Huang believes that beyond artificial intelligence itself, robotics will be Nvidia’s biggest growth market, with autonomous vehicles as the first major commercial application.

International Finance will examine how Nvidia is leveraging its AI prowess to drive breakthroughs in autonomous driving and robotics, and what it means for the company’s future and the tech industry at large.

From GPU king to AI powerhouse

Nvidia has a very underdog story. It was established in 1993 and was almost set to be named GeForce. The name Nvidia comes from the Latin word ‘invidia’, which means envy (or green with envy). In early 2006, they put everything they had into CUDA (Compute Unified Device Architecture), which began paving the way for AI’s rise. It’s important to note that there would be no ChatGPT without Nvidia.

The company was a household name in the early 2000s, being the top supplier of graphics cards that were necessary to play high-quality video games. Their top competition back then was AMD, which in the 90s had considered acquiring Nvidia. Today, Nvidia dwarfs AMD, as they are single-handedly pioneering AI, robotics, self-driving cars, chip production, and even building supercomputers. The company is considered a major source of inspiration for Silicon Valley enthusiasts. Notably, Nvidia CEO Jensen Huang was once rejected by Apple, yet he went on to become a titan in the industry and has been referred to as the “Steve Jobs of AI Hardware.”

However, the visionary cofounder of Nvidia knows the semiconductor industry can be cyclical, with data centre investment coming in “booms and busts.” To secure Nvidia’s place in the tech stratosphere long term, Huang has been scouting the next big market beyond conventional “Big Tech” pursuits. At Computex 2024, he declared that two “high-volume” products will dominate robotics in the future: self-driving cars first, and eventually humanoid robots.

These technologies are converging thanks to advances in machine learning, and both require human-like perception, split-second decision-making, and immense computing power, precisely what Nvidia specialises in.

In Huang’s words, “Every single car company will have to be autonomous, or you’re not going to be a car company,” a bold prediction underscoring his belief that autonomy is the future of transportation.

Accelerating the self-driving car revolution

Nvidia has methodically embedded itself at every level of the self-driving technology stack. Huang often describes a three-part approach: one computer to train AI models, another to run simulations, and a third inside the vehicle for real-time driving. By providing the chips and software for all three stages, Nvidia aims to be the go-to enabler of autonomous vehicles rather than a consumer-facing automaker.

“Nvidia has strategically embedded itself in all three key steps that could make every car a self-driving car,” notes Business Insider.

While companies like Waymo and Tesla build robotaxis and personal electric vehicles, Nvidia positions itself as the behind-the-scenes supplier powering those efforts.

Nvidia Drive, the company’s end-to-end autonomous driving platform, exemplifies this strategy. It includes powerful automotive systems-on-chip (SoCs), like the current Drive Orin and next-generation Drive Thor, paired with the Drive OS software and toolkits for perception and mapping. At CES 2025, Toyota (the world’s largest automaker) announced it will integrate Nvidia’s Drive AGX Orin “supercomputer” and Drive OS into its upcoming vehicles to enable advanced driver-assistance and automated driving features.

This was a major win for Nvidia, as Toyota has been collaborating with the company since 2017 on AI for self-driving and even uses Nvidia’s cloud GPUs to train its models. The Toyota deal underscores Nvidia’s “cloud-to-car” strategy: first supplying chips for AI training in the data centre, and now supplying chips and software for intelligence inside the car.

Other automakers are also lining up. Mercedes-Benz, China’s BYD, Volvo, Hyundai, Lucid Motors, and many electric vehicle startups have adopted Nvidia’s Orin-based platforms for their next-gen cars. In early 2025, General Motors struck a broad partnership with Nvidia to use its GPUs and AI software across passenger vehicles, robotaxis, and even factory automation.

GM will equip future cars with Nvidia’s “AI brain,” including Drive SoCs running the safety-certified Drive OS (based on Nvidia’s latest Blackwell GPU architecture), to enable hands-free driving and autonomy. Notably, GM is also leveraging Nvidia’s Omniverse 3D simulation platform to create virtual assembly lines and train its industrial robots, aiming to boost manufacturing efficiency with AI. This includes the company’s Drive AGX system-on-a-chip (SoC), similar to Tesla’s Full Self-Driving chip or Intel’s Mobileye EyeQ.

The SoC runs the “safety-certified” Drive OS operating system, built on the Blackwell GPU architecture, and capable of delivering 1,000 trillion operations per second (TOPS) of high-performance compute.

This partnership came on the heels of GM’s decision to wind down its Cruise robotaxi unit after safety incidents, signalling that GM now prefers to pivot toward consumer vehicles with advanced autonomy, and it’s tapping Nvidia to help make that happen.

Winning over these automotive giants could translate into huge business for Nvidia. The company projects its automotive division will reach a $5 billion annual run rate by FY2025, a fivefold increase from 2023. That’s still modest next to Nvidia’s booming data centre revenue, but the growth trajectory is clear. Nvidia’s automotive VP Ali Kani remarked that the car business is “still in its infancy,” contributing Nvidia chips to under 1% of cars on the road today, but he calls it a “trillion-dollar opportunity” long term.

Industry analysts have taken note: McKinsey estimates assisted and autonomous driving could be a $400 billion market by 2035. And after a few gloomy years when automakers dialled back self-driving investments (Ford and VW shuttered Argo AI in 2022, GM pulled back on Cruise in 2024), Jensen Huang’s confident CES showcase was seen as a “shot in the arm” for the sector.

“Nvidia has reversed that and just gave autonomous driving an absolute shot in the arm,” said one automotive consultant, noting that hearing a tech leader evangelise self-driving renewed investors’ interest in the space.

Crucially, Nvidia’s advantage is its full-stack approach. Few companies can provide the training-side infrastructure (massive AI supercomputers to train driving models) and the in-car chips to execute those models on the road.

Tesla, for instance, trains its Autopilot AI on Nvidia GPUs in the data centre, even though it builds custom chips for its cars.

This “cloud + edge” synergy makes Nvidia a natural partner for any firm aiming to deploy autonomous vehicles at scale. It’s no surprise Huang says Nvidia is “absolutely positioning [itself] as the leader for autonomous technologies, period.”

Indeed, from passenger cars and long-haul trucks to robotaxis, Nvidia’s silicon and software are increasingly becoming the standard toolkit for autonomy. As Huang put it at CES 2025, self-driving cars are no longer perpetually “coming” — “they’re already here,” citing the commercial progress of Waymo and Tesla as proof.

Building an ecosystem of robots

If self-driving cars are essentially “robots on wheels,” Nvidia’s ambitions don’t stop at transportation. The company is simultaneously assembling an expansive ecosystem for robotics and automation in other domains. Huang believes the world is on the cusp of an era of “physical AI,” intelligent machines performing tasks in the real world, and he wants Nvidia to provide the brains of those robots. At Computex, flanked by virtual humanoid figures, Huang proclaimed, “Robotics is here. Physical AI is here. This is not science fiction.”

So, what is Nvidia’s game plan for robotics? In short, to offer a full technology stack akin to its automotive approach. Simulation is one pillar: the company’s Omniverse platform creates rich virtual worlds where robots can be trained and tested safely. Built atop Omniverse is Isaac, described as a “gym” for robots, which lets developers put virtual robots through their paces to practice tasks or generate synthetic training data.

Then comes the edge hardware: Nvidia’s Jetson line of AI chips (with a forthcoming flagship called Jetson Thor) provides the onboard compute for robots to perceive and act in real time. Finally, tying it together are AI models and software frameworks that give robots their smarts.

In 2023, Nvidia unveiled Project “GR00T,” a “moonshot” effort to develop a foundation AI model for humanoid robots. In 2025, this bore fruit in the form of Isaac GR00T N1, billed as the world’s first open-source generalist model for robot intelligence.

GR00T N1 is essentially a robot “brain” that has been pretrained on vast data, not just text or images, but demonstrations of physical actions. It uses a dual-system architecture inspired by human cognition: a “slow-thinking” module that reasons and plans, and a “fast-thinking” module that executes reflexive actions.

This mimics psychologist Daniel Kahneman’s concept of thinking fast and slow. In practice, GR00T N1 can observe its environment (through sensors and cameras), interpret instructions, plan a sequence of actions, and then control a robot’s limbs to carry out complex tasks. Nvidia pretrained it on both real-world human motion data and millions of synthetic scenarios generated in simulation.

Importantly, GR00T N1 is customisable. Developers can fine-tune it with additional data so a robot learns specialised skills. Huang declared that “the age of generalist robotics is here” as he opened up GR00T N1 to the world’s robot makers.

Complementing GR00T is another key piece called Nvidia Cosmos. Unveiled at CES 2025, Cosmos is a family of foundational models focused on modelling the physical world.

Whereas language models ingest books and websites, Cosmos was trained on 20 million hours of video of humans and objects in motion. It generates highly realistic images, simulations, and 3D scenarios, for example, showing boxes falling off a shelf in a warehouse, which can be used to teach robots what to expect and how to respond in the real world.

“It’s not about generating creative content, but teaching the AI to understand the physical world,” Huang explained.

Companies are already using Cosmos: humanoid robot startups like Agility Robotics and Figure, and self-driving car developers like Waabi and Wayve, are leveraging it to accelerate their training and simulation. In essence, Cosmos gives robots common sense about physics and environments, while GR00T gives them the decision-making and motor skills, together aiming to dramatically lower the barrier to robotics development.

Nvidia’s Jensen Huang envisions a future where advanced AI chips and software power fleets of autonomous vehicles and humanoid robots, a vision already taking shape through partnerships with automakers, electronics manufacturers, and even entertainment companies.

Nvidia is backing up these platforms with real-world pilot projects to showcase what’s possible. One headline-grabbing example is its collaboration with Foxconn, the world’s largest electronics manufacturer.

In 2025, Nvidia and Foxconn announced plans for a “robotic factory” in Houston that will use humanoid robots to assemble Nvidia’s own next-gen AI servers.

This would be the first time Nvidia products are built with the help of humanoid machines, and one of the first such deployments in any electronics factory. Foxconn has been co-developing humanoid robots with Nvidia’s hardware and software, including one bipedal model and one wheeled model, and training them for tasks like picking up components, inserting cables, and performing assembly.

The goal is to have a small number of these robots operational by Q1 2026 when the Houston plant begins production of Nvidia’s “GB300” AI servers. If successful, this could herald a new era of AI-driven manufacturing.

Observers note it as a prestige project for both firms: Nvidia would solidify its position not only as a chip and server leader but as a platform provider for robotics, while Foxconn would demonstrate high-tech manufacturing innovation on American soil.

Nvidia’s robotics push goes beyond factories. The company is moving into service and entertainment robots, even magic-infused Disney creations.

In March 2025, it emerged that Nvidia, Disney Research, and Google DeepMind are teaming up on a project codenamed “Newton” to create a new generation of interactive robotic characters.

Newton is essentially an open-source physics engine that will help Disney’s robots learn complex movements with precision. Disney Imagineering’s vision is to bring more lifelike robots to its theme parks, for example, free-roaming droids like the Star Wars-inspired “BDX” robots that were previewed during Huang’s keynote.

“This collaboration will allow us to create a new generation of robotic characters that are more expressive and engaging than ever before,” said Disney Imagineering’s senior R&D VP.

In fact, Disney’s first batch of AI-powered BDX droids has already been play-tested on a cruise ship and will soon appear in Walt Disney World and other parks.

For Nvidia, this alliance is a testament to the scope of its robotics prowess, reaching into animatronics and arts, away from factory floors. It also highlights a familiar refrain: Nvidia is not making the robots or cars themselves; rather, it provides the enabler technology that allows industry leaders (be they Toyota, Foxconn, or Disney) to fulfil their AI-fueled dreams.

Towards a deep tech superpower

All these moves point to Nvidia’s evolution from a pure “Big Tech” company into something broader, a deep technology platform spanning hardware, software, and services for the AI-driven future.

“We stopped thinking of ourselves as a chip company long ago,” Jensen Huang recently remarked.

He prefers to describe Nvidia as an “AI infrastructure” and “computing platform” provider, one that now delivers cloud services, simulation software, and development toolkits in addition to silicon.

By weaving itself into the fabric of emerging industries like autonomous vehicles, robotics, and even defence (Nvidia is a partner in a European project led by Nokia to use drones and robots for critical infrastructure protection), Nvidia is staking a claim as a leader in “physical AI,” the application of artificial intelligence in the physical world.

Huang predicts that in the not-so-distant future, there will be “billions of robots, hundreds of millions of autonomous vehicles, and hundreds of thousands of robotic factories” all powered by Nvidia technology. It’s an audacious vision, but one the company is investing heavily to realise.

Financially, these sectors are still ramping up. Nvidia only recently began reporting its automotive and robotics revenues together, and they accounted for roughly $567 million last quarter (about 1% of total sales), albeit growing 72% year-on-year. The company’s present profitability still relies on data centre AI chips, but investors are keenly watching these nascent divisions.

For tech-savvy investors, Nvidia’s foray into self-driving cars and robotics represents the opening of new multi-billion (even trillion) dollar TAMs (Total Addressable Markets) over the coming decade. It pits Nvidia not against the usual FAANG companies, but against (or alongside) players in automotive, manufacturing, healthcare, and aerospace, industries hungry for AI solutions.

The company’s strategy of partnering with incumbents (rather than competing directly) could yield a sprawling customer base without massive capex on its part. As one set of analysts wrote, Nvidia’s strengths in robotics and digital twins could “scale into massive businesses themselves,” potentially driving decades of growth.

Naturally, challenges abound. Robotics, especially humanoid robots, remain harder than web or mobile tech; they involve complex mechanics, safety concerns, and huge data requirements to function reliably in unstructured environments. Sceptics point out that despite Nvidia’s impressive tools, fully autonomous robots are still in the early stages and demand significant R&D.

Even Huang acknowledges that growing the robotics market “isn’t just a matter of time” or inevitability. It will require continued advances in artificial intelligence algorithms, sensors, and perhaps most importantly, cost reduction, to see robots proliferate beyond pilot projects.

Nvidia’s strategy of open-sourcing models like GR00T N1 and collaborating widely is meant to accelerate this progress by seeding an ecosystem (much as OpenAI frameworks spurred the machine learning boom).

Huang believes that by reducing barriers and providing substantial computing power, Nvidia can do for robotics what it accomplished for AI software: make it accessible enough for an explosion of innovation.

Nvidia has gone from selling graphics chips to becoming the linchpin of modern AI, and now it’s charging into autonomous machines on our roads and in our factories. This pivot could fundamentally reshape Nvidia’s identity, no longer simply a supplier to “big tech” companies, but a superpower in deep tech, commanding influence in the next generation of industries built on AI, from smart cars to smart robots.

Huang’s remarks at a recent shareholder meeting put it best: “AI and robotics are the two largest opportunities, representing a multitrillion-dollar growth opportunity.”

If Nvidia succeeds, it won’t just be leading in AI computing; it will be everywhere that advanced computing meets the real world.

In an era when “everything that moves” is poised to become autonomous, Nvidia appears determined to supply the engines of that revolution, thereby laying the basis of its transformation as a force dominating deep tech innovation.

The post Nvidia’s vision: Chips for a robotic world appeared first on International Finance.

Today, BDB’s role as a trusted partner in Bahrain’s financial sector is further accentuated by its commitment to innovation, strategic investments, and economic diversification. What began as a specialist institution in 1992 has evolved into Bahrain’s primary hub for SME development, one that is actively working to build a stronger entrepreneurial ecosystem in the Kingdom.

Aligned with “Bahrain Economic Vision 2030,” BDB has adopted a dynamic strategy to stimulate business activity and support the sustained growth of the vital SME sector.

Active participant in Bahrain’s growth journey

Bahrain’s SME Development Board wants to establish the country as a leading hub for startups and emerging businesses by formulating promising developmental strategies that will increase the contribution of these enterprises to the national GDP, boost exports, and create quality employment opportunities for the national workforce.

This vision aligns with Bahrain’s Economic Recovery Plan, which includes 43 initiatives focused on SME development. The plan is a collaborative effort involving the Economic Development Board (EDB), the Labour Fund (Tamkeen), the Bahrain Development Bank (BDB), the Ministry of Youth Affairs, and the Tender Board. These stakeholders are working together to create a supportive infrastructure for SMEs, recognising their pivotal role in cultivating new industries.

Currently, SMEs constitute approximately 93% of Bahrain’s commercial establishments. This significant presence underscores the importance of targeted initiatives to support and enhance the sector’s contribution to the national economy. BDB plays an active role in fulfilling this strategy by providing SMEs with essential growth capital.

With the vision of becoming the regional leader in digital solutions and financial services for SMEs, BDB wants to enable businesses to grow locally and internationally by facilitating access to finance and export markets.

Over the years, BDB has transformed from being a traditional bank into an agile, innovation-driven institution deeply committed to supporting Bahrain’s growing economic landscape. Established during the early days of the Kingdom’s modern economic growth journey, the bank has provided critical financial support to enterprises at key milestones, reinforcing its position as a long-standing contributor to national progress.

Leading BDB’s emergence as a guiding force in Bahrain’s SME revolution is Dalal Al Qais, the bank’s Group Chief Executive Officer. A banking veteran with professional experience spanning over 20 years in the banking and financial industry, Dalal Al Qais possesses deep-rooted knowledge in areas such as retail, SME, digitisation, as well as risk across conventional, Islamic, and international banks.

She earlier served as Chief Retail Banking Officer for the region at Standard Chartered Bank, apart from donning the role of Chief Retail Banking and Wealth Management Officer at the Bahrain Islamic Bank (BisB).

Since assuming charge at BDB, Dalal Al Qais has steered the bank towards a new era of growth marked by innovation and inclusivity. Her leadership at BDB and dedication to the growth of Bahrain’s SME sector have been a game-changer for the organisation.

BDB’s Role in supporting SMEs

BDB offers business loans with flexible terms and competitive interest rates that accommodate the varied needs of emerging enterprises.

“BDB plays a major role in driving Bahrain’s economic diversification. By channelling funding into innovative projects and supporting sectors beyond traditional industries, the bank contributes significantly to the nation’s Vision 2030 goals. Its proactive support for sectors such as technology, renewable energy, and modern manufacturing has enabled the Kingdom to reduce reliance on conventional industries while making way for a more dynamic and inclusive economy. Our strategic investments and forward-thinking initiatives have been integral to creating job opportunities, enhancing competitiveness, and ensuring long-term economic resilience,” said Dalal Al Qais.

In April 2024, BDB entered into a groundbreaking partnership with Export Bahrain to introduce tailored export and supply chain financing solutions that offer competitive interest rates to support businesses in expanding into global markets. With a focus on facilitating international product and service exports, this initiative aligns seamlessly with the SME Development Board’s 2022-2026 Strategy, aiming to encourage a vibrant ecosystem of thriving businesses.

In November 2024, BDB, in partnership with a consortium of leading local and regional banks, launched the Kingdom’s first $265 million (BD100 million) Private Credit SME Growth Fund. The fund aims to accelerate economic development by providing critical financial support to SMEs.

The Central Bank of Bahrain (CBB) is offering incentives to participating banks, allowing their funded portions to count towards their share of SME lending with a risk-weighted average of 25%. The fund’s capital is pooled from key local and regional financial institutions, demonstrating a strong commitment to Bahrain’s SME sector. Managed by BDB with the support of Tamkeen, the fund was developed in collaboration with the Ministry of Industry and Commerce (MOIC), National Bank of Bahrain (NBB), Al Salam Bank, Bank of Bahrain and Kuwait (BBK), and Khaleeji Commercial Bank. It focuses on high-value sectors with significant export potential and job creation opportunities.

The fund has a 10-year structure, with a five-year deployment period dedicated to loan disbursements. Contributing to Bahrain’s sustainability goals, up to 10% of the fund will be allocated to support green economy initiatives.

Key products and services offered

BDB’s Investment Division supports its mission to accelerate the development of SMEs in the Kingdom. Targeting establishments that have the potential to grow locally and internationally, and have high commitment from both their owners and management, investments can be made at different levels of their business cycle.

Apart from heavily focusing on sectors like healthcare, manufacturing, food security, financial institutions, logistics, and technology, BDB has also shown keen interest in supporting companies that promote import substitution, export opportunities, job creation, value addition, and foreign investment.

“Our extensive experience across various industries stems from a deep understanding of the unique challenges and opportunities faced by SMEs in Bahrain. The Director nominated by the bank on the board of the investee companies supports and guides the firm to achieve its full potential and reach its goals. The Investment Division provides minority interest equity, which is typically up to 20% of the paid-up equity share capital, as a shareholder in private companies as a means of funding,” BDB’s Group CEO added.

BDB offers a comprehensive range of financial products, services, and solutions, including business loans, advisory support, and diverse financing options tailored for entrepreneurs. Prominent among these offerings is Sharia-compliant Finance, which offers business owners to secure a minimum amount of BHD 3,000 to finance specific assets like plant or machinery. The bank also provides working capital loans with comfortable repayment tenors and grace periods for sectors like manufacturing, ICT (information and communication technology), agribusiness, private education, healthcare, tourism, trading, transportation, and other services.

BDB has also partnered with Labour Fund Tamkeen to introduce “BDB & Tamkeen Finance,” a suite of soft financing programmes for MSMEs offered in accordance with Islamic Sharia principles. Through this collaboration, Tamkeen facilitates access to finance by subsidising a percentage of the loan profit for eligible applicants under applicable schemes.

Key offerings under this joint initiative include Start Your Business, which is designed to support new enterprises within their first three years of operation. This programme empowers early-stage businesses with financial solutions tailored to their growth requirements, aiming to foster entrepreneurship, productivity, and innovation. Go Digital is another initiative that encourages MSMEs to integrate relevant digital technologies into their operations, helping them advance their business models, increase efficiency, and improve agility. Business Growth is targeted at scaling existing enterprises by providing financial support for strategic objectives such as entering new markets, launching new products or services, franchising, expanding locally, or boosting exports. Lastly, Business Turnaround supports struggling enterprises by providing temporary access to financing, along with a structured recovery plan to help them stabilise operations and return to sustainable growth.

In addition to these programmes, BDB provides trade finance instruments to facilitate commercial activity. These include letters of credit (L/C), issued on behalf of importing clients to guarantee payments to exporters, and various types of Letters of Guarantee. These guarantees, such as Bid Bonds, Performance Bonds, and Advance Payment Guarantees, are commonly used in project-based transactions to support clients’ contractual obligations.

The bank also offers an overdraft facility for its client MSMEs, which essentially authorises them to overdraw their accounts up to an agreed limit. Such facilities are normally granted to meet working capital requirements arising from the customer’s operating cycle.

BDB’s role in financial inclusion

Financial inclusion is deeply embedded in BDB’s mission to empower underserved and high-potential business segments across the Kingdom. For over three decades, the bank has been a strategic enabler of business growth, a role it continues to play through its impactful initiatives and innovative financing solutions that directly address the sector’s evolving needs. BDB has become a transformative force for startups, women entrepreneurs, and rural businesses’ access to finance.

In November 2023, BDB collaborated with The Supreme Council for Women, the BENEFIT Company (the Kingdom’s leading innovator in fintech and electronic financial transactions services) and Bahrain FinTech Bay to establish the Innovate for Bahrain Centre (I4B) at the Riyadat Centre in A’ali.

This pioneering initiative aims to drive comprehensive programmes that promote gender equality in the technology industry through multi-faceted programmes that align with national strategies led by the Supreme Council for Women in partnership with the private sector. Operated by Bahrain Fintech Bay and supported by Tamkeen, I4B is designed to equip women with the tools, resources, and networking needed to succeed in the digital economy.

As stated by Group CEO Dalal Al Qais: “We have launched purpose-driven initiatives such as the Riyadat scheme to empower female business owners, zero-interest loans to boost food security and sustainable development in the agriculture and fisheries sectors, and the SME fund to expand capital access for high-impact ventures. In collaboration with Tamkeen, we have also introduced co-financing programmes that extend tailored support to MSMEs across various sectors.”

Believing in Bahraini women’s ability to fuel the Kingdom’s economic growth and create a transformational impact, the Riyadat Scheme is helping these entrepreneurs scale their businesses with access to favourable Sharia-compliant financing and dedicated advisory services. The scheme supports both new and existing enterprises through two financing tracks, delivered in collaboration with Tamkeen’s “Start Your Business” and “Business Growth” programmes.

Innovation and technology in banking

BDB has continued to lead by example in digital transformation, consistently embracing innovative technologies to enhance operational efficiency, customer experience, and service accessibility. Central to this transformation is tijara, BDB’s flagship digital banking platform. Built to meet the evolving needs of MSMEs, tijara provides real-time account information, transaction details, statement downloads, fund transfers within BDB and to external accounts, as well as international transfers via SWIFT, all in a secure and user-friendly environment.

BDB customers can use the Tijara platform to view account balances and account and transaction details, download statements, generate account reports, and transfer funds to their own accounts and other BDB (and non-BDB) accounts. Funds can also be transferred to international bank accounts through SWIFT. With advanced security features such as two-factor authentication and password encryption, the platform offers peace of mind while delivering convenience at scale.

In October 2020, BDB took a major step forward by selecting the TCS BaNCS Global Banking Platform, developed by Tata Consultancy Services (TCS), a leading global IT services, consulting, and business solutions organisation, to modernise its core banking infrastructure. The decision was driven by a strategic goal to deliver personalised digital customer experiences and align with Bahrain’s national vision of cloud-based transformation.

Hosted on Amazon Web Services (AWS), the TCS BaNCS platform integrates cutting-edge technologies like APIs, artificial intelligence, and data analytics to support the rapid rollout of new products and services. This cloud-native solution not only enhances scalability, security and cost efficiency, but also enables BDB to tap into TCS’s fintech ecosystem to accelerate innovation and create contextual, value-driven interactions with customers.

In a further demonstration of its digital-first strategy, BDB entered a strategic partnership in February 2025 with Mazad, a leading online auction platform. This collaboration enables the bank to conduct asset sales through live bidding, creating a more transparent, efficient and competitive process. By leveraging Mazad’s advanced digital capabilities, BDB is building a more accessible, fairer, and reliable bidding ecosystem for investors.

Shining at the CSR front

In June 2024, BDB won the “Excellence in Sustainable Environmental Development” Award at the GCC International CSR Awards. This achievement reiterated the bank’s ongoing commitment to environmental sustainability, its efforts to promote green initiatives, and its continued support for agricultural projects, including the Farmers Market in Hoorat A’ali, which serves as a key platform for local farmers to showcase their products and boost sales.

As part of its efforts to support food security and agricultural production in the Kingdom, BDB offers zero-interest financing solutions to farmers and fishers in partnership with the Ministry of Finance and National Economy. The product enables farmers to expand their businesses and allows local fishermen to purchase equipment with ease.

The bank has also shown longstanding support for the National Initiative for Agricultural Development (NIAD)’s Forever Green campaign over the past four years by contributing to tree planting efforts across various areas within the Kingdom. BDB’s diverse initiatives highlight its active role in contributing to the United Nations’ Sustainable Development Goals (SDGs), promoting economic growth, gender equality, supporting MSMEs, and enhancing education in Bahrain.

BDB’s support for individuals in the fishery and agriculture sectors includes offering interest-free loans for production development. As of December 2023, 2,729 individuals had received loans amounting to BD 22.7 million, illustrating the bank’s commitment to promoting sustainable agriculture.

In addition, BDB’s provision of education loans aligns with SDG 4 (Quality Education). The bank also supported 1,160 individuals with loans totalling BD 20.4 million as of December 2023, reflecting its dedication to enhancing educational opportunities and human development.

Partnerships, collaborations, and a promising future

BDB has continued to build strong partnerships with financial institutions, government agencies, and international bodies to enhance its service offerings and contribute meaningfully to Bahrain’s long-term economic vision.

Among the most impactful of these is BDB’s collaboration with the Labour Fund Tamkeen, which subsidises over 50% of the interest on eligible loans, significantly improving access to capital for MSMEs. The bank has also played a leading role in empowering female entrepreneurs through its partnership with the Supreme Council for Women, offering tailored business loans for women-led ventures.

BDB’s partnership with the Bahrain Tender Board is easing SME access to government tenders. Meanwhile, its collaboration with Export Bahrain empowers Bahraini SMEs to scale internationally by providing export support and financing mechanisms.

In November 2024, BDB signed a strategic agreement with Lumofy, an AI-powered talent management platform, to enhance employee upskilling practices at the bank. This collaboration marks a significant step forward in BDB’s ongoing efforts to build internal capabilities that support long-term operational excellence and sustained success.

BDB’s strategic goals for the future centre around expansion, new product introductions, and other priorities aligned with Bahrain’s broader economic vision. Plans for the near to medium term include broadening the spectrum of financial products and developing innovative digital platforms to simplify banking services. The bank is also improving its advisory and funding programmes to strengthen Bahrain’s entrepreneurial landscape. At the same time, it continues to invest in state-of-the-art fintech innovations to improve operational efficiency and extend its competitive edge in an evolving market landscape.

As it looks to the future, BDB will continually seek new alliances with both local and international stakeholders to drive collaborative efforts in innovation, sustainability, and inclusive economic progress across the Kingdom.

The post BDB elevates Bahrain’s SMEs & economic growth appeared first on International Finance.

COVID-19 impact and post-pandemic era

The COVID-19 pandemic irreparably altered the UK real estate market, producing upheavals and redefining industry norms. Property sales were momentarily halted by lockdowns and social restrictions, which left the market uneasy. Potential buyers and investors were less eager to enter into real estate deals as a result of the economic consequences.

But there were also major changes in demand on the market. Due to a demand for more roomy and private accommodations brought on by the expansion of remote work, there was an increase in interest in rural and suburban homes. On the other hand, as individuals sought out homes with more outside space, urban centres, particularly London, experienced a decline in the market for city apartments.

The UK government took action to reduce the economic effects of the pandemic by enacting policies like the stamp duty holiday to encourage home buying. As companies reevaluated their space needs, concerns about the future of office space emerged in the commercial real estate market.

While this was going on, lockdowns and the rise of online shopping presented difficulties for high-street shops and shopping malls. Lockdowns and supply chain issues caused construction projects to be delayed, which had an impact on the supply of new homes and perhaps affected home prices.

Despite the difficulties the pandemic brought, the UK real estate market has demonstrated adaptability and endurance in the post-pandemic age, particularly in the previous 12 months.

The dynamic UK rental market

The UK rental market is a diverse industry that is essential to the country’s housing landscape. It serves a broad spectrum of tenants, including young professionals, families, students, and seniors. The rental market in the UK is characterized by a number of significant trends and traits.

First of all, there is still a strong demand for rental apartments. Renting has been a popular choice due to issues with house affordability, changing lifestyles, and mobility. Particularly young professionals frequently decide to rent in urban areas in order to access work possibilities and active social scenes.

In the UK rental market, build-to-rent (BTR) has become a substantial trend. BTR complexes are specially designed rental homes that frequently include cutting-edge facilities and qualified management. These buildings provide a hassle-free living for their occupants, and they have grown in popularity because of their practicality and neighbourly amenities.

Another significant element of the UK rental industry is student housing. The top colleges in the country draw both domestic and foreign students, fueling a constant need for purpose-built student accommodations (PBSAs). These residences offer students secure, up-to-date living quarters that meet both their needs for academic and personal needs.

Rent affordability is still a serious challenge, particularly in big cities like London. Discussions concerning rent control measures to shield tenants from disproportionate rent increases have been sparked by high housing costs relative to salaries.

A greater emphasis has been placed in recent years on the calibre of rental homes. Renting accommodations must now adhere to rules and specifications to guarantee that they are safe, healthy, and energy efficient. The general standard of rental housing in the UK has improved as a result of this.

Sustainable real estate takes over the UK

In recent years, sustainable real estate in the UK has become a crucial factor, reflecting a growing awareness of social and environmental responsibility. This industry is being shaped by a number of significant trends and behaviours.

Building research establishment environmental assessment methods like BREEAM and LEED, as well as other green building certifications, have been gaining popularity. These accreditations serve to increase the appeal of certified properties to both investors and tenants by demonstrating a dedication to energy efficiency, minimal environmental impact, and sustainable construction methods.

In sustainable real estate projects, integrating energy-efficient technologies is now considered best practice. In addition to reducing environmental impact, features like solar panels, cutting-edge insulation, and energy-efficient heating and cooling systems also provide long-term financial savings for building owners and residents.

Sustainable real estate has been fueled by the switch to electric cars (EVs). As the use of electric vehicles increases, there is a high demand for real estate that has EV charging infrastructure. To fulfil this growing demand, many developers are now adding EV charging stations in their brand-new complexes.

In the real estate industry, there is a rising commitment to reaching net-zero carbon emissions. Through a combination of energy-efficient building design, renewable energy sources, and sustainable property management methods, investors and developers are vowing to lessen their carbon footprint.

Embracing property technology

The property industry in the UK has enthusiastically embraced technology and PropTech, or property technology. This adoption demonstrates the industry’s dedication to improving client experiences, reducing procedures, and maintaining its competitiveness in a setting that is changing quickly.

In the UK real estate industry, virtual property viewings have completely changed the game. Potential tenants and buyers can examine homes remotely using augmented reality (AR) and virtual reality (VR) technologies, which eliminates the need for in-person inspections. This offers a handy way to view homes while also saving time.

Online real estate search engines like Rightmove and Zoopla have become indispensable in the UK. These platforms provide a sizable database of property listings, comprehensive property details, and market analytics, arming buyers and renters with crucial information they can use to make wise choices.

With the help of smart home technology, homeowners can now control lighting, security, heating, and other features from their smartphones. As tech-savvy purchasers look for modern, connected homes, these technologies not only provide convenience but also raise the value of real estate.

The adoption of blockchain technology holds the promise of streamlining real estate transactions by delivering open and secure record-keeping systems. This might lessen fraud and simplify the frequently difficult process of buying and selling real estate.

The COVID-19 pandemic has expedited the use of PropTech for lease signing, tenant communication, and property management. More and more, landlords and property managers are using digital platforms to improve productivity, offer contactless services, and streamline business processes.

The adoption of technology and PropTech by the UK real estate sector has ushered in a new era of comfort, effectiveness, and creativity. The industry is set to offer even more customized and frictionless experiences for property buyers, sellers, renters, and investors while remaining at the forefront of technical breakthroughs as these technologies continue to develop.

Affordable housing: Still a concern

The lack of affordable housing supply, slow income growth, and rising property prices have all contributed to an ongoing problem with affordable housing in the United Kingdom. These difficulties have broad social and economic repercussions.

The high expense of property, especially in major cities like London and regional hotspots, is one of the main problems. Homeownership has become a distant dream for many due to skyrocketing property prices, pushing a sizable section of the population into the rental market, where affordability issues still exist. The issue is made worse by the vast disparity between availability and demand for affordable homes. In brand-new complexes, local authorities frequently fail to satisfy the necessary quotas for affordable housing. Although there are government incentives to promote the building of affordable dwellings, supply still does not meet demand.

Housing associations are essential to the provision of affordable housing because they fill the gap between the demand for and supply of cheap houses. However, there might be a long waitlist for these homes, placing many people and families in unstable living situations.

Rent that is priced affordably and shared ownership plans are two popular methods for achieving affordable housing. Low-cost rental properties are made available via affordable rent, and renters can gradually build up equity in their homes thanks to shared ownership. Although the availability of both choices and the eligibility requirements vary by region, both aim to increase housing accessibility.

Policymakers, developers, and housing associations are working to find creative solutions to the affordable housing shortage as the UK struggles with a continuous housing crisis. This will guarantee that more people have access to stable and cheap housing.

UK property sector: Attracting international investors

The real estate market in the United Kingdom has historically been significantly influenced by foreign investment, which has boosted its vibrancy and appeal on a global scale. International investors are still drawn to the UK because of its reputation for stability, an open legal system, and a broad real estate market. There are several important factors to consider when it comes to investing in real estate in the UK as a foreigner.

Historically, foreign investors have concentrated on coveted areas in large cities, particularly London. Luxury homes, exclusive locales, and well-known landmarks have all proven to be extremely alluring targets, frequently acting as long-term investments and value stores.

The UK commercial real estate market is dominated by institutional investors, notably sovereign wealth funds, pension funds, and real estate investment trusts (REITs). These organizations are looking for assets that would generate steady revenue, and the UK market’s durability appeals to them.

Brexit originally led to considerable ambiguity in the environment of foreign investment, with worries about changes to regulations and market access. However, as the post-Brexit landscape became more evident, the market showed resiliency, and investor confidence rose.

Beyond just residential and commercial properties, foreign investment in UK real estate also affects other areas. The country’s overall economic growth and infrastructural development are aided by the investments made in development, logistics, and infrastructure projects.

The diversity of international investors is noteworthy, with interest coming from the Middle East, Europe, Asia, and North America, among other places. Each area brings to the market its distinct investment preferences and methods.

Large-scale real estate developments have been financed with the help of foreign investment, which has also boosted the economy and produced jobs. The requests for more balanced investment have, however, been spurred by discussions about housing affordability and its possible effects on nearby towns.

The COVID-19 pandemic, the Russia-Ukraine war, demographic changes, and sustainability concerns are just a few of the many factors that have an impact on the UK real estate market. Understanding these trends and insights is crucial for everybody involved in the UK real estate industry, including buyers, sellers, investors, and developers. The UK real estate market will continue to be a fascinating and lucrative industry for years to come, even as the market adjusts to the changing circumstances.

Recently, International Finance caught up with GMS Kumar, CEO of MAI (Myproject.ai) and Work-tops.

GMS Kumar embarked on his journey in the construction industry at Work-tops.com in the UK, where he put to use his 10+ years of experience in the Stone Industry, and eight years in Recruitment and Education consulting. He is also set to venture into the world of marketplace with MAI (Myproject.ai), a platform catering to diverse construction needs for the people of the UK through mobile application.

His track record includes pioneering Microsoft Dynamic CRM in international student recruitment, implementing SAP at a prestigious Solicitor Firm, launching a PHP-based Stone Industry marketplace, and integrating cutting-edge Artificial Intelligence into Work-tops.com.

During his interview with International Finance, GMS Kumar sheds light on various aspects of the UK real estate market. He talks about the application of blockchain and AI in the property market and how real estate professionals are adapting to the digital era. Additionally, he discusses the key factors that influence real estate prices in the UK and provides further insights into the market.

Q) How has the UK real estate market evolved in response to changing economic conditions in 2023, and what trends can we expect in 2024?

A) In my opinion, in the UK, the construction industry is embracing sustainability. The UK has reduced its reliance on raw materials and is increasingly using reusable products. Moreover, the industry is integrating technology into property construction to lower energy consumption and electricity usage.

We anticipate a shift towards using more local raw materials, supported by the government’s initiatives to reduce carbon footprints. Expect the emergence of innovative recycling methods for raw materials through government schemes and support.

Q) How can one determine the current market value of his/her property?

A) In the UK, property owners can easily determine their property’s value through the England Land Registry, where data is submitted and third-party companies evaluate market property values. The UK is also promoting individual builders and self-building activities, emphasising the use of leftover materials to increase property value. Proper maintenance of the property is crucial, and various communities provide guidance on enhancing property value through sustainability. Having a property that has incorporated more sustainable methodologies will increase its value in the current trend. Contests for people who build with sustainability are being held. The best ones get financial aid, awards, etc. This encourages people to move more towards sustainability.

Q) How are blockchain and AI used in real estate and property management in the UK?

A) Blockchain and AI are being integrated into the real estate sector. For instance, my soon-to-be-launched startup, MAI (Myproject.ai), aligns with the UK Prime Minister’s zero-carbon scheme by helping property owners and traders list leftover construction materials on our platform, reducing carbon footprints and maximising value. MAI also serves as a platform for homeowners and construction-related service providers to find solutions to construction-related challenges. This technology is set to play a significant role in property management in 2024, backed by years of industry research and insights.

Q) What are the key factors influencing real estate prices in the UK?

A) The United Kingdom’s real estate prices are influenced by several factors like the location of the property, condition of the property, and age of the property. Notably, properties older than 75 years cannot have even one brick removed/repaired without proper approval in order to preserve heritage. The government provides financial support to maintain such legacy properties and offers funds for repairs or purchases.

Q) How are rising construction costs and supply chain disruptions affecting new development projects in 2024?

A) Rising construction costs and supply chain disruptions have had a significant impact on new development projects in 2024. Events such as China’s container backlog, the pandemic, the Russia-Ukraine war, and the Suez Canal blockage have driven up container costs from around $1500 in 2021 to $7000 to $8000. Despite these challenges, the construction industry remains robust due to increased interest from migrants and buyers, even after the UK government scaled back some policies for first-time property buyers.

Q) What are the current trends in urban vs. suburban vs. rural real estate markets, and how are they expected to evolve in the coming days?

A) Currently, urban areas are expanding rapidly, with London now encompassing a larger area. Rural areas, on the other hand, are primarily inhabited by retirees seeking a peaceful environment, subject to strict government approval for property construction or repairs. The population influx is leading to the urbanisation of suburban areas. Rural areas may remain largely unchanged for the next few decades due to regulatory hurdles. To rent a property in London, people are waiting in lines for hours just to take a look at the property. So, there’s a property crisis in the UK and it could increase in the near future.

Q) How can an individual effectively stage his/her home for sale to attract buyers?

A) In the UK, selling a property is relatively straightforward, with most properties selling within 15-90 days, thanks to online availability of property data. To attract buyers, it’s essential to maintain the property well, consider renovations to enhance its appeal, and prioritise sustainability features. Sustainable properties tend to sell faster. Additionally, legal transactions involving property sales are handled by lawyers, ensuring a secure and trustworthy process.

Q) What is the outlook for mortgage rates in 2024, and how might they influence homebuying decisions?

A) UK interest rates have experienced a rapid ascent since December 2021. Initially, these rates reached historically low levels in August 2020, when the Bank of England (BoE) reduced the base rate from 0.25% to 0.10% as a response to the COVID-19 pandemic. However, recent months have witnessed significant shifts in market expectations regarding the trajectory of UK interest rates.

As of the end of 2022, projections indicated that interest rates in the UK could climb to approximately 4.5% within the next 12 months. This estimate saw a substantial revision upward following data revealing that UK inflation displayed greater resilience than initially anticipated. As a result, there were predictions that rates could peak at 6.5% by the first quarter of 2024.

Nevertheless, an unexpected decrease in UK core inflation occurred in August. Consequently, it is now reasonable to anticipate that interest rates might settle within the range of 5.25% to 5.50% by the end of 2023.

Q) In light of climate change concerns, what sustainability and energy-efficient features are becoming more important to homebuyers and property investors?

A) Homebuyers and property investors are placing greater importance on sustainability and energy-efficient features in response to climate change concerns. Advanced technologies like wall cladding are being adopted to protect the interior from external weather conditions. Properties with energy ratings above the C level are favoured, reflecting the country’s energy-conscious stance. Smart devices like motion sensor lights are also gaining popularity for their energy-saving benefits.

Q) How are real estate professionals adapting to the changing landscape of marketing, sales, and property management in the digital age?

A) Real estate professionals are gradually adapting to the digital age, but trust-based transactions remain prevalent. Positive word-of-mouth reviews still drive success in the industry, with traditional methods valued. While digital marketing is growing, property management is largely handled through traditional channels. Real estate agents play a vital role, as around 90-95% of property transactions involve their expertise. Collaborative communication among existing brands and professionals is essential for effective property management and sales.

The post The ever-adapting face of UK real estate appeared first on International Finance.

KHUH has recently hit the headlines after it adapted to Amazon Web Services (AWS) and developed a long-term storage solution without making changes to its existing Picture Archiving and Communication System (PACS).

The 600-bed hospital faced limitations on the data maintenance front as their on-premise storage of medical images kept on getting bigger with every passing year. The AWS solution has helped the healthcare facility to reduce its data storage costs by 40%.

KHUH’s journey as the tech pioneer in Bahrain’s healthcare sector is sure to be a textbook reference for hospitals in other parts of the world wanting to make it big in the industry.

KHUH’s cloud-based solutions

By January 2022, the hospital had accumulated around one million image studies in some 476 million files. While the total data volume is around 44 TB (terabytes), to date, the hospital has been adding around 1 TB of new data monthly. Out of those one million image studies, only 94,000 from the timeline of 2011-19 were retrieved in 2021, and these nine-year data alone formed a 3TB volume. To simplify the equation, only 7% of PACS data was retrieved annually.

While these storage upgrade works kept KHUH’s IT staff busy until 2021, a state-of-the-art archival solution became a necessity. The innovation required to be an adaptive one towards future technological breakthroughs, while making minimal changes to the PACS system. That’s where Amazon Web Services stepped in with its S3 File Gateway and S3 Glacier. Now, the new on-premise data storage architecture keeps only medical images generated in the last four years, whereas AWS archives the remaining data. The hospital is now having the best information and communication technologies in Bahrain.

KHUH’s data infrastructure

While the Amazon S3 File Gateway provides a file interface into Amazon Simple Storage Service (S3), these two together create a service and virtual software compliance, through which the hospital can store and retrieve objects in S3 file sharing, using the file protocol Server Message Block (SMB). The software gateway is deployed in the KHUH on-premises environment as a virtual machine (VM), which is running on VMware ESXi. The gateway then allows the medical image-related data to be accessed in S3 as files or file share mount points.

While KHUH used the solution to transfer the image data to the cloud without much modification to the existing PACS system, the latter uses the SMB protocol to store data on a Windows file server. If the data volume rises, the hospital adds IBM SAN (Storage Area Network) Volume Controllers (block storage virtualisation appliances from the IBM System Storage product family) to the Windows file server and creates new file shares.

These new file shares are then added to the PACS storage manager. The S3 file share added as another file share, helps the PACS system to store medical images on the S3 File Gateway.

While the initial solution architecture was developed with AWS, the Amazon S3 Glacier Flexible Retrieval storage class got roped in as well, as the healthcare facility onboarded more and more solutions. S3’s induction was done to store those archived data which may not be required immediately but can be easily retrieved as per the hospital staffers’ demand. The feature has flexible retrieval options, balancing cost with access times. KHUH’s goal was to avoid manual interventions in the data retrieval process, which is why the healthcare facility automated the whole operation. If the PACS system attempts to access a file from the Glacier Flexible Retrieval storage class, an error message will be sent to the Amazon CloudWatch logs, resulting in an AWS Lambda function, aimed at retrieving image files via S3 batch operation.

“We have achieved our digital transformation by focusing on three vectors. Robotic process automation, AWS storage technology, and most importantly, empowering our in-house engineers,” said Hamad Saeed Abdulrahman, Director of ICT at King Hamad University Hospital.

But then, there was a catch as the KHUH didn’t have access to the image data in any of the S3 File Gateway cache or S3 bucket in the AWS Cloud, which prolonged the recovery process. To remove the obstacle, the medical facility deployed another S3 File Gateway virtual machine in their data centre. These gateways are addressed through a single domain name system with failover alias records.

Following the AWS Storage Gateway user guide, KHUH didn’t write multiple file shares to one S3 bucket and configured two Identity and Access Management (IAM ) roles to put the bucket in the failover architecture. The hospital’s on-premise application monitoring system checks the S3 File Gateways. If one of the gateways becomes unavailable, KHUH’s IT team gets a notification about the glitch.

While the hospital reduced the storage cost by some 40%, it achieved benefits such as higher durability for medical images, a reduction in administrative efforts like expanding the on-premise storage facilities yearly, and long planning cycles for infrastructure development. The KHUH can even carry out quicker changes in the archiving department.

KHUH Healthcare information system recognised by oracle

“After trying many other systems, we realised we had to build our own. Today, we are very proud to have developed HOPE. It has shown that it is a robust, user-friendly system with proven excellence over the years,” said Major General Dr. Shaikh Salman Bin Ateyatallah Al Khalifa, Commander, King Hamad University Hospital, in a recent Oracle report.

KHUH has been using HOPE since 2017. From scheduling, admissions, electronic medical records, lab testing, speciality care, pharmacy, catering, revenue management, or any other healthcare service, HOPE is the answer.

While the facility offers over 40 specialised treatments, it was finding it difficult to come up with a responsive hospital management information system. Eventually, they found a capable solution in the form of Oracle Application Express (APEX). This cost-effective framework provides application development at a faster rate compared to Java and Net programs. KHUH’s development of the HOPE portal relied heavily on APEX.

The hospital now has one application, which carries a suite of over 40 modules. Under it, the application development speed not only got increased by five times, but it also resulted in the creation of a paperless modern healthcare information portal, while saving 80% of the operational costs of the KHUH during its 10-year budget period savings exceeding the $40 million mark.

The healthcare facility has now diverted the saved money towards fulfilling the goal of becoming the first and only healthcare facility to connect to Bahrain’s National Electronic Medical Records (NEMR), National Healthcare Insurance Information System (NHIIS), and Drug Utilization Review (DUR).

KHUH has taken innovation to the next level with the development of its fully automated robotic pharmacy and chemotherapy preparations. During the COVID pandemic, apart from having robust virus testing and vaccination services, its telemedicine mechanism proved to be a game-changer as well.

Bahrain Oncology Center (BOC), under KHUH, currently possesses a fully integrated chemotherapy protocol workflow. Under it, some 300 protocols have already been integrated, with 30 more to go, to meet the goal of a cost-saving, safe medication management programme. Services, especially on the chemotherapy front, improved by leaps and bounds, as few errors and incidents got reported.

Currently, the hospital app has 5,000 users, including its physicians and staff. It registers some 4 to 5 million hits daily, apart from arranging 8,000 to 10,000 sessions in the same timeframe.

While access to real-time data and reporting has brought transparency in hospital finance and accounting, the institute now has an efficient budget control mechanism under its wings. All these are helping the hospital to prioritise patients and reduce waiting periods.

Robotic Process Automation: KHUH’s answer to COVID

King Hamad University Hospital has been no stranger to the entity called automation. Since the start of COVID, KHUH has worked to have robotic process automation that empowered it to make drastic changes to its operations to cope with the pandemic fallouts.

Beginning with the declaration of COVID symptoms, an RPA (Robotic Process Automation) mechanism was developed to integrate and operate multiple silo systems. The rota system sent an actionable email to all healthcare staff members to see if they had COVID symptoms. Following the identification of the infected personnel, an infection control mechanism will be activated, in which the healthcare facility will schedule testing appointments, initiate a quarantine action in the HR system, and notify managers/team leaders of the isolated employees. The system was operational from the start of the pandemic until mid-2022. Furthermore, this system enabled KHUH management to monitor trends and spikes, giving the hospital agile and proactive quarantine measures, which ensured healthcare provisioning and continuation of services.

The RPA took one week to create and another week to test. This quick rollout utilising current in-house technology had a significant impact on the hospital. A positive case would cause the action of having symptoms to be triggered by clicking on a staffer’s email prior to the start of the designated shifts. All of the preceding actions would be activated, and they would be assigned time slots to be tested in the quarantined COVID testing tent. The HR attendance system would be locked for the duration of the testing results, and their managers/team leaders would be notified so that any necessary shift changes could be made.

The rapid and agile deployment of the RPA inspired multiple applications and systems that coped with pandemic challenges, such as the lack of human resources and the extended duration of material deliveries. This will be discussed in depth in the next part of the article.

Migrating the hospital in Zero Operations Downtime

In early 2020, KHUH faced the complex challenge of core network replacement. Even though the cycle refresh was due, the medical facility wanted to ensure that not a single second of hospital operations would be disrupted. Putting matters into perspective, all KHUH systems that supported operations were on-premises. The hospital leadership came up with a three-tier plan.

Firstly, through Microsoft M365 SaaS (software as a service), KHUH was able to shift communication from on-premises to a cloud solution. That enabled two main success factors, more versatility in the user experience and connectivity, and independence for the current infrastructure.

The second plan was to virtualise all systems in place. Going from physical to virtual was a challenging task as all the systems were live and had to be accessible during working hours. KHUH utilised VMware virtualisation technology, with ICT engineers creating virtual copies of current running systems as they were running, and then utilised the time between hospital shift changes to replace the live physical system with the virtual copy.

KHUH was left with the access server hardware after virtualising all of the systems. Therefore, it enabled the hospital to have multiple server clusters, meaning that those servers could be moved seamlessly from one data centre to another. This was the main success factor behind KHUH’s core network migration.

The last tier was to segregate the network into different zones. In simple words, this operation was all about splitting a complex setup into many small segments, which are easier to manage. Furthermore, it meant that the engineers could migrate systems from affected segments.

Because all of the tiers were in place, the hospital’s migration went smoothly and was completed by mid-2022. Furthermore, the performances of all systems have been exponentially great. Faster response, increase in storage space and having an agile infrastructure are some of the added features achieved in this endeavour.

Going beyond standard Oracle Enterprise Business Suite

Another aspiring endeavour was the vast implementation of proactive systems that were developed and deployed in record time. The KHUH IT team has worked extensively to boost its current ERP (Enterprise Resource Planning) with agile and proactive features to face the challenges imposed by the post-COVID period.

With its HR portal, mass hiring of health care professionals was already in place. However, maintaining the vast quantity of documents and licenses for each employee was a great challenge, especially during the pandemic times. Therefore, KHUH ICT developed an employee profile management system, in which staffers’ medical licenses with dates were maintained, managed, and scheduled. This system ensured zero congestion with renewals and regulation compliance-related issues.

The hospital’s ICT team also streamlined the maintenance of the healthcare facility’s bio-medical systems, through the creation of its custom bio-medical assets management system. Under this, all assets’ locations are tracked. It also listed the history of the maintenance works done on the assets. It also sets the planned periodic maintenance of each asset. The solution expanded the life of the medical equipment in KHUH, apart from enabling the pre-ordering of consumable parts per item, prior to shortages and supply chain stagnation.

Lastly, KHUH ICT managed, maintained, and automated the hospital’s sub-store inventory. This system empowers these sub-store managers for accurate item consumption history throughout days, months, and years. This also enabled department managers to easily transfer items between sub-stores and have the deliverables tracked and confirmed. Finally, an in-depth investigation on the maximum and minimum requirement of each item in each store has been digitised to enable auto reordering of those products, thereby stopping item shortages hospital-wide.

As for what is next in KHUH ICT plans, they have finished the initial testing of a supplier portal and moved it to a selective release in November 2022. This system completely transforms the procurement operations in the healthcare facility, as it enables its suppliers to update and upload their proposals and bids for any open purchase order, check the status of the awarded bid, and track the delivery dates through two-way communication and a delivery calendar.

Conclusion

King Hamad University Hospital’s case study is not any other success story of a healthcare facility. It shows the game-changing effects of disruptive technologies in the medical field. Embracing the technology has not only cut down the hospital’s daily mundane paperwork and operational costs, but it also ensured an improved patient care mechanism. Days are not far away when the KHUH model will not only be replicated across the Middle East but will emerge as a viable solution across the world as well.

The post Armed with RPA, KHUH revolutionises healthcare industry appeared first on International Finance.

B.Grimm Group, Thailand’s oldest German-Thai infrastructure developer founded in 1878, has had a deep-rooted history in Thailand for 144 years, starting as a manufacturer of European modern medicines for Siam in the reign of King Rama V. Since then, B.Grimm has grown from a venture business to a large-scale infrastructure developer entrusted with landmark national projects such as the construction of Rangsit irrigation canals with a total length of 1,500 km, the operation of the country’s first telegraph license, and many other major industrial and trading activities. Today, B.Grimm Group is a conglomerate company with widely renowned expertise in building and industrial systems, healthcare, transportation, real estate, lifestyle, and emerging digital technologies; and now is also a country’s key player in the energy business.

The company ventured into the energy sector in the 1990s with B.Grimm Power as its strong investing arm and has been a listed public company limited since 2017. Notably, B.Grimm Power has grown from its first greenfield industrial power plant in Amata City in Chonburi to one of Thailand’s fastest-growing industrial and renewable power producers.

B.Grimm Power is committed to creating value for society in the form of a “Sustainable Utility Solution Provider” by producing high-quality energy and a full range of services to fulfill the needs of its associates, business partners, and society at large. The company focuses on the development, financing, construction, and operation of greenfield power plants, has successfully developed gas-fired electricity and steam-generating power plants, purchased additional projects, and will look for many more opportunities in the upcoming future. B.Grimm Power is also working strenuously to expand its investment in renewable energy, including solar energy, hydropower, wind energy, and energy storage systems (ESS) which are primed to be the epicenter of future energy generations.

At B.Grimm Power, sustainability is the core principle that reflects the company’s commitment to “Empowering the world compassionately” through sustainable business practices covering economic, environmental, and social dimensions, underpinned by commendable corporate integrity and governance. In doing so, B.Grimm Power constantly applies world-class standards and procedures; growing in a sustainable way domestically and internationally; working as a team with ethics under good governance, unity, and professionalism; creating long-lasting value for stakeholders and society; and being environmentally responsible and caring for the community in all respects.

In view of global climate change, B.Grimm Power has expanded its renewable energy business and has already produced a remarkable amount of renewable energy (solar, hydro- and wind power plants) in Thailand and many other countries. Besides Thailand, the firm is also an active energy player in global economic powerhouses including China, South Korea, and Japan, as well as rising economies in the ASEAN region such as Vietnam, Cambodia, Malaysia, Laos, and the Philippines. In parallel, B.Grimm Power is also proactively pursuing various business opportunities with potential partners in Europe; the success of which would help accelerate the company’s future growth even further.

In 2019, B.Grimm Power successfully inaugurated the commercial operation of the largest solar power generation project in Southeast Asia in Tay Ninh, southwest Viet Nam, as well as the country’s largest single PPA installed capacity, 257 MW Phuyen TTP JSC, the latter of which was also awarded the Best Power Plant Project Developer – Solar, International Finance Awards 2019.

A new era for renewable energy development
In 2021, the B.Grimm Power-Energy China consortium brought a new era for renewable energy development in Thailand by successfully completing work at the world’s largest hydro-floating solar hybrid project at the Sirindhorn Dam for the Electricity Generating Authority of Thailand (EGAT). The work included the installation of seven sets of solar cell panels, buoys, a concrete underwater anchor system, and a switchgear building at the site in northeastern Ubon Ratchathani province.

The solar farm at Sirindhorn Dam covers a surface area of more than 450 rai (one rai = 1,600 m2) of the dam’s reservoir. The solar panels and related equipment are mounted on buoys made from High-Density Polyethylene (HDPE) carefully selected to ensure it would be harmless to aquatic animals and the environment. The solar panels used for the scheme are double glass type and the system is moisture resistant with the ability to withstand water movement of the reservoir and substantial wind force.

The system shares various existing resources at the dam including transformers, transmission lines, and high voltage stations, thus making the operation cost-effective by translating into lower tariffs. It also helps to reduce greenhouse gas (CO2) emissions by about 47,000 tonnes per year.

“We are pleased and proud to be a part of the endeavor that brings a new era for renewable energy development in Thailand by integrating solar and hydroelectric power in a hybrid system,” according to Dr. Harald Link, President of B.Grimm Power.

Furthermore, B.Grimm Power is also committed to expediting its solar rooftop business in the country and overseas. The emphasis on solar rooftops is in response to greater awareness of clean energy use to address environmental issues. At this juncture, B.Grimm Power is committed to supporting and collaborating with organizations around the world to increase the share of clean energy in the overall power portfolio to help alleviate global warming problems and achieve environmental sustainability

By expanding the renewable energy business to cover solar rooftops and floating solar, B.Grimm Power can offer a distribution and maintenance model to customers in an integrated and effective manner in order to address environmental issues. These factors provide a critical explanation as to why the company is proactively pursuing the solar rooftop business.

“The solar rooftop business model is in response to social and environmental needs as well as to help us to build long-term partnerships with customers. Today, the solar rooftop has made us more accessible and conveys a symbolic message for others to understand what it means to conduct business with compassion,” said Dr. Harald Link.

B.Grimm Power’s vision of “Empowering the world compassionately” has seen the company’s expansion accelerate into renewable energy with investments in solar, wind, and hydropower projects. Along with its decarbonization initiatives, impeccable safety record, and human rights advocacy across the entirety of its value chain, B.Grimm is a rare example of a company that matches its words with deeds.

With a strong foothold across priority locations around the world, business areas from which to expand its business, supported by excellent partners, the strategic initiatives of B.Grimm Power will empower the company to be a leading Utility Solution Provider and grow from strength to strength in the future.

Cambodia’s Ray Power Supply venture contributes to B.Grimm Power
Ray Power Supply Co., Ltd., a wholly-owned subsidiary of B.Grimm Solar Power 1 Co., Ltd., is a project company operating a 38MWp ground-mounted solar power facility in Banteay Meanchey Province, Cambodia. The project is a new addition to B.Grimm Power Public Company Limited’s power portfolio in 2020. B.Grimm Power, a company reputed to be Thailand’s leading industrial power producer, will seek to accomplish the strategic roadmap by continuing to embrace its traditional principles of conducting businesses with compassion.

B.Grimm Power is evolving to be a “Sustainable Utility Solution Provider” powered by reliable and clean energy sources, providing integrated services to meet changing customer needs, Dr. Harald Link, President of B.Grimm Power explained. B.Grimm Power will also continue to gear up business cooperation with congenial partners to further the company’s synergies and growth prospects both at home and abroad.

Ray Power Supply’s power plant successfully achieved commercial operation on 15 December 2020 and began supplying electricity to state-run utility Electricite Du Cambodge (EDC)’s grid under a 20-year power purchase agreement. This indeed marks the first solar energy project in Cambodia to secure a firm power supply guarantee from the government. Furthermore, the project is Cambodia’s only solar power project which could be constructed and successfully achieved commercial operation in 2020.

Amidst numerous obstacles and difficulties in the development and construction of this project including the Covid-19 pandemic which had a direct adverse impact on labor arrangements and equipment logistics, as well as the devastating floods that seriously affected the construction sites throughout 2020, B.Grimm Power considered the development of this project as a great example of a diligent endeavor with a high degree of professionalism and perseverance of B.Grimm Power’s team spirit to overcome the various restrictions along the way.

In June 2022, the project successfully achieved a financial close of 15-year term financing from a syndicated group of Thai lenders consisting of KASIKORNBANK PLC, Export-Import Bank of Thailand, and Bangkok Bank PLC. The loan is a vote of confidence by preeminent Thai financial institutions in B.Grimm Power, especially at a time when fundraisings, in general, are significantly hampered by the effects of Covid-19 and global economic uncertainty. Ray Power Supply’s project development is pursuant to changing energy demand that has led various domestic and international organizations to come up with a policy toward reducing carbon dioxide in the long term and embracing renewable energy.

B.Grimm Power’s expanding solar power business is a concrete response to the adaptation of energy demand platforms as an increasing number of organizations, particularly international ones, is turning to renewable energy as a means to reduce carbon dioxide emissions. This scheme also aligns with B.Grimm Power’s goal to rapidly enhance clean energy in its generation portfolio as well as fulfilling its mission of “Empowering the world compassionately.”

Currently, B.Grimm Power has a total of 56 power plants in commercial operation. The company aims to ramp up its total installed capacity from 3,058 MW at the end of 2020 to at least 7,200 MW of secured power purchase agreements by 2025, and further to 10,000 MW by 2030 with an annual revenue target of over 100 billion Baht. The company is also eyeing investment opportunities in Thailand, Asia, Europe, and the US as part of its move to become a leading global energy producer. More importantly, B.Grimm Power is moving strenuously towards realising net-zero carbon emissions by 2050.

Dr. Harald Link: Business must prosper together with society
Dr. Harald Link is the Chairman of B.Grimm Group and President of B.Grimm Power Public Co., Ltd. He is touted as one of Thailand’s foremost philanthropists. Like all his forefathers, Dr. Link believed that business must prosper together with the society that it operates. A good example is the B.Grimm Boworn Smart Village Project, a model village of sustainable development, covering a village, school, and temple in Aranyaprathet district, Sa Kaeo province. The project applies the sufficiency economy approach with the participation of the local people.

Education is always at the forefront of Dr. Link’s agenda, and in his capacity as Chairman of the Princess Mother’s Charities Fund of Thailand, he provides nursing scholarships to nursing colleges throughout the country. Vocational education is supported in the Chitralada Vocational School as well as in B.Grimm’s power plants by way of the dual vocational system.

Dr. Link has also ensured that B.Grimm continues to support the Little Scientists’ House of Thailand, one of the most successful education projects under the auspices of HRH Princess Maha Chakri Sirindhorn Foundation. The project is based on the curriculum developed by the Haus der Kleinen Forscher Foundation, Germany, which aims to instill a love of science learning in preschool children aged three-to-six years old. Since the project launched in 2010, it has been taught in more than 22,000 kindergarten schools throughout Thailand.

The natural environment is equally important as the social environment. Apart from its reforestation projects, B.Grimm plays a leading role in supporting WWF-Thailand’s ambitious “Save the Tigers” conservation programme. Dr. Link firmly believes that Thailand still has a chance to save its majestic tigers. He also believes that, with compassion, a business can exist in harmony with nature and community. Tigers are at the top of the food chain – one of the top predators that maintain the balance of the ecosystem. When the top species are endangered, the ecosystem in which they live is endangered as well. There are only approximately 150 tigers remaining in the wild in Thailand, so strong actions are needed to increase the population.

Art and culture are also areas of interest for the company. B.Grimm is one of the major supporters of the Royal Bangkok Symphony Orchestra (RBSO) under the Royal Patronage of HRH Princess Sirivannavari Nariratana Rajakanya. Presently, Dr. Link serves as the Chairman of the RBSO Foundation. He leads the foundation through its fourth decade with the mission to cultivate classical music for the younger generation and to make classical music accessible to all by empowering music education through the Royal Bangkok Symphony Music School (RBSS). Today, RBSO is one of the best orchestras in Southeast Asia and the orchestra provides a musical career to several outstanding musicians in the country.

For sports, Dr Link is not only a keen equestrian personally but also supports polo and equestrian sports in Thailand, elevating Thailand’s talents to world-class levels. In his role as the Chairman of the Thailand Equestrian Federation, Dr. Link gives full financial support to Thailand National Team riders. His proudest achievement came when the Thai Polo & Equestrian Club was selected by the International Federation for Equestrian Sports (FEI) to host the FEI Asian Championships, the first of its kind to take place in Asia, during 1-8 December 2019. Through his initiative, Thailand became the first country in Asia to host the Asian Championship. In 2021, with Dr. Link’s full support, Thailand made history by sending its first national equestrian team to the Tokyo Olympics.

There is no doubt that Dr. Harald Link embodies B.Grimm’s mission statement: “We remain committed to good governance and business responsibility for the economy, society, and the environment, with an important long-term goal to become a net-zero carbon emissions organization by 2050.”

The post Empowering the world compassionately appeared first on International Finance.

Natural gas prices in Europe have soared by over 400 percent since the beginning of the year. Electricity prices have also increased by over 250 percent during the same period. Meanwhile, in the US natural gas price has more than doubled. Natural gas is mostly used for electricity and to generate heat in the UK during the winter season. Furthermore, the price of coal in the US has soared by nearly 400 percent this year to reach $270 per ton. The crisis is as we understand is considerably worse in Europe. Electricity prices in the continent have soared significantly as well. Natural gas prices have surged as well to $30/mm Btu.

This is resulting in inflation which means prices for energy-intensive metals are also increasing. For example, prices of metals such as nickel, steel, silicon have increased due to the energy crisis. Besides metals, prices of fertilizers have ramped past 2008 record highs to nearly $1,000 a ton. It is noteworthy that the prices were around the $300 to $450/ton mark in the last couple of years. The price for copper too has increased to a record high of $4.50 per pound. Copper is an important metal and raw material for the solar or wind energy industry, which emphasis is growing day by day as and is seen as an important factor to tackle climate change.

In Britain, renewable power production this year was much lower than normal as a result of a windless summer. The region meets around 24 percent of its energy needs through the wind. However, due to low production this year, it means the UK has to rely on coal. Over the years, Britain has transitioned away from coal as an electricity source. Prime Minister Boris Johnson said that the UK remains committed to wind power generation. He went on to say that he wants the UK to become the ‘Saudi Arabia of wind power’ with offshore wind farms generating enough electricity to power every home in the UK in the next 10 years.

However, the landscape is pretty different in the present time. Soaring electricity prices is a matter of growing concern for politicians across Europe. The crunch in the gas market is forcing countries to revert to coal. This goes against Europe’s fight against climate change and that the fact that the UK hosted the 2021 United Nations Climate Change Conference, more commonly referred to as COP26 at the SEC Centre in Glasgow.

In Asia, thermal coal prices also keep hitting record highs. In short, there isn’t enough coal to meet demand. Economies in the region are slowly resuming activities and are in the process of an economic revival, be it China, Malaysia or India. It has led to greater demand and is one of the primary causes of an emerging electricity crisis in China. Coal stockpiles are running low in India too, however, the government claimed there are enough stockpiles to keep the wheels running.

The International Energy Agency said in a report, “Record coal and gas prices, as well as rolling blackouts, are prompting the power sector and energy-intensive industries to turn to oil to keep the lights on and operations humming. Higher energy prices are also adding to inflationary pressures that, along with power outages, could lead to lower industrial activity and a slowdown in the economic recovery.”

The agency further added that global energy demand is set to increase by 4.6 percent in 2021. This will be led by emerging markets and developing economies – pushing it above its 2019 level. Demand for all fossil fuels is on course to grow significantly in 2021, with both coal and gas set to rise above their 2019 levels.

Europe’s energy crisis
Even though there isn’t a simple answer to this, a natural gas supply shortage in the region caused the energy crisis in Europe. But why is there a shortage in the supply of natural gas? There are many factors that are also contributing to the crisis. To understand this crisis better, we must understand that nations across the globe are pledging to reduce emissions and become carbon neutral in the next few decades. Reduction in the usage of coal is an important factor when it comes to tackling climate change. As nations are transitioning away from coal, they are meeting their energy demands with other sources such as natural gas or renewable energy sources. According to the bloc’s statistical office, Eurostat, the EU imported around 90 percent of its natural gas from outside the bloc in 2019.

As a result of the pandemic, the whole world entered into a state of lockdown and global energy demand fell significantly. This led to a drop in natural gas prices. With the Covid-19 vaccination drive ongoing, nations are resuming economic activities and as a result, energy demand has also increased significantly. However, supply has struggled to keep pace.

Given natural gas prices are higher in Asia, it is quite normal for producers to prioritise Asian markets over Europe. This is normally not problematic for Egypt, however, since the demand for natural gas in Asia began skyrocketing this year, supply has become extremely constrained. Normally, what Europe does is stockpile gas reserves when prices are low. But this year, it was not possible due to constrained supply. With the winter seasons approaching, people in Europe are rightfully concerned over their low gas supply.

The pandemic has also made matters complicated or in short, have played a part in the crisis. Due to the lockdown measures and other Covid-19 related restrictions, the production of coal in countries such as Indonesia, Australia, and India have taken a hit. This has forced countries in Asia to rely even more on natural gas to meet their energy needs further reducing the available supply for Europe.

To fully understand the energy crisis, we must also understand the role of Russia. As per reports, Russia supplies about 50 percent of the EU’s natural gas imports. Many Russian gas pipelines do flow into Europe through Poland and Ukraine, but most of them have been inactive. As the energy crisis deepens, many pointed the finger towards Russia and blamed the country for being an opportunist and benefitting from the crisis.

This is because Russia is pushing for German approval of its Nord Stream 2 pipeline. Also, Russia is hesitant to sell Russian gas on the spot market. Russia’s state-owned energy giant Gazprom has been accused by the likes of the International Energy Agency (IEA) and European lawmakers of purposely not boosting its natural gas supply to Europe. In a statement, the IEA said, “The IEA believes that Russia could do more to increase gas availability to Europe and ensure storage is filled to adequate levels in preparation for the coming winter heating season.”

Global energy crisis
The energy crisis is not just limited to Europe at this moment. In China, energy prices are soaring because of increasing consumer demand as economic activities return to normal after the pandemic. Production to meet the increasing demand, however, has failed to bounce back. This has led to a supply and demand imbalance. Similarly, in the UK, a shortage of truck drivers who ferry fuel to pumps has led to the fuel crisis. The shortage is attributed to Brexit and also restrictions imposed due to the pandemic.

Many also believe the rise in energy prices is a result of increasing restrictions announced by governments on traditional energy sources such as coal. In their bid to tackle climate change, regulators across the globe are discouraging the use of traditional energy sources and simultaneously encouraging the use of renewable energy. China, which is one of the biggest polluters, pledged to reduce emissions by 65 percent by the end of 2030 and has cracked down heavily on coal mining.

The UK generates around 24 percent of its energy needs from wind. However, due to low production this year, it means the UK has to rely on coal. Many also argue that shifting focus too quickly on renewable energy is also a reason for the energy crisis. What we need is a proper transition from traditional sources to renewable energy. An aggressive push may have led investors to under-invest in traditional energy sources. A report released by Rystad Energy supports this. The report revealed that investments in traditional sources by European or US-based oil companies shrunk by more than half between 2015 and 2021.

What lies ahead?
Europe’s energy crunch is expected to further worsen as the northern hemisphere winter approaches. With natural gas prices skyrocketing, many fear the EU’s integrated energy system could be on the verge of breakdown. To sustain the winter, many member nations are already resorting to hoarding what supplies they have. This only adds to the trouble as it provides a platform for an intra-EU political squabble.

As of now, it looks like energy supplies are likely to remain constrained. Boosting production in a short period of time is not easy. Also, the rise in prices is not helping either. In fact, the crunch is expected to worsen depending on the weather conditions. A much severe winter means higher energy demand. It will be interesting to see how the EU and leaders across the continent respond to the crisis.

While there are calls for measures to control prices, it can only make matter worse. Even if regulators do introduce measures to control prices for natural gas, it will discourage producers who will think twice before deciding to boost production. While a limited supply means energy must be used efficiently, a price cap could potentially lead to consumers overusing energy and only adding to the crisis. A lot of Chinese thermal plants are shutting down because of the introduction of measures to control prices.

During the winter, energy sources such as solar or wind energy often turn out to be unreliable, especially in Europe. With prices of natural gas increasing, Europe may be forced to rely on traditional fossil fuels. This means governments across Europe will have to rethink their energy policy.

The IEA’s Global Energy Review 2021 estimates that CO2 emissions will increase by almost 5 percent this year to 33 billion tonnes, based on the latest national data from around the world as well as real-time analysis of economic growth trends and new energy projects that are set to come online. The key driver is coal demand, which is set to grow by 4.5 percent, surpassing its 2019 level and approaching its all-time peak from 2014, with the electricity sector accounting for three-quarters of this increase.

Natural gas prices in Europe have soared by over 400 percent since the beginning of the year. Electricity prices have also increased by over 250 percent during the same period. In October, the UK recorded a stellar 37 percent spike in UK wholesale gas prices within a period of 24 hours. As a consequence of the rise in prices and the overall crisis, manufacturers of steel, chemical and fertilizer businesses are calling on the government for support as well.

The prices of natural gas, oil and coal have hit highs that were not seen in recent years. Coal supply disruption in China has also led to factories being shut down. This has halted the country’s recovery from the Covid-19 pandemic, which started in Wuhan in late 2019. Energy prices do affect economic decisions across the supply chain. Furthermore, soaring energy prices have had a significant impact on economic policies. Many European, as well as Asian companies, are shutting down operations due to increasing energy costs.

The IEA said that global energy demand is set to increase by 4.6 percent in 2021. This will be led by emerging markets and developing economies – pushing it above its 2019 level. Demand for all fossil fuels is on course to grow significantly in 2021, with both coal and gas set to rise above their 2019 levels. Oil is also rebounding strongly but is expected to stay below its 2019 peak, as the aviation sector remains under pressure.

Long winter in Europe
During the start of this year, the northern hemisphere witnessed a series of very cold and extreme weather events. If the same is repeated this year, it will put additional pressure on the energy stock which is already depleted and stretched severely. Chartering ships to transport LNG has also taken a hit due to a lack of shipping capacity. Daily spot LNG vessel charter rates have spiked above $100,000 in each of the last three northern hemisphere winters and hit an all-time high of well above $200,000 during the unexpected cold spell in northeast Asia in January 2021 – amid physical shortages of available shipping capacity, according to the IEA.

Governments are doing their bid to deal with the crisis. For instance, the Italian government has announced a €3.4 billion budget to support low-income households in the country. Italy has suspended grid charges for private residents and has promised to further subsidise electricity costs. In France, the French government has decided to let gas prices rise by 12.6 percent before freezing prices at least till the end of April. The government is handing out energy vouchers to the vulnerable to help them deal with the energy crisis. The Spanish government has decided to suspend supply cuts in the country for vulnerable residents until 2023.

The post Are we headed for a global energy crisis? appeared first on International Finance.

Major economies such as China, the US and many European countries reported economic contraction for 2020 as borders were sealed, trades were disrupted, flights were grounded and people were advised to stay indoors. With economic activities halted across the globe, the global economy contracted by 4.4 percent in 2020, according to the International Monetary Fund (IMF).

2021 dawned and according to the World Bank, the global economy is set to expand 5.6 percent this year, its strongest post-recession pace in 80 years. This is a sharp upgrade compared to its previous forecast made in January 2021, where the World Bank said that the global economy will grow by 4.1 percent in 2021. Much of the recovery will depend on factors such as fiscal policies, stimulus packages, employment growth and the vaccination drive.

Vaccines key to global economic recovery
Similar to the World Bank, the IMF, in its World Economic Outlook released in April 2021, said that the global economy is projected to recover in 2021 and 2022 with an anticipated GDP growth of 6 percent and 4.4 percent respectively. The recovery of the global economy will depend on various factors, but mostly on the success of the global vaccination drive which is currently Within months of the Covid-19 virus becoming a global crisis, funds were raised and the search for a Covid-19 vaccine began. So far, around 20 vaccines have already been authorised in different parts of the world and many more remain in development. So, how important is a widespread vaccine roll-out for the recovery of the global economy?

Professor Andrew Delios, Vice Dean, MSc Programmes, Professor of Strategy and Policy at the National University of Singapore (NUS) Business School told International Finance that the vaccine roll-out is crucial. He said, “What we have learned now is that the plans to control borders, test and trace only temporarily reduce the threat of the virus. As an invisible enemy, it is not possible to evade the spread of the virus in a jurisdiction for an extended length of time. The lessons have been hard, but they have also yielded the clear message that widespread vaccination is the only possible means to resume social and business life on a wide scale in a way analogous to pre-Covid.

“Nearly 70-80 percent of the nations needs to be vaccinated. “Nations need to independently build vaccine security, meaning, if at all possible, domestic vaccine manufacturing capabilities to contend with at least the next few years while Covid-19 vaccinations of various types become a routine part of life for everyone,” he added.

Nuno Fernandes, who is a Professor of Finance at IESE Business School, chairman of the Board of Auditors of the Portuguese Central Bank (Banco de Portugal), Non-Executive (Member of Audit Committee) at the European Investment Bank, and a Research Associate of the European Corporate Governance Institute told International Finance, “Governments are risk-averse, and will therefore be reluctant to fully dispense with medical restrictions until they’re certain that no new outbreaks will occur. Without successful vaccination rollouts and the vast majority, or at least 70 percent, of adult populations being vaccinated, certain restrictions will stay in place.”

Harald Fadinger, Professor of Economics at the University of Mannheim, Germany also echoes the same thought. He told International Finance that the vaccine roll-out is the single most important factor contributing to global economic recovery because it allows to phase out social distancing measures. The manufacturing sector is already booming in many economies since consumption has shifted from services to physical goods during the pandemic. He said, “Widespread vaccine rollout will enable fast recovery of the service sector which accounts for the largest share of GDP in most economies (many services require personal contact). “
But the problem now is not vaccine development, but making the vaccine available to the 7.7 billion population. It is critical for a global economic recovery that the vaccine reaches every section of the society, especially the marginalised.

In this regard, Neha Anna Thomas, Senior Economist & Programme Manager, Frost & Sullivan told International Finance that extensive vaccination is critical to global economic recovery in 2021 and 2022. A weak pace of vaccination stands to delay the lifting of economic restrictions as well as dampen consumer and business confidence. She said, “As information shows that the likelihood of mutation is linked to higher virus circulation, it becomes important to boost national vaccination campaigns in order to quell variants and prevent new Covid-19 waves and associated lockdowns. Proof of vaccination has now become especially important for the opening up of the global tourism sector, with vaccination proof to become increasingly important across other industries as well, especially those relying on in-person contact.”

Can vaccine disparity hinder economic growth?
To make sure vaccine distribution is not uneven, WHO launched the Covid-19 Vaccines Global Access (COVAX) in April 2020. However, there is a disparity in the vaccination rates across continents. It is estimated nearly 50 percent of the adult population in the US has been fully vaccinated so far. In Europe, so far, nearly 30 percent of the adult population have received at least one dose of a Covid-19 vaccine, whereas, around 17 percent of them have been fully vaccinated. However, this is not so in the case of lower-income countries, where the rates remain as low as 1 percent of the population when it comes to the Covid-19 vaccine.

In this regard, Neha Anna Thomas said, “Data clearly shows that there is a disparity in vaccine coverage across the global economy, with advanced economies seen to be taking a lead in vaccine coverage. To begin with, weaker progress in vaccination, particularly amongst prominent emerging markets which are fairly significant global GDP contributors, could potentially derail the pace of domestic recovery in these countries and in turn, directly impact global growth prospects. Disparities in the pace of vaccination would also negatively impact international tourism and cross-border trade and investment flows. Finally, weaker vaccination programmess and higher virus circulation increases the risk of exposing global economies to newer mutations, necessitating recurrent lockdowns and restrictive measures.”

Andrew Delios too has similar views. He agrees that a slow vaccination programme could hamper economic growth. That is why it is critical that government stresses the importance of vaccine security. They need to build independent capabilities to manufacture vaccines. They need to build relationships with pharmaceutical companies that permit licensed or other such sanctioned production of proven vaccines. Developing productive capacity is a much more manageable task than developing independent R&D skills. “Just as a nation does not want to be dependent on others for the basics of its food supply, it should not be for vaccine supply. If it is, it will always be behind other nations in vaccinating its population and catching up those countries that are able to manufacture vaccines for their own populations,” he added.

Local fiscal and monetary policies also to play a pivotal role
While inoculating the population is key, other factors such as stimulus packages and monetary policies will also play an important role. Businesses, irrespective of size, had to bear the brunt of the Covid-19 pandemic. Sectors such as aviation, hospitality and tourism were the hardest hit. Even though economic activities have resumed across the globe, many businesses are finding it hard to sustain their operations and are seeking government assistance.

Safety nets such as business loans, job retention schemes and protection from eviction are important to help businesses, especially the small and medium-sized enterprises (SMEs),. In Spain, the government announced an €11 billion economic relief package that includes €7 billion in direct aid to distressed businesses. Recently, France’s Finance Minister Bruno Le Maire announced a €3 billion fund that will primarily focus on supporting mid-sized and large companies emerge from the Covid-19 crisis.

Through stimulus packages, it is also important that governments across the globe put money into the hand of the consumers to keep the wheels of the economy rolling. In March, the Japanese government announced $20 billion in reserve funds to offer financial support to struggling businesses and households.

Harald Fadinger believes key factors that will contribute to the global economic recovery besides vaccine rollout will be the local fiscal and monetary policy stance. Taking the US as an example, he said the nation has seen extraordinary loose monetary and fiscal policy. While US monetary policy is likely to tighten soon due to rising inflationary pressure, this is not the case for fiscal policy.

The situation in the EU is a bit different: while the ECB continues to support the economy strongly via asset purchases and ultra-low interest rates, fiscal policy has been somewhat less expansionary than in the US. Differences across EU economies in local fiscal space have led to variation in the generosity of fiscal measures used to preserve employment and prevent firm bankruptcies.

“The EU’s $750 billion recovery package will help to maintain a certain level of public investment and a relatively loose fiscal policy stance. However, a number of fiscally conservative EU countries are already putting pressure to go back to much tighter fiscal policy soon and to reduce public debt levels. Conservative economists, in particular in Germany, also (wrongly) worry about mounting inflationary pressure and lobby for a tightening of the ECB’s monetary policy stance.”

Similarly, Neha Anna Thomas said, “A strong vaccination campaign goes hand-in-hand with appropriate social distancing and other precautionary requirements. Enforcement of these measures, at the national and enterprise level, is important to both contain virus circulation as well as boost consumer confidence levels for higher economic activity.

“Stimulus packages will continue to play an important role in driving recovery. The US’s $1.9 trillion stimulus package, approved in March 2021, for example, significantly accelerated the country’s growth prospects. Frost & Sullivan revised its 2021 growth forecast for the US economy from 4.4 percent, to 6.8 percent).”

She also mentioned that while some countries are expected to continue to roll-out new stimulus packages in the second half of 2021, the global scale of stimulus support in 2021 is expected to be lesser compared to 2020.

“Accommodative central bank monetary policies through 2021 and 2022 will also be important in supporting economic activity. Premature or drastic interest rate hikes could dampen the fragile economic recovery in some countries,” she said.

Nuno Fernandes added that government spending is indeed needed, but it must be administered intelligently. According to him, it is vital to avoid zombie lending, or directing resources to companies that were struggling before the pandemic. “This was done, to disastrous results, during the financial crisis. And you can bet that politicians will remain tempted to rescue businesses with more political clout than financial viability. Recovery plans should instead focus on boosting innovation. After all, misdirected subsidisation is no way to fuel a healthy economy,” he added.

Joe Biden’s $1.9 tn stimulus package to support global economic growth?
The Organisation for Economic Co-operation and Development (OECD) forecasts that the world economy will expand 5.6 percent this year and the Paris-headquartered think-tank believes the US president Joe Biden’s $1.9 trillion stimulus package will lift global income by 1 percent this year. Similarly, IMF spokesman Gerry Rice said that the stimulus package will help the US economy expand by five to six percent in the next couple of years. This means higher demand and at the same time an opportunity for other exporting nations to sell more products in the US market.

The US has been one of the worst affected countries by the Covid-19 virus. The stimulus package includes $415 billion to fight the virus and around $440 billion for small businesses in the country. While the US economy is already on its recovery path, the stimulus package is expected to have a ‘spill over’ effect on the rest of the world.
Sharing her views on this, Neha Anna Thomas also believes that the $1.9 trillion stimulus package will help support the global economy as well. With the US being a top global GDP contributor, a significant boost in the US economy will translate into stronger global growth.

She said, “As a leading global goods importer, the stimulus package should especially help fuel stronger export demand for the US’s trade partners. The package encompasses $1400 in stimulus checks which should particularly help drive US consumer spending and import demand. 2020 data itself revealed how earlier rounds of stimulus checks helped drive US consumer demand. The US’s top goods import partners such as China, Mexico, Canada, Japan, and Germany stand to consequently benefit from a demand boost.”

However, there are also growing concerns about the stimulus package overheating the US economy. Professor Andrew Delios believes the $1.9 trillion stimulus package has come at an interesting time. Independent of fiscal stimuli the US economy is already beginning to recover. Long closed or crippled industries like tourism or F&B are recovering and the recovery will be fast.

“Moreover, Americans are flush with cash. With private sector growth, an economy charged with liquidity and then a fiscal stimulus emerging as well, we have a dangerous combination that can lead to an overheated economy quickly. To me, the concern is not whether the stimulus package will turbocharge the US, the concern is whether it will overheat the US economy. As for the world economy, even though the US is the key nation in the world’s economy, the spill-overs will not be as substantial to heat the global economy. The effects of the stimulus should be largely local focusing on domestic business activity and domestic employment growth,” he added.

Harald Fadinger added that rising inflationary pressure resulting from potentially over-expansive fiscal policy in the US could force the FED to raise interest rates. This may have a negative impact on emerging markets, in particular those with a weak balance of payment and lots of dollarised debt. In conjunction with the dangers from slow vaccine rollouts, this could well trigger a financial crisis in some emerging markets.

Global unemployment crisis and economic growth
The International Labour Organisation (ILO), in its latest report, revealed that nearly 220 million will remain unemployed this year. The report further stated that the unemployment rate will be 5.7 percent in 2022 with an estimated 205 million unemployed people around the world. Employment growth enabled by widespread vaccine rollout is one of the most important criteria for global economic recovery.

Harald Fadinger said that while other physical production factors such as capital have not been much affected by the pandemic, stay-at-home orders and social distancing measures have led to a large drop in employment and a resulting negative labor supply shock. Once this shock is reversed, recovery will be smooth and quick. This, however, requires that firms stay alive until workers can be allowed to go back to work.

“If vaccine rollout is too slow, many firms will eventually go bankrupt. This will not only destroy matches between firms and workers but could also put at risk the local financial system, which would have to sustain large losses on outstanding loans. Thus, in poor economies with slow vaccine rollouts, the crisis could prolong and deepen,” he added.

However, much depends on what is the nature of work going forward but clearly, unemployment is not positive for growth. Increasing employment levels both contribute to and reflect a global economic recovery. Andrew Delios said, “The world needs to put people back to work, however that work is defined. Employment growth is essential to the global economy’s recovery.”

Job losses can also be viewed as an indirect fall-out of the Covid-19 impact. New job creation will partially come about as a result of the containment of cases and lifting of restrictions. At the same time, job creation itself will contribute significantly to the economic recovery process. This is because employment opportunities will help put more disposable income into the hands of workers, thereby helping to boost demand for goods and services.

Neha Anna Thomas said, “Additionally, with the lifting of restrictions, more businesses can move towards full operational levels, thereby reducing the need for government wage support to furloughed workers. These funds can instead be directed into infrastructure development and other activities that will help accelerate growth potential.”

Nuno Fernandes also believes employment growth will play a strong role in the recovery. Lower-income households spend a greater share of their income on consumer purchases. Indeed, many households spend their entire salaries. That’s why jobs are so vital to keeping economies rolling. Wage growth is also critically important to growth.

Unfortunately, we will at the same time have to come to terms with the fact that some of these jobs will not be coming back. Hotels, restaurants, cinemas, sports arenas and cultural venues are still facing an extremely uncertain future. Just as airlines stay afloat by packing people onto planes, the viability in these sectors depends on crowding people into confined spaces. Many people might avoid crowded places even after the crisis subsists. “The spread of the Delta variant has made this worryingly clear, as even some fully vaccinated people are exercising increased caution as compared to just a few weeks ago,” Nuno added.

The post How can the world get back on its feet? appeared first on International Finance.

By practice, Inter-Pacific Asset Management is focused on unit trust funds and portfolio management. It is responsible for the overall management and administration of the funds objectives in line with the deed, Securities Commision and other relevant laws. Dato’ Dr. Nazri Khan (DDNK) as the CEO of Inter-Pacific Asset Management’s approach to investment has been a hallmark of its philosophy, which is underpinned by three essential questions: Is it a good business? Is it a good company? How much are they willing to pay for it? Asking such questions signals its full understanding of investment dynamics in Malaysia and global markets.

An important fact of the matter is that DDNK does not attempt to predict the movement of the market. Instead, he actively seeks undiscovered good businesses to invest in. This is how he operates on a fundamental level and strongly believes in his core that the earnings of the business will determine the value of the company. Such direction is necessary to pave the way for high return on investment and strengthen investor confidence, even in the midst of a crisis.

Today, the coronavirus pandemic has dwarfed the progress of world economies—and Malaysia is facing its own set of challenges. However, the Malaysian economy is expected to rebound faster on the basis of an effective lockdown index, which predicted that it is among the top three economies with a better scope to control and alleviate the side effects of the pandemic in 2021. Inter-Pacific Asset Management’s operating in the midst of a pandemic is a piece of its larger transformation on a global scale. This interview with International Finance sheds light on various aspects, such as DDNK’s approach, asset manager’s performance, unit trust funds, investment strategies and Malaysia’s path to post-pandemic recovery.

What is the chief business of Inter-Pacific Asset Management and how well did it perform in 2020 in light of the pandemic?
Inter-Pacific Asset Management was established as a fund management company in Malaysia. Its principal activity is fund management, provision of advisory services and management and distribution of unit trust funds. The management team holds a combined experience of more than 100 years. The current team comprises experienced fund managers and young talented people who have been able to strongly cope with the pandemic. In retrospect, 2020 has proved to be a challenging time for the asset management industry globally—and particularly in Malaysia as the pandemic has caused a lot of economic and investment uncertainties.

DDNK has adopted a dynamic strategy in managing funds, by using the appropriate momentum trading tools in the US market investment. Despite the precarious situation due to the pandemic in local and global markets, by a combination of fundamental and momentum-strategy technical analysis method, DDNK has been able to outperform major indices in the US with an average return of more than 80 percent for the US Private Mandate Fund and the local unit trust funds in Malaysia.

Why are the unit trust funds so important to Inter-Pacific Asset Management and how are they adding value to its portfolio management?
Currently, Inter-Pacific Asset Management offers local and global coverage in equity analysis. Most of our equity-based unit trust funds and individual private accounts managed have local and global exposure. At present, DDNK’s strategy applies international equity exposure and will additionally include three US market strategies in 2021 through our soon to be listed Dana Abadi, a US Shariah Unit Trust Fund; Dana Saadi, a US Conventional Unit Trust Fund; and Dana Ghani, a US Wholesale Fund. Unit trust funds are important to Inter-Pacific Asset Management because they are used by the public to gauge performance of fund managers in Malaysia.

Building a good track record in managing unit trust funds is considered to be the epitome of a successful fund management company. Those efforts in turn will make Inter-Pacific Asset Management’s products very competitive in the market as investors continue to choose a trusted and consistent brand that can deliver good return on investment over a period of time. The strength of DDNK is rooted in actively seeking to own a diversified pool of Islamic compliant securities in US dollars with an investment objective of capital preservation and high targeted return on investment. The benefit of holding a portfolio among US stock markets and selective global stocks provide investors with means of gaining exposure to international issuers in their respective economic environment. In the global economy, the decline of the Malaysian Ringgit can cause Malaysians to potentially experience a reduction in their purchasing power that can also potentially undermine the preservation of capital.

What is the prime difference between each of those unit trust funds and what are the individual strategies adopted to maximise capital gains?
Each of the unit trust funds offer different opportunities for our investors, and they segregate Shariah investment from conventional investment. First: Inter-Pacific Dana Safi (IDS) is an actively managed Shariah equity fund that is developed to achieve its goal of maximising capital gains by investing in Shariah approved stocks listed in Bursa Malaysia. To achieve its investment objective, between 70 percent to 95 percent of the fund’s NAV may be invested in shares that conform to Shariah principles. It has a flexible asset allocation and may also invest in Shariah-based debt securities to help generate returns where yields are attractive and interest rate trends are favourable. Investment portfolio of the fund comprises instruments that have been classified as Shariah compliant by the Shariah Advisory Council of the Securities Commision or the Shariah Advisory Council of Bank Negara Malaysia. For instruments that are not classified as Shariah compliant by the Shariah Advisory Council of the Securities Commision or the Shariah Advisory Council of Bank Negara Malaysia, their status of the instruments has been determined in accordance with the ruling issued by the Shariah advisor.

Second: Inter-Pacific Dynamic Equity Fund (IDEF) is actively managed to achieve its goal of maximising capital gains by investing in stocks listed in Bursa Securities. To achieve its investment objective, between 70 percent to 95 percent of the fund’s NAV may be invested in shares. It has a flexible asset allocation and may also invest in fixed income securities to help generate returns where yields are attractive and interest rate trends are favourable. The allocations to fixed income securities are raised when weaknesses in the equity market are anticipated. Conversely, when equity markets are expected to perform well, the funds are reallocated from fixed income securities to equities.

Third: Inter-Pacific Social Enterprise and Responsibility Fund (ISERF) is a conventional wholesale equity fund that encourages social responsibility and social enterprise participation by utilising returns from investments. The fund will disburse 20 percent of the gain in the financial year—measured by an increase in the fund’s NAV within the financial year—either in the form of dividend declaration, capital repayment or any other methods, back to investors. The principal objective of the disbursement is for investors to participate in social responsibility projects and a cause of their choice. However, the actual utilisation of the disbursement is the sole discretion of investors. These are the three main funds that are currently managed by Inter-Pacific Asset Management and we believe that it offers investors a broad range covering retail, wholesale, Shariah and conventional segments. All of these funds are managed by DDNK and his team.

Has Shariah-based finance become a top pick in Malaysia and what is the impetus for it to gain momentum?
Malaysia’s history of Islamic finance started very early in the 1960s. The era of Islamic banking in Malaysia can be traced back to 1963 when Perbadanan Wang Simpanan Bakal-bakal Haji (PWSBH), currently known as Lembaga Urusan dan Tabung Haji (LTH), was established. Malaysia is considered a top destination for global investors in Islamic finance through banking and capital markets for more than six decades. Local investors have been exposed to Shariah-based finance as part of the government’s efforts in promoting Islamic finance, while the support from the Securities Commission on the capital markets has cemented Malaysia’s position among the top destinations for Shariah-based finance and investments. Malaysia is chosen because of its advanced position in Islamic banking and finance and the comprehensive legal and regulatory dual system is where conventional banking and finance functions parallel to Islamic banking and finance, which was then adopted.

What are the types of financial instruments that Inter-Pacific Dana Safi invests in in line with Shariah-based principles and what was the approximate achievement rate for its investment objective in 2020?
Inter-Pacific Dana Safi invests in the Shariah approved Bursa Malaysia equities. As there are not many financial instruments available in Bursa Malaysia, our concentration is towards the listed equities. There are some Islamic exchange traded funds available, but due to lack of liquidity, Inter-Pacific Dana Safi is almost 100 percent into the Shariah approved equities. To date, Inter-Pacific Dana Safi has met the objective by providing a ‘handsome’ return for investors. At the end of December 2020, Inter-Pacific Dana Safi that is currently managed by DDNK was ranked first by Fundsupermart and remains in the Quartile 1 of Lipper and Morningstar ranking.

Of the three unit trust funds, which one outperformed its peers in 2020 and why?
Of all the three unit trusts that Inter-Pacific Asset Management offers, Inter-Pacific Dana Safi reached the top in 2020 with more than 87 percent returns versus Inter-Pacific Dynamic Equity Fund and Inter-Pacific Social Responsibility Fund. This is attributed to DDNK’s strategy to focus on domestic technology, rubber gloves, healthcare and biotech companies, mimicking the performance of the US Nasdaq counters. In addition, Inter-Pacific Asset Management’s high portfolio turnover over the year has resulted in a more active movement of shares in the portfolio where we have successfully adopted a momentum trading strategy. DDNK was able to take profits from some of the companies and purchased the equities during significant market corrections.

What is the financial objective of wholesale funds and private mandates as part of Inter-Pacific Asset Management’s product offerings and how are they different from unit trust funds?
The US/Global Private Mandate investment that is currently offered by Inter-Pacific Asset Management is an opportunity for the mass market to access global markets. Currently, there are not many asset managers in Malaysia that can offer this opportunity as most of the exposure for the local asset managers lies in local equities. For as low as MYR50,000, investors can gain exposure to the likes of Tesla, Alphabets, Nvidia and Zoom in the US markets. This opportunity would provide investors with an alternative investment landscape rather than mired in the same country or region.

Furthermore, the US markets are always known for their powerful sectoral growth component, such as technology, artificial intelligence, internet and biotech. Wholesale funds target high-net-worth individuals, ultra-high-net-worth individuals and corporates with a minimum investment of MYR250,000. With all of these funds categorised under sophisticated clients, DDNK is able to offer more structured products to their needs compared to the retail market segment.

What is the role played by Inter-Pacific Asset Management in the administration and management of the unit trust funds in line with the deed, SC’s guidelines and other relevant laws in Malaysia?
Inter-Pacific Asset Management has always been supporting Capital Markets Malaysia which is under the purview of the Securities Commission. Adhering to the guidelines by the Securities Commission on the unit trust administration and agreement has been ingrained in the operational flow of Inter-Pacific Asset Management. Providing consistent feedback from investors to the Securities Commission is also part of Inter-Pacific Asset Management’s contribution to the industry. For the record, Inter-Pacific Asset Management has never been reprimanded for any breach of compliance by the Securities Commission or any other governing bodies in Malaysia due to its strict adherence to the guidelines.

Going forward, Inter-Pacific Asset Management will continue to contribute new ideas to the Securities Commission and other governing bodies in Malaysia. Taking a step further, which is not something that many asset managers in Malaysia would encounter, its experience in managing global markets through equities, exchange traded funds and other asset classes will be essentially important to the domestic asset management industry. Inter-Pacific Asset Management believes that the global market dynamics can be adopted and implemented in Malaysia by the Securities Commission and other relevant authorities. Other aspects point to efficient governance of short selling activities globally as well as leveraging exchange traded funds that can be looked into by the Securities Commission.

What makes Malaysia an attractive investment destination and what is your investment forecast for Inter-Pacific Asset Management over a six-month period?
As we move into 2021, Malaysia appears to look much better in our opinion. Despite the political uncertainties and resurgence of Covid-19, Malaysia is on the headlines for its domestic market. In our view, 2021 economic recovery will be underpinned by the effective roll-out of vaccines coupled with external growth and stable commodity prices as resumption of economic activities has allowed manufacturers to resume their operations. For the first half of 2021, we think that local large cap’s upside potential might be limited but a cyclical recovery could boost companies’ earnings within small to mid-cap and gain the interest of market participants. Against this background, we are optimistic about the prospects of the Malaysian economy and its equity market. As the major economies in the world are still suffering from the pandemic, we can never be too bullish and should not remain pessimistic at the same time. The stock markets may continue to climb higher or pause for a while—and we think that both are a game of possibilities.

What is the investment approach adopted by DDNK and what are the important factors considered for choosing to invest in a good business?
DDNK practices the untraditional strategies and investments like ultra exchange traded funds or long-term warrants that provide risk mitigation as well as consistent, attractive and resilient real returns. By combining fundamental and technical analysis, we are providing investors with a unique strategy that aims to generate returns that are less dependent on the overall movement of the stock market. This strategy is unique because we leverage financial instruments like inverse exchange traded funds for hedging or to generate income when we believe the market is overvalued. Through the use of these tactics and by strategically managing their exposure to the market, we should only have a modest correlation to other asset class returns.

Unlike the traditional portfolio management, we perform better than a buy-and-hold portfolio as we move investment time to time from poor performing stocks. DDNK practices an active portfolio strategy that aims to generate maximum value for our investors. That said, we focus on a specific class of assets or stocks that are off the radar or neglected by institutions. From an investment perspective, we believe that conventional value investing may be inadequate in a few developing companies where established institutions may be lacking and market forces are in an embryonic stage. Thus, we prefer our long book to be stacked with the most exceptional businesses because they surprise the world by compounding their value at unexpectedly high rates. Above all, our aim is to transfer the investment into potentially higher performing asset classes.

With Malaysia poised for a V-shaped, what is the anticipated influence on the domestic equity market for 2021?
Despite the gradual reopening of the economy and the roll-out of the vaccine, we expect the improvement to be broad-based sector by sector. In our view, the domestic equity market is predominantly plagued by political issues and overall it was bogged down by the 1MDB saga. The lacklustre scenario of the domestic equity market translates into investor disappointment on the back of not having a clear vision for policies. We are anticipating a few factors that could possibly affect the performance of the Malaysian market in 2021 such as the transition of power, the bubble of the US-China trade war and the delay of vaccines rolling out to the people. The road ahead remains bumpy coupled with local and external influences, but undemanding stock prices and a weaker dollar could see the market to play a catch up.

What is the current investment sentiment in Malaysia and how is Inter-Pacific Asset Management helping investors to rebuild their momentum through portfolio management?
Due to the pandemic, most Malaysians remain careful with their spending and this has hurt the economy at large. The six-month moratorium that was imposed by the government has helped most of the community to a certain extent, but the economy is still in a recovery mode. The political impasse in Malaysia and global pandemic has also caused local investors to be cautious of the overall situation. Inter-Pacific Asset Management has been very active in global markets where it offers investors a better alternative in finding strong returns, despite the protracted pandemic.

Investors that subscribe to the private mandate programme through a minimum investment of MYR50,000, which is considered to be one of the lowest initial investment for a global market, have been able to gain access to the global markets. The strong performance of DDNK shows that investor confidence has grown. The programme is still on-going and it saw Inter-Pacific Asset Management open a whopping 1,450 individual and corporate private mandate accounts worldwide.

How are money market funds currently performing in Malaysia and how Inter-Pacific Cash Fund is changing the game for the conservative money market funds?
Money market funds are one of the most sought-after funds in Malaysia mostly by corporates due to the zero capital tax gain. Inter-Pacific money market funds remain attractive to investors as the fee charges are very competitive compared to other asset managers. The other advantage of the cash management fund is that Inter-Pacific Asset Management does not impose any penalty for part withdrawals.

The investment calculation will still be based on the remaining balance unlike fixed deposits where penalty will be imposed on part withdrawals. In comparison, investors who place their money in fixed deposits may not get the accrued interest if they withdraw their money before maturity and since money market funds are still relatively alien to the retail investors, Inter-Pacific Asset Management has been introducing the fund to retail investors with a highly competitive fee, compared to other asset managers.

What were the uphill battles that Inter-Pacific Asset Management was challenged with in 2020 and what is the key takeaway from those encounters? Give an example.
Among the uphill battles that Inter-Pacific Asset Management faced during 2020 was the pandemic that caused investors to become sceptical about investments. The fact that most global markets dipped between February and March 2020 did not help the situation. Also, remote work has limited interaction with corporate clients as most of the corporates have decided to postpone any investment decision due to the current economic glut. Achieving effective communication through Zoom sessions was also a challenge to the team in Inter-Pacific Asset Management as investors still prefer to have meetings in person to understand more about the products. Nonetheless, after a few months of online meetings, investors were able to grasp the situation and things have progressed smoothly in the last six months.

Has Inter-Pacific Asset Management established its presence outside Malaysia and what is its key business focus for 2021?
Our main operation is currently focused on Malaysia, as it is easier and more strategic to operate within the environment that we fully comprehend. We are aiming to expand our presence into Singapore as our asset under management and clientele growth is expected to reach our target within the next two years. DDNK’s biggest aim is to create the first Islamic hedge fund in the world that first started in Southeast Asia. In the future, our key business will emphasise on consistent returns that beat market benchmarks and streamline our products and services.

How is Inter-Pacific Asset Management contributing to Malaysia GDP development overall?
Over the years, the fund management industry has played an important role in contributing to Malaysia’s GDP development. The total size of the capital market expanded to RM3.2 trillion as of 2019 from RM3.1 trillion in the year before. Notwithstanding the challenging global backdrop coupled with ongoing domestic policy reforms and surging coronavirus cases, the Malaysian capital market witnessed a higher level of liquidities in 2020. Against this background, we aim to increase assets under management, while addressing investor needs through expansion of our investment product offerings and differentiating our product platform from that of our competitors.

Will Inter-Pacific Asset Management introduce more Shariah-based financial products in the future?
The Shariah-based universe is always our niche, which is in line with our company objective to become the Islamic Hedge Fund company in the long run. Looking forward, we are planning to introduce more Shariah-based financial products. As of now, we are going to introduce a new unit trust that caters to the US market. The fund is Shariah-based Dana Abadi, a US Shariah Unit Trust Fund. Our private mandate will continue to focus on different strategies in the coming years for our private mandate investment.

Will Inter-Pacific Asset Management focus more on the Shariah-niche-base in its investment module?
Shariah-niche-based financial products have been our strength that cater to the demand in the local market. As we evolve, there will be more Shariah-based products to be introduced to provide more flexibility to our clients based on their risk appetite. For this year, we will be introducing Dana Abadi, a US Shariah trust fund to our local investors who seek Shariah-based financial products with competitive returns.

The post Putting Malaysia on the world’s financial map appeared first on International Finance.

It is reported that the country’s economic managers predict it to shrink 5.5 percent this year from an earlier estimated decline of 2 percent to 3.4 percent before a strong rebound next year. It appears that the economic cost of trying to curb the infection spread through continued restrictions on movements has weighed heavily on its domestic demand and investment. Even Bloomberg economists said that the Philippines’ gross domestic product in the second quarter of the year marked an all-time low for the economy and more weakness is expected in the coming months.

Abhineet Kaul, who is the senior director of public sector and government, Frost & Sullivan Asia Pacific, told International Finance, “With the resurgence of coronavirus in the Philippines and continued lockdown, the economy will take a beating. We expect a U-shaped recovery with return to growth by Q1 2021. However, the domestic investment is expected to pick up by Q4 2020 and will drive the short-term demand. This is evident by the pledged DDI in H1 2020, which is 166 percent higher than the same period in 2019.” For now, the country is facing an economic downturn—and despite that many developments are simultaneously happening to secure the country’s investment environment and competitiveness in global markets.

Creation of new economic zones will protect investor interest
Last July, the President during the Station of the Nation Address highlighted the significance of Administrative Order (AO) No. 18 which aims to distribute the economic and business activities of the country by strengthening the development of special economic zones. What is interesting about the country’s efforts in building itself up as an attractive investment destination to foreign and local investors is the continued creation of economic zones in line with the Philippine Economic Zone Authority’s (PEZA) mandate according to the Special Economic Zone Act of 1996. It was in June that the Philippine government through the Office of the President’s presidential proclamations approved the 12 new economic zones to be managed by the authority.

The creation of the 12 new economic zones will promote rural development, encourage nationwide economic activity and boost investor interest. This is especially important with the contagion effects of the pandemic affecting the country on many levels. Among the 12 economic zones, the first five were proclaimed in January this year under Presidential Proclamation Nos. 885, 889, and 895-897. These zones are Abiathar Commercial Complex, TDG Innovation and Global Business Solutions Centre, Millennium Industrial Economic Zone, Ayala Bacolod Capitol Corporate Centre and Silver City.

That said, the remaining seven economic zones were proclaimed under Proclamation Nos 940, 946-950, and 953, which were signed by President Rodrigo Duterte. These economic zones include Davao del Sur Industrial Economic Zone, Batangas State University Knowledge, Innovation and Science Technology Park, GLAS Office Development, Bench City Centre, Ortigas Technopoint Tower 1 & 2, NEX Tower and Robinsons Luisita 2. It appears that 67 percent of the total approved investments will be located in Luzon while the remaining 33.33 percent will be in Visayas and Mindanao.

PEZA’s role in the development of economic zones
The fact of the matter is that the authority is pivotal to the current and future development of the country’s economic zones. This is because “it manages 408 operating economic zones which includes 284 in Luzon, 82 in Visayas and 42 in Mindanao with 4,584 of its locator companies directly employing about 1.6 million workers nationwide,” PEZA Director General Charito “Ching” Plaza told International Finance. However, the authority directly manages four of the total 408 economic zones which are privately developed. Despite the nature of development, “the economic zones are regulated under R.A. No. 7916 under which PEZA has the mandate to regulate and supervise the operation of PEZA-registered economic zones.” The authority contributes to 64 percent of the Philippines’ export of commodities and 16.8 percent of its GDP. Now it is actively taking initiatives to promote national development and industrialisation by coming up with a myriad of projects such as the new 10-point programme and the Development Outreach for Labour, Livelihood and Advancement of Resources (DOLLAR) programme.

The DOLLAR programme was launched to accelerate rural progress and encourage nationwide progress in the country. This is anticipated to result in the economic growth of local government units which will be hosting the viable and environment-friendly economic zones. The authority has launched an online job platform which aims to provide 69,081 jobs within its economic zones and an online skills training programme to help people to further develop their skills. Meanwhile, the 10-point programme seeks to assist existing investors and attract new ones to create a globally competitive, sustainable and environment-friendly business landscape for export-oriented companies in economic zones.

In short, PEZA is imperative to the development of all types of economic zones including manufacturing, assembling, processing, IT services, agro-industrial, medical tourism, knowledge and technology. The authority explained that the new economic zones will be in addition to the existing 408 economic zones, each providing their own fiscal and non-fiscal incentives to foreign investors. Kaul explained that “10 of the 12 new economic zones are in high value-adding digital sectors which will help to catalyse investment and job opportunities in the Philippines. They are expected to generate an additional Ph6.4 billion in this fiscal year. While the long-term outlook looks good, the short-term investment will be impacted due to the coronavirus.”

Foreign investment portfolio—by numbers
For the country, a cause for truly legitimate concern is its foreign direct investment. “The investment outlook is not very good. In 2019, the foreign direct investment of $5 billion was below the government’s target of $8 billion and also below the 2018 record of 6.6 billion. Even the latest numbers in April 2020 were down 68 percent compared to April 2019,” Kaul said.

The central bank of the Philippines said in a statement that the “registered foreign portfolio investments for June yielded net outflows of $235 million resulting from the $1.3 billion gross outflows and $1 billion gross inflows for the month.” This record is smaller than the net outflows of $1 billion in May. “The $1 billion registered foreign investments for the month was more than twice the investment record of $486 million for May 2020.” It is reported that 92.3 percent of investments registered were in PSE-listed securities, while the remaining 7.7 percent investment was directed into Peso government securities. It seems that the foreign investment outflows for June was lower compared to the recorded outflows for May. The US had received 61.4 percent of the total outflows.

The foreign investment commitment in the first quarter was propelled by investments from the UK, the US and China. The UK, Singapore, the US, Norway and the Bahamas were identified as the top five investor countries for June, with a combined share totalling to 71.7 percent. “The Philippines registered foreign portfolio investment transactions from January 1 to June 30 this year yielded net outflows of $3.3 billion resulting from $9 billion gross outflows and $5.7 billion gross inflows for that period,” the central bank said in a statement. “This is larger compared to $721 million net outflows noted for the same period last year, brought by uncertainties such as the impact of the coronavirus pandemic on the global economy and financial system, and other key events earlier this year like the continuing geopolitical tensions between the US and Iran; ongoing trade negotiations between the US and China; and renegotiation of the contracts of the country’s water concessionaires. Meanwhile, year-to-date transactions for all investments including PSE-listed securities, Peso GS and other investments have resulted in net outflows.”

Ecozones incentives to attract foreign and local investors
The authority administers incentives to investors and companies registered in the economic zones. The incentives include income tax holiday, tax and duty free importation of capital equipment or supplies, exemption from payment of local government taxes, employment of foreign nationals and special visa for foreigner investors and long-term lease up to 75 years among other aspects. “Our incentives have already been tried, tested and proven over the years to attract investors and compete globally as attested to by industry associations and international institutions,” PEZA Director General Charito “Ching” Plaza said. “From the ecozone investors’ perspective, any reduction in the existing incentives will erode the country’s competitiveness in attracting new foreign direct investment and might even trigger an exodus of existing ecozone locators or reallocation of their production quotas to other countries where they can be more viable with their export operations.”

According to the Philippines Chamber of Commerce and Industry, providing additional flexibility in fiscal and non-fiscal incentive grants is important as the country competes internationally for high-value investments. For that reason, the authority supports the grant of longer ITH and 5 percent gross income earned incentives including the retention of tax and duty-free importation and zero VAT rating for local purchases of production-related materials for strategic and large scale projects. “This in turn will encourage the existing locators to expand their operations and to re-invest in new projects in the country to be eligible for transition to the new incentives’ regime.”

Economic zones will lead to socio-economic progress
The purpose of further developing economic zones is quite clear. The new and existing economic zones will “help to create job opportunities for locals and build forward and backward linkages,” PEZA Director General Charito “Ching” Plaza explained. “This will in turn boost socio-economic progress and reduce crime and poverty incidences in regions as experienced by local government units hosting the economic zones.”

The rising number of economic zones are seen as drivers for growth especially to less developed urban areas in the country. The development of economic zones will transform idle lands for better use and address unemployment to a great extent. In fact, new economic zones are yet to be developed in different regions with thousands of hectares of idle lands present. According to PEZA’s data, regions such as NCR and Region IV have the highest number of economic zones with contributing capacity to the country’s gross domestic product as they have a multiplier effect in the local business landscape. For example, Cavite, a province located in the Calabarzon region in Luzon only had two municipalities prior to the creation of PEZA’s public economic zones in General Trias. Now, it has developed three cities within the province and seven municipalities. “Flourishing economic activities and better livelihood is what we want to create across the country,” PEZA Director General Charito “Ching” Plaza said.

Similarly, private and public economic zones are located in Pampanga and Mactan among other areas. “Even with the difficulties caused by the coronavirus pandemic, PEZA will continue to attract investors in the country and promote creation of special economic zones especially in the countryside that will become economic drivers in every region,” PEZA Director General Charito “Ching” Plaza said. The development of numerous infrastructure projects by the national government under its ‘Build, Build, Build’ programme will complement the creation of more economic zones across the country because infrastructure, logistics and digital connectivity are imperative to enhance the ease of doing business.

Ease of doing business will be more pronounced
Certainly, a high employment rate and ease of doing business will contribute to sustainable economic development. “The new economic zones will also provide employment opportunities to our repatriated OFWs and those who have lost their jobs due to the unfortunate effects of the coronavirus pandemic,” PEZA Director General Charito “Ching” Plaza explained. Last year, the country’s unemployment rate decreased to 5.1 percent and it is expected to further decline in the coming years. Even its Labour Force Participation Rate increased to 61.5 percent last October compared to the previous year. But the International Monetary Fund expects the country’s unemployment trend to be largely affected by the pandemic, with an estimated increase of 6.2 percent in 2020 and decrease of 5.3 percent in 2021.

For that reason, the existing and new economic zones will stabilise the economy and ensure uninterrupted services to locator companies operating in the country despite global challenges. “The IT-BPO sectors under PEZA remain strong amid the negative impacts of the pandemic. Many BPO companies were quick to facilitate a work from home arrangement for their staff or were able to provide living quarters for them to ensure business continuity and still be able to provide support to their clients abroad,” PEZA Director General Charito “Ching” Plaza said.

It is positive that statistics show 77 percent of the IT sector and 92 percent of the manufacturing sector were operational for the period July 27-30, 2020. A total of 2606 companies were operating nationwide during that period, while 700 of them remained non-operational. The status of operations also point to an estimated total of 69,081 job openings recorded during that month. The authority has invested a lot of effort in implementing effective strategies to protect the welfare of workers and ensure continuous business operations during the pandemic. For example, stringent procedures were implemented in compliance with the guidelines set by the Inter-Agency Task Force for the Management of Emerging Infectious Diseases to curb the spread of the coronavirus infection. These procedures include social distancing measures, use of thermal scanning equipment, sanitisers and face masks and regular disinfection of the workplace.

Implications of CREATE Act for investors and businesses
According to Kaul, more than the new economic zones—the CREATE Act—if passed has a potential to attract investment by providing standardisation and clarity to investors about the incentives. The country is preparing to issue the CREATE Act through which the government will reduce the corporate income tax rate from 30 percent to 25 percent until 2022. After that, one percent annual reduction will be made until 2027 to lower the rate to 20 percent. The government has assured that the CREATE Act will lead to a fair and accountable tax incentive system in the country.

In this context, the authority explained that “PEZA supports the objectives of the CREATE bill, mainly the goal to rationalise the fiscal incentives to make them performance-based, targeted, time bound and transparent. However, its position is that the proposed rationalisation of incentives as espoused in the said bill need not result in the reduction of tax perks currently being offered by PEZA.”

The Fiscal Incentives Review Board, an agency which is responsible for managing the country’s investment promotion agencies will be given the authority to recommend appropriate fiscal and non-fiscal support incentives, under the CREATE Act. The fiscal and non-fiscal support incentives will include tax incentives, logistics support, training, facilitation of obtaining certification from government agencies and customs facilitation for investors. It is estimated that businesses in the country can save $842 million in tax savings and more than $12.5 billion over the next five years. Then these savings will be reinvested by businesses to empower themselves and increase cost competitiveness. This move is especially important to the Philippines at a time when it is exploring new ways to hit quick recovery and secure economic activities despite the protracted pandemic.

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In 1952, the Saudi Arabian Monetary Authority was established by two royal decrees and continues to monitor the banking industry to date. Following the establishment of the regulator, it licenced a significant number of local and foreign institutions which introduced new products and services to both retail and commercial customers in the Kingdom. That has led to the creation of today’s key players including the National Commercial Bank and Riyad Bank.

Cut to recent times, the Kingdom’s banking industry demonstrated strong financial performance compounded with promising profit growth in 2019. The total assets of the Kingdom’s five largest banks increased by 16 percent to reach $453.2 billion. The banks’ combined loans and advances expanded by 15 percent to $266.6 billion, with an impressive 30 percent growth in profits totalling to $9.1 billion from $7 billion in 2018.

Saudi banks see a new wave of mergers and acquisitions
Another notable event which took place last year was the merger of Alawwal Bank and the Saudi British Bank leading to a structural change in the industry. Also, the Saudi Arabian Monetary Authority granted two new banking licences to Credit Suisse and Standard Chartered Bank. Despite the pandemic, it appears that there is room for new establishment of banks in the Kingdom. For example, the National Commercial Bank which is the Kingdom’s largest bank by assets is likely to acquire rival Samba Financial Group. Under the terms of the proposed deal, the National Commercial Bank has offered to pay $15.6 billion to Samba Financial Group at a premium of 27.5 percent to the latter’s share price. It is anticipated that the consolidation will create the third largest lending in the region with total assets of approximately $210 billion, put behind Qatar National Bank and First Abu Dhabi Bank.

In this context, Christos Theofilou, a senior analyst at Moody’s, told the media, “NCB would benefit from Samba’s strong corporate and investment banking franchise and well-established risk management practices. The merger would combine NCB’s large franchise across most business lines and mass retail capabilities with Samba’s upper-middle-income retail presence and well-established corporate banking franchise.”

Even prior to the pandemic, the Kingdom and the wider GCC were on the brink of a new wave of mergers and acquisitions to boost competitiveness, reduce operating costs and increase capital amid slow economic growth. The Saudi Arabian Monetary Authority is also processing additional applications for two traditional and one digital banking licences. In fact, the regulator has accelerated the application process for banking licences — making the Kingdom an attractive hub for banks seeking to foray into the domestic market in the future.

Are Saudi banks equipped for the pandemic’s distress?
Truth be told, the Kingdom’s banking industry started this year on a promising note, with 13 local banks offering services to a population of more than 30 million people. But as experts have emphasised the long-standing effects of the pandemic on the industry, the scale of the impact could be significant on its asset growth through this year. This is despite the fact that the Kingdom’s banks have strong capabilities to remain profitable over looming difficulties — as was the case in the past.

For example, the Saudi Arabian Monetary Authority experienced its first complexity in the 1960s when a number of non-performing loans established by Al Watany Bank led to the collapse of a major financial institution. This in turn had a residual effect on the regulatory framework governing the banking industry.

The Saudi Arabia Monetary Authority has provided support for domestic banks by rolling out a myriad of measures in response to the pandemic. These measures include funding to help companies maintain employment levels, support banks customers who have lost jobs, restructure loans without additional fees, waive off charges for accounts holding below minimum balances, refunds for customers on currency exchange fees during travel plans.

In March, the Saudi Arabia Monetary Authority introduced the Private Sector Financing Support Programme to strengthen financial stability and support the government’s efforts to protect businesses worst affected by the pandemic. The programme seeks to allocate $13.3 billion in loan guarantees for the sake of deferred payments and direct funding for lending.
The long-standing impact of the pandemic
But in the midst of a protracted pandemic causing global recession — what is the impact on the domestic banking industry? Is the industry prepared to fight the downside effects of the pandemic? Will the pandemic undermine the industry’s asset growth?

It is certain that declining oil prices and Covid-19 pandemic in early 2020 is posing great challenges for the global banking industry. In this context, Ovais Shahab, Head of Financial Services, at KPMG Saudi Arabia, told International Finance, “In 2020, the majority of banks across the world will inevitably face challenges, and the Saudi banking sector is no exception. However, the resilience and strength of the Saudi banking system will allow it to cushion the economic fallouts of Covid-19.”

S&P Global Ratings in a report titled Saudi Banking Sector 2020 Outlook: Risks Contained Despite Higher Credit Growth noted that the profitability of the Kingdom’s banks could lower slightly on the back of softening monetary policy and rates decline. That said, in another report titled Banks In Emerging Markets: 15 Countries, Three Main Risks,

the ratings firm expects the credit losses to stabilise with the help of steadying economy and mortgage-led lending growth. In fact, S&P has praised the Saudi Arabian Monetary Authority for keeping a good track record. Last September, the long-term rating on banks stood at BBB+ in line with a stable outlook.

Now the domestic banks seek to expand beyond competitive corporate and retail segments in the long term — extending their services to underserved market segments such as smaller enterprises and microfinance. In the first quarter of 2020, the Kingdom’s banking industry saw 13 locally licenced banks, of which, five of them held total assets worth more than $53.2 billion.

Banking performance in 2020 — an overview
In March, the central bank foreign exchange reservesdropped at its fastest rate in at least 20 years — and the Kingdom’s budget deficit dropped to $9 billion in the first quarter as oil revenues crashed.

“With the dissemination of financial results for the first quarter of financial year 2020, the magnitude of the pandemic impact on the banking industry has unfolded. The banking sector has reported an average increase of 93.3 percent in expected credit losses for the first three-month period and significant declines in market valuations since December 2019,” Shahab explained. “Nonetheless, healthy credit underwriting until February 2020 enabled total assets to rise 3.9 percent to SAR 2,540 billion ($677 billion), while total customer deposit edged up 1.5 percent to reach ($489 billion). Total gross loan book also posted an average growth of 4.9 percent. Despite the hike in expected credit losses, a substantial amount of income in the form of a SAR 1.12 billion government grant resulting from Saudi Arabian Monetary Authority support measures which have restricted the decline in net profitability only to 6.9 percent, relative to the same period of financial year 2019.”

The consequences of the pandemic for the banking industry in the Kingdom and globally is still unclear. But the consensus among economists is that there will be a slowdown in activities and a downward revision in GDP growth targets for 2020. For that reason, most governments have outlined inducement measures to sustain the economy and protect the core of the banking system in the long term.

SAMA issues measures to preserve the core banking system
A report published by KPMG said that the Saudi Arabian Monetary Authority has issued a myriad of measures and guidelines for banks and financial institutions in the Kingdom to cope with the pandemic’s distress. For example, it has introduced a Private Sector Financing Support Programme with a total value of SAR 50 billion.

In theory, the regulator has introduced key financial support programmes and qualitative measures through commercial banks. The support programmes comprise allocation of a SAR 30 billion stimulus package for banks and financing companies to delay SME dues for six months of its date, provide concessional finance of nearly SAR 13.2 billion for SMEs by granting loans from banks, allocation of SAR 6 billion for MSME sector to facilitate secure financing for banks under the Kafalah SME Loan Guarantee Programme and support the ecommerce sector by bearing the costs for point of sales and ecommerce services.

That said, the qualitative measures include extending working capital finance to all corporates to meet short-term liquidity requirements, flexibility in repayments of consumer finance to individuals who have lost their jobs due to the pandemic, waiver of all fees in the use of digital banking, waiver of minimum deposit balance requirement for up to six months and review credit card interest rates adjusting them to reasonable APR rate.

The regulator has been quite responsive to the current situation and has injected $13.3 billion into the banking industry as they prepare to resume operations. Shahab said, “The stimulus package has aimed to enhance the liquidity, as well as enable banks to continue providing credit facilities to their clients. The central bank’s decision to inject such a large amount of cash into the banking sector in the form of a one-year free deposit is rooted in its role of promoting financial stability. It will further help the wider banking sector to continue to provide credit to borrowers during this challenging period.”

The amount was injected in an effort to ensure the banking industry is able to continue lending to private firms on the back of slow economic recovery. The regulator said in a statement that the banking industry remains strong with assets up 14 percent in the first quarter of 2020 compared to the previous year.

It appears that banks are relatively high on liquidity compared to the pre-Covid-19 period, observed the KPMG report. Shahab further explained that “The Saudi Arabian Monetary Authority has always made sure there is enough liquidity in the monetary system in general and in the banking sector in particular. Such support is part of several financial stimulus programmes spearheaded by Saudi Arabian Monetary Authority since the start of Covid-19 outbreak Its ongoing support to banks through liquidity and relief, amplified by recently announced measures, has been the key mitigant to combat the impact on the banking industry.

“A robust support programme by the apex bank suggested that panic-driven measures such as foreclosures, uneconomical debt restructurings and forced liquidations have not been rampant. These measures have been a breath of fresh air not just for the corporates, primarily the micro, small and medium enterprises (MSME) sector, in addition to banks as they combat the economic fallout on the front lines.”

Finance Minister Minister Mohammed Al Jadaan said that the Kingdom must reduce expenditures to mitigate the negative economic effects of the pandemic. “Saudi Arabia is committed to protecting itself from the economic fallout of the Covid-19 pandemic through any necessary financial measures despite plunging oil revenues,” the Finance Minister told the media. The Saudi Arabian Monetary Authority confirmed that the Kingdom’s foreign assets have dropped to $464 billion — marking its lowest record in 19 years as it combats economic fallout.

KPMG’s ‘cautious optimistic’ outlook explained
Against this background, KPMG conducted a survey on C-suite executives to fully understand the severity and duration of the pandemic’s impact and the banks’ preparedness to strategies undertaken by the regulator and the government. The first point emphasises 10 percent to 20 percent of the loan book for more than half of the banks need to undergo restructuring changes. The second point highlights that SME financing is the most impacted followed by consumer and corporate banking. The third point notes that banks consider Saudi Arabian Monetary Authority’s plans to be highly comprehensive and sufficiently focused on all business segments.

The KPMG report also pronounced the fact that it is important for banks in the Kingdom to assess whether the credit risk on a financial instrument has increased since initial recognition. However, the rising challenge for the banks is to incorporate predictions associated with the economic impact of the pandemic. In fact, the report has expressed ‘cautious optimism’ for the domestic banking industry.

“The financial trends identified by KPMG’s analysis for 2019 were mostly positive, and particularly impressive, given the unique political and economic circumstances the region has witnessed in recent years, reflecting the continued resilience of the Kingdom’s banking sector. Saudi Arabia’s 11 listed banks reported an asset growth of 12 percent to $652 billion during the fiscal year 2019, with a healthy 40.9 percent growth to $12.03 billion in net profit. Our evaluation of the key financial indicators for the past year suggests growth and a positive outlook for the banking environment in the Kingdom, fueled by a proactive government and bespoke initiatives by the regulators,” Shahab said. “However, banks that are agile, flexible and willing to transform their business models will succeed, and secure their financial strength for future growth, while those that rest on their laurels will be left behind. Of late, the Covid-19 situation has not only tested the strong capitalisation and high profitability of the sector but indicating a dynamic shift in investment towards digital platforms and omnichannel functionalities. Looking forward, KPMG’s key predictions for 2020 include continued customer focus through innovation, cost and operational efficiencies to remain a priority, limited asset and profit growth, increasing capital and fundraising activity, further consolidation and rethinking of business models.”

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