IFM Correspondent

February 1, 2017: Germany’s Deutsche Bank has been hit with a $629 million penalty in the US and UK over a $10 billion money laundering scheme that involved its branches in Moscow, New York and London.

The UK Financial Conduct Authority ordered a $204 million fine on January 31 hours after New York’s Department of Financial Services fined the bank $425 million for failures over the so-called “mirror-trades”. The US Justice Department is investigating the trades, which were used to convert rubbles into dollars and transfer the money out of Russia.

“The bank missed numerous opportunities to detect, investigate and stop the scheme due to extensive compliance failures, allowing the scheme to continue for years,” the New York Department of Financial Services said in a statement.

This penalty follows a $7.2 billion settlement Deutsche Bank reached with the US Department of Justice in December over toxic mortgage assets. The German lender admitted in a 71-page statement of facts that it made “false representations” to mortgage bond investors and omitted material information.

The bank agreed to pay $7.2 billion and admitted to misleading investors. It will pay a $3.1 billion civil penalty and provide $4.1 billion in relief to homeowners.

Deutsche Bank is expected to tap current legal reserves to pay the US fine, potentially reducing pre-tax profits.

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Alibaba Group is principally engaged in online and mobile commerce through offering of products, services and technology that enable merchants, brands and other businesses to transform the way they market, sell and operate in the People’s Republic of China as well as internationally.

By teaming up with retailers, billionaire founder Jack Ma hopes to develop a new model of online and offline retail.

Apart from Intime, Alibaba has also bought into two other Chinese companies — Suning Commerce Group Co. and Haier Electronics Group.

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Neiman Marcus Group is a luxury department store headquartered in Dallas, Texas. The group decided to withdraw its filing for an IPO after sales plummeted in December, showing a wide loss in the first fiscal quarter.

“The company has determined that it is not in its best interest to proceed with the initial public offering” at this time, according to a filing with the US Securities and Exchange Commission (SEC).

The retailer previously filed to go public in June 2013 before owners TPG and Warburg Pincus sold it to Ares and CPPIB.

The store has reported five straight quarters of declining comparable sales, including a whopping 8% drop last quarter.

Macy’s and Kohl’s also reported slow sales, causing them to cut future forecasts. Macy’s, the largest department-store company, also pushed ahead with a plan this week to shutter 100 stores and eliminate about 10,000 jobs.

Over the last year, there has been a clear shift to online shopping as compared to physical shopping. Consequently, there has been a significant drop in sales in November and December.

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Suparna Goswami Bhattacharya

May 13, 2016: With oil price continuing to show no signs of improvement, it is no secret that oil dependant nations have to think of alternatives to run their economy. The Kingdom of Saudi Arabia recently announced a slew of measures titled ‘Vision 2030’ to help the economy make a smooth transition away from oil.

Thirty-year-old Deputy Crown Prince Mohammed bin Salman emphasised that urgent steps needed to be taken to save the economy from running out of cash reserves. According to estimates, the Kingdom had cash reserves of $746 billion in 2014, which is now down to $616 billion. “To be fair, this is still a lot compared to other nations, but the fact is cash reserves are depleting fast. And there is no major alternative source of income apart from oil,” says Hassan Ahmed, an independent researcher who studies Middle East economies closely.

Saudi Arabia’s budget deficit in 2016 stood at $87 billion, which was slightly less than the 2015 figure of $98 billion. However, these figures do not take into account the cost of the war in Yemen. So, in actuality, the numbers could be well above $100 billion.

Vision 2030 aims to restructure the economy such that it will not rely on oil as its primary source of revenue. It also includes a much-awaited National Transformation Programme (NTP), which will include a drive for efficiency, tax increases, strategic spending cuts and a bigger role for the private sector.

The goals will be achieved by 1) replacing imported products; 2) creating an ecosystem for entrepreneurship; 3) transforming the welfare state.

According to Saudi American Public Relation Affairs Committee (SAPRAC), the vision revolves around, but is not limited to, privatisation, governance, investing in human capital and economic diversification.

“I am mostly impressed by the aim to increase non-oil government revenue. I believe it is the most ambitious and vital cornerstone of Saudi’s vision for 2030, as it will require an extensive reformation of Saudi Arabia’s income model,” says Salman al-Ansari, founder and president of SAPRAC.

The reforms envision increasing the role of women in the workforce from 22% to 30%. Towards this end, the government announced a special business park for women, which is expected to create around 21,000 jobs.

Saudi Arabia is restructuring its housing ministry to increase supply of affordable housing by creating a ‘green card’ system within five years to give expatriates long-term residence.

Masood Ahmed, director of the IMF’s Middle East and Central Asia department, says, “I do see a number of actions plans to address the budget deficit. That gives us comfort and encouragement. The scale of the plan measures up to the challenge facing the economy.”

A report by SAPRAC states that the Kingdom should create a specialty industry. For example, the country should produce experts in building and designing carbon fibre vehicles. Such experts can turn Saudi Arabia into a premiere destination for acquiring expertise and logistical advice in the industry in question. For example, Taiwan produces computer chips so cheaply yet effectively that barely any other country bothers making them, leaving Taiwan to reap all the financial and economic benefits.

“There is a need to create a technical working middle class, which is now almost totally comprised of expatriates. The young generation have got used to doles from the government. Saudis should be made to realise that everything cannot be taken care of by the government,” says Ahmed, an independent research analyst.

For instance, all 1.2 million college students inside the country receive free university enrolment, free books, free use of labs, dorms and professors. In addition to that, they all receive SR 990 ($26,399) monthly regardless of their economic status. This is unheard of in any other nation.

Additionally, Saudi Arabia has been a country where money was sent out as quickly as it was made. To build a nation with a robust economy, capital is needed from both private and public sectors. With the private sector having no incentive to keep their money inside the country, this will be a handicap to the development and diversification of the economy. Hence, it is important to move away from cradle-to-the-grave social welfare by introducing taxes to people that can afford them (say, property tax and VAT on retail products).

The government aims to increase foreign direct investment (FDI) to 5.7% of GDP as against the current 3.8%. Traditionally, the compiled wealth has left the country as fast as it’s been accumulated, as expats transfer up to 90% of their income to their home countries. Even wealthy Saudis regularly invest in foreign stock markets and various savings accounts abroad. Since the slump of 2014, Saudi Arabians have sent about $73 billion out of the country.

The steps have been announced and now it’s about implementation.

“One of the goals is to have a more efficient government that is less hampered by bureaucratic red tape. Steps to achieve this are already being undertaken. At the very latest, you will start to see these reforms come to fruition some time in mid-2017,” says al-Ansari.

Though the road ahead is not easy, the fact that the government has made a start is reassuring for the global economy. And, what happens in Saudi Arabia will impact the global economy, or at least the Middle East countries.

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February 15, 2016: The insurance industry in Bangladesh is considered to be an untapped sector. It has one of the lowest insurance penetrations in the world (around 1%). While some choose to be pessimistic about it, insurance experts tend to view this as an area full of possibilities and opportunities. Lack of awareness regarding insurance is very much visible, which makes it hard to achieve our desired growth in the industry.

Currently, we are seeing a consistent 13%-15% growth every year in the insurance industry. If this reaches 20%, this will be a remarkable achievement for the industry. Being the market leader and the only AAA rated insurance company in Bangladesh; Green Delta Insurance believes that when the industry grows, they grow as well.

The market penetration of insurance is currently less than 1%. With our flagship project ‘Insurance For Everyone’ and the government’s recent praiseworthy initiatives related to safety net insurance to give coverage to the bottom of the pyramid group, we are hopeful regarding the possibilities of a 5% market penetration within 5-10 years’ timeframe.

Green Delta Insurance holds 13-14% of the market share of the insurance industry being the leader of the non-life insurance sector at the moment. In the decade ahead, if our projections work out properly, we will be more aggressive in the market and aim to capture 22-25% of the market share.

Green Delta Insurance is the first non-life insurance company from Bangladesh to introduce the retail insurance department. The department was created with the motto ‘Insurance for Everyone’. Ms. Farzana Chowdhury, MD & CEO of Green Delta, was the person who gave birth to the concept. After the formation of the retail department, the people in the department are working hard to take it forward. The direct sales team is going door to door to build awareness regarding insurance and convince people about the brighter side of having an insurance policy.

The insurance penetration in Bangladesh is less than 1%, which shows the current scenario of the market. There’s always a negative aura regarding insurance among the general people of our country. We see people try to avoid buying a policy unless it’s mandatory by law. So, naturally the job for the Retail Insurance department is very challenging. But Green Delta is coming up with innovative branding strategies to create a positive buzz in the market. A wind of change can be felt already. The market is growing slowly but consistently. Green Delta is not only promoting its own products but also promoting the overall sector.

The main products that the retail insurance department sells are Motor Insurance, Overseas Mediclaim Insurance, Personal accident insurance, People’s personal accident policy, Health Insurance, All risk insurance and Nibedita – Comprehensive Insurance scheme for women. There are few other projects under Retail and SME. They are Niramoy-micro insurance for rural people, Shudin- micro insurance for garments workers, Weather index based Crop Insurance and Probashi- Comprehensive Insurance Scheme for Migrant workers.

The insurance penetration in Bangladesh is less than 1%, which shows the current scenario of the market. There’s always a negative aura regarding insurance among the general people of our country. We see people try to avoid buying a policy unless it’s mandatory by law. So, naturally the job for the Retail Insurance department is very challenging. But Green Delta is coming up with innovative branding strategies to create a positive buzz in the market. A wind of change can be felt already. The market is growing slowly but consistently. Green Delta is not only promoting its own products but also promoting the overall sector.

As the market leader, Green Delta wants to grow with every other insurance company because that’s the only way to materialise the concept of insurance for everyone. It will be difficult for a single company to change the scenario regarding insurance penetration so the support of the other insurers is expected.

Green Delta is confident about the success of this department. The number of people who started believing in insurance products is increasing every day, which promises a better day for the industry. Green Delta is leaving no stone unturned to educate the general people regarding the necessity of insurance. Positive results can be noticed through public behaviour on social media.

A country’s strong economy is very much interrelated with its insurance market. Bangladesh’s economy will grow rapidly once people start realising the importance of insurance in everyday life. Retail & SME Insurance in Bangladesh is committed to bring about a positive change in the insurance market.

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