, but they made a welcomed contribution to the evening’s festivities.  They feature Moravian wines from 45K acres, which produce 60M gallons.  They’ve won 78 medals & earned 25 of the top 1000 wines by Klub Sommelier.