World Bank chief sees “window of opportunity” for India – Industry roundup: 20 July
by Graham Buck
India should capitalise on “China plus one” strategy, says World Bank chief
India is well positioned to capitalise on the “China Plus One” strategy - a global economic trend gaining traction which has seen companies seek to lessen their reliance on the second largest global economy, says the new president of the World Bank.
But Ajay Banga, former Mastercard CEO who took over the role last month, says that the opportunity will not stay open for long, and India has a window of only three-to-five years to use it to attract investment.
Disruptions to supply chains caused by the Covid-19 pandemic and escalating geopolitical tension between the US and China have been further drivers of the strategy.
Banga identified the opportunity for India to claim a portion of the global shift for investors to broaden their horizons and companies to widen their manufacturing base beyond China during his visit to a Skill India Mission centre in Dwarka, New Delhi. “India's opportunity currently is to cash in on the China Plus One opportunity,” he said.
“The 'China Plus One' window will not remain open for a decade. This is a three-to-five-year opportunity as supply chains start pivoting or broadening their presence.” He added that it was among the topics he intended to raise with Indian government officials during his meetings in New Delhi on Wednesday.
At the age of 63, Banga made history last month by becoming the first Indian American to preside over the World Bank. His visit to India coincided with the conclusion of the G20 Finance Ministers and Central Bank Governors meeting on Tuesday at Gandhinagar in the state of Gujarat.
At the meeting, he warned that growing divides between rich and poor nations risk deepening poverty in the developing world.
“The thing that keeps me up at night is a mistrust that is quietly pulling the Global North and South apart at a time when we need to be uniting,” he told finance ministers and central bank chiefs. “The Global South’s frustration is understandable. In many ways they are paying the price for our prosperity.”
UK and Turkey to negotiate updated trade deal
The UK and Turkey are to begin negotiations to update their existing free trade agreement (FTA) following the UK’s departure from the European Union.
The UK-Turkey FTA was rolled over after Brexit; however, it only applies to the import and export of goods, and not services, which comprise around 80% of the UK economy. The UK is the second largest exporter of services in the world after the US.
The move to begin negotiations between the two countries follows a call between UK Business and Trade Secretary Kemi Badenoch and Turkish Minister for Trade Ömer Bolat, who both committed to deepening the trade relationship between the two countries. Representatives of both the UK and Turkey met on Tuesday in Ankara to formalise the move towards renegotiations.
Business and Trade Secretary Kemi Badenoch said: “Turkey is an important trading partner for the UK and this deal is the latest example of how we are using our status as an independent trading nation post-Brexit to negotiate deals that are tailored to the UK’s economic strengths.
“I look forward to using the deal to deepen the UK-Turkey trading relationship, drive economic growth and support businesses up and down the country.”
The move to begin talks with Turkey follows a recent deal signed this week with the 11 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) counties around the Pacific Rim: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.
In a separate development, the Turkish lira (TRY) has weakened more than 2% to a fresh record low against the US dollar over market concerns that the central bank might raise interest rates this week by less than previously expected. It has lost 30% against USD since the start of the year.
- Turkey’s central bank on Thursday hiked its key interest rate by 250 basis points (bps) to 17.5%, as as the country’s monetary policymakers attempt to tackle double-digit inflation. “Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved,” the bank said in a statement. A Reuters poll had earlier indicated that analysts had expected ta larger increase of 500 bps to 20%. “Terrible decision and I think a mistake. Again under-delivering,” one strategist said in reaction to the news.
Climate change “may alter 9 to 5 working day”
Working 9 to 5 could become a thing of the past, as the world becomes hotter amid global warming and companies may need to revise their employees’ working patterns to cope with “uncomfortable” heat levels, according to researchers from the University of Oxford.
Their study suggests that in the UK and across Europe workers may need to start their shift at 6 a.m. and finish by 2 p.m. in order to beat the afternoon heat. For those with a long commute, this could mean starting the day as early as 3 a.m. or 4 a.m. to get ready, leave for work, and reach work on time.
The study, published in the journal Nature Sustainability claims that the UK is one of many European countries that will have to adapt the most to cope with higher temperatures.
Some businesses have already embraced summer hours, according to a report by the business magazine Fortune. L’Oréal, Asos, and Nike are among the growing number of companies that are allowing staff to leave work between midday and 3.30 p.m. on Fridays during the summer months.
In Spain, where this month temperatures have approached 45°C (113°F) during heatwaves across Southern Europe, businesses have already mandated that workers start and finish their shift earlier.
Countries with cooler climates, such as the UK, Switzerland and Norway, are expected to see about a 30% increase in days with uncomfortably hot temperatures—not accounting for extreme weather events such as heatwaves, which are becoming increasingly prevalent.
“Even a small increase in the temperatures is actually showing a high relative change, which can be very impactful and make these countries more vulnerable to needing more cooling,” said Nicole Miranda, who led the Oxford study. “These increases in relative change are going to mean that we need the deployment of cooling adaptation measures at a fast speed and on a large scale.”
But she warned economies against not preparing for the rising heat and later taking the easier option of installing air conditioning, which would exacerbate the problem, as per the report. Proposed solutions from the researchers include retrofitting buildings to include ventilation measures that could also be closed off to keep in heat during the winter and planting more trees next to buildings to create shade.
China’s digital yuan transactions “seeing strong momentum”
Transactions using China's digital yuan (e-CNY) hit 1.8 trillion yuan (US$249.33 billion) at end-June, the country's central bank governor Yi Gang said on Wednesday, marking a jump from over CNY 100 billion as of August 2022.
The numbers reinforce China’s role as a leader among countries developing their own central bank digital currencies (CBDCs) although adoption is still in the early stages. The e-CNY has so far been used mainly for domestic retail payments.
Speaking at a lecture organised by the Monetary Authority of Singapore (MAS) in the Southeast Asian city-state, Yi said China's digital currency in circulation reached CNY16.5 billion Total e-CNY transactions reached 950 million, with 120 million wallets being opened.
However, e-CNY in circulation accounted for only 0.16% of China's M0 money supply, or cash in circulation, Yi said.
And you can see that right now the balance of e-CNY is only counting two-tenths of 1% of M0, so that the balance is very small, but with this kind of balance (we) support a big number of transactions, which means that the velocity is high and more efficient,” Yi said.
Chinese state-owned banks participated last year in a trial focused on cross-border transactions developed by the Bank of International Settlements (BIS).
Yi, who was introduced in a slide presentation at the Singapore event as President of the China Society for Finance and Banking - an organisation under the People's Bank of China (PBOC) - has been widely expected to step down since being left off the ruling Communist Party's Central Committee during the party's once-in-five-years congress in October.
The Communist Party named PBOC Deputy Governor Pan Gongsheng as PBOC party chief on July 1, a move sources have said put him in a position to succeed 65-year-old Yi as central bank governor for the world's second-biggest economy, a position nominated by the government.
Asked about the PBOC succession, Yi said only: “I am Yi Gang, and also, my title is right here on the screen, and I will... take care of my duty any time in my full capacity.”
Société Générale wins France's first comprehensive crypto licence
Forge, a subsidiary of France’s third-largest bank Société Générale, has become the first company to obtain the highest access license for providing crypto services in the country — a prerequisite for numerous service activities (PSAN). The provider will have a right to custody digital assets, to purchase and sell them for legal tender, and trade them against each other.
Forge will have a right to custody digital assets, to purchase and sell them for legal tender, and to trade them against each other.
Local media paid attention to the update in the register of the French stock market regulator, the Autorité des Marchés Financiers (AMF), on July 19. As the Société Générale representatives state in the press release: “Accreditation represents the highest level of regulatory certification currently possible for digital asset transactions.”
So far, around 90 companies have already been on the AMF list of licensed providers. For example, the subsidiary of Société Générale’s competitor, Crédit Agricole, won custody last month. However, Forge became the first to receive the highest approval for numerous services from the regulator. As the French radio station Business FM stated, such stringent requirements for this level of approval give an obvious advantage to large traditional banks over smaller crypto companies.
Société Générale has previously been active in the crypto sector, issuing euro bonds on the Ethereum blockchain and security tokens on the Tezos blockchain, and proposing Dai stablecoin loans in exchange for bond tokens. In April, Forge launched EUR CoinVertible, a euro-pegged stablecoin for qualified institutional clients. The new digital asset is only available to investors onboarded by Société Générale through its existing know your customer and anti-money laundering (KYC/AML) procedures.
While France remains one of the most pro-crypto European jurisdictions, the local arm of Binance has been the subject of a preliminary investigation conducted by the Judicial Investigation Service of Finance under the direction of the specialised interregional jurisdiction of Paris.
Indonesia’s green growth potential valued at US$400 billion
The value of Indonesia’s green growth opportunity has reached US$400 billion, combining industry revenue and carbon offset potential, according to a new report.
‘Catalysing Indonesia’s Green Growth Potential’ is a joint report by Indonesia’s early-stage venture capital firms, AC Ventures (ACV) and Boston Consulting Group (BCG) and examines the decarbonisation sector and its sweeping implications for the nation’s “green growth” potential.
As the fourth largest global greenhouse gas (GHG) emitter, Indonesia faces significant environmental challenges and stands critically exposed to climate change risks. “However, Indonesia also possesses the immense potential to transition to a green economy,” said Lauren Blasco, ACV’s Principal of environmental, social and governance (ESG).
“This shift is an opportunity for startups, micro, small and medium enterprises (MSMEs), and investors to play a leading role in fostering sustainable economic development and combating climate change,”
An example Blasco gave was the international demand for voluntary carbon credits, which is set to increase annually by 27% until 2030.
According to the report, the public and private sectors in the country are expected to spend US$350 billion a year by 2030 to help Indonesia achieve its net-zero goal by 2060. Other key sectors are strategy and professional services, with a US$46 billion projected market size, and emission offsetting at US$3.5 billion.
Indonesia is the home of several recent startups operating in the greentech sector, such as electric vehicle (EV) firms Maka Motors and Ion Mobility, decarbonization platform Unravel Carbon, energy solutions firm Xurya, and waste management company Waste4Change.
Kyriba: Multinationals’ FX headwinds wipe out US$22 billion in revenue
North American and European multinational corporations (MNCs) experienced US$23.20 billion in total impacts to earnings from currency volatility in Q1 2023, the fourth-largest impact on record, reports Kyriba.
The cloud treasury and financial management solutions provider has issued its latest Currency Impact Report (CIR), a comprehensive quarterly survey of the impacts of foreign exchange (FX) exposures among 1,200 MNCs based in North America and Europe with at least 15% of their revenue coming from overseas.
The combined pool of corporations reported US$22.52 billion in FX-related headwinds and $0.68 billion in tailwinds in Q1 2023, with North American companies reporting US$21.24 billion in headwinds, and European companies US$1.28 billion. Total quantified currency impacts fell by US$9 billion since the previoud quarter, and for the first time since 2021, the average negative impact to corporations also dropped.
“While the downward trend is substantial, we are by no means out of the woods regarding a very complicated and volatile currency market fuelled in large part by continued inflationary pressures, interest rate moves and a general sense of uncertainty from a variety of geo-political events,” said Andy Gage, SVP of FX Solutions and Advisory Services at Kyriba.
“This quarter’s report shows earnings per share (EPS) impact reported by North American companies was $0.06, six times greater than the industry standard MBO of less than $0.01 EPS impact. For the rest of 2023, CFOs need to gain accurate and faster visibility to their currency risk and underlying exposures to eliminate EPS at risk.”
Highlights from the July 2023 Kyriba CIR include:
- Publicly traded North American companies reported $21.24 billion in headwinds over Q1 2023; up by 45% year-on-year (YoY).
- Publicly traded North American companies reported $0.66 billion in tailwinds; up by $0.07 million from the previous quarter.
- The average earnings per share (EPS) impact reported by publicly traded North American companies in Q1 2023 was $0.06; up $0.01 from Q4 2022.
- Publicly traded North American companies indicated the euro (EUR) as the most impactful currency, with 33.3% of companies referencing it as impacting revenues; the Canadian dollar (CAD) was second at 26.7%, and the Chinese yuan (CNY) was third with 20% of North American companies identifying it as impactful.
- The euro was cited as one of the most impactful currencies by publicly traded European companies on earnings calls.
- The top five industries that experienced the greatest impact from currencies in North America were (in ranked order): biotech and pharmaceuticals, chemicals, electronic equipment, instruments and components, airlines, and healthcare equipment and supplies.
“We see CFOs who can quantify the impact of currency volatility on their financial statements and cash flow in a much better position to reduce preventable FX losses. Finance teams who have successfully managed FX impacts are turning to data and analytics to reduce their cost of hedging and deliver improved predictability to support earnings, revenue, and cash flow guidance,” said Gage.
Nigeria signs MoUs on fintech regulation and financial inclusion
The Central Bank of Nigeria (CBN) has signed memorandums of understanding (MoUs) with the Central Bank of Egypt (CBE) and theLondon Institute of Banking and Finance (LIBF).
The MoU with the CBE focuses on developing expert exchanges in the areas of fintech, innovation, e-payment solutions, and financial inclusion. The collaboration aims to leverage both countries’ knowledge and experience to drive breakthroughs in their respective financial technology sectors.
The Deputy Governor of CBN, Dr Kingsley Obiora, said the partnership would deepen cross-border regulatory collaboration, and information sharing, boost innovation, and grow regional technology investments.
The MoU signed with the LIBF includes parallel commitments. It entails the provision of specialised training courses, workshops, and programmes tailored for Egypt's fintech sector executives. The ultimate goal of this strategic alliance is to empower Egyptian fintech professionals with state-of-the-art knowledge and skills, fostering an environment of innovation and growth within the sector.
Additionally, the Fintech Outlook Study was presented by the governor of the CBE, outlining several promising developments in Egypt's fintech sector. The study disclosed that the country attracted US$800 million in fintech investments during 2022, underscoring its capacity as a dynamic participant in the global fintech industry.
Standard Bank partners with Huawei Mobile
South Africa-based Standard Bank has partnered with Huawei Mobile Services to provide digital banking solutions to the bank’s clients.
The partnership aims to offer seamless digital banking experiences to clients who access the Standard Bank banking app through Huawei devices. The two entities have been working together for the past three years ensure that app is fully compatible with Huawei's ecosystem.
The partnership also includes the implementation of the Safety Detect system, which will authenticate clients using the app. Moreover, a universal app downloads campaign has been launched, extending the world of digital banking to over 300,000 Huawei users.
Representatives from Standard Bank spoke of the ongoing collaboration with Huawei and highlighted the critical role of technology in Africa’s growth and development. They said that many of the bank’s clients access the Standard Bank banking app through Huawei devices, and in this context, partnering with Huawei to provide clients with digital banking solutions became a priority.
According to the company press release, Huawei is working on creating a robust app ecosystem that can provide a useful and diverse range of apps for its users. The company’s collaborations with established organisations such as Standard Bank are important to expand the app offerings on the AppGallery and improve the overall user experience. HMS partners receive the necessary resources, tools, technical support and incentives to support businesses to build and optimise their apps for HUAWEI devices.
Huawei Mobile Services has previously partnered with major banking apps in the United Arab Emirates (UAE), including ADCB, ENBD, FAB, Mashreq, ADIB, and Standard Chartered Bank UAE, as well as Saudi banks such as Alrajhi Bank, SNB Bank, Riyadh Bank, Alinma Bank, and SAB Bank.
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