China’s Pollution Crackdown: How Severe is the expected Macro-Economic Impact?

China is undergoing an environmental paradigm shift, transitioning from the world’s top polluter to global leader in the fight against climate change. In recent months, China has dramatically strengthened the enforcement of its environmental regulations as it pursues its goal of promoting ‘ecological civilization’, and has inspected and fined countless businesses in the process.

Many areas in China suffer from severe levels of pollution, and the central government under the leadership of President Xi Jinping has initiated several crackdowns on heavily polluting industries that are non-compliant with current environmental regulations. These measures have affected business as usual in various sectors and have had rippling effects throughout the economy.

Measures taken by the government

The Ministry of Environmental Protection (MOEP) and the environmental bureau have adopted an intolerant stance against businesses flouting environmental laws over the last year, which is expected to cut air pollution levels in northern cities. Although predominantly targeting air pollution, the authorities are also stringently curbing other types of pollution, including water and soil pollution, in addition to scrutinizing waste management systems across the country.

It is important to note that although environmental laws have not been substantially altered recently, the enforcement of pre-existing laws has been tremendously increased. As enforcement of environmental laws has been historically lax in China, this sudden change in government policy has rattled the industry and made polluting businesses cautious.

In 2016, the government began conducting a series of investigations in heavy industries, and as a result, several non-compliant and illegal steel mills, coal mines, aluminum smelters, and other manufacturing units were shut down. To date, it is estimated that more than 80,000 factories have been shut down across the country by the anti-pollution drive. Other establishments caught infringing environmental regulations have been ordered to clean up their operations within a short time frame or risk closure by the inspection squad.

Penalties have been levied on around 40 percent of factories across the country as environmental inspectors have been dispatched to more than 30 regions in recent months. Inspectors have reportedly imposed hefty fines totaling over RMB 870 million (US$132.2 million) to date, and in some cases criminal liability on employers who are facing jail time for violating environmental regulations. Further, additional inspectors have been deployed to act as watchdogs and ensure that local inspectors are fulfilling their duties.

In addition, municipal authorities have filed a large number of environmental pollution cases in the past year. Beijing municipality alone has filed close to 13,000 cases against non-compliant polluters.

Rippling impact on business and economy

The sectors most severely impacted by the anti-pollution drive have been textiles, energy, heavy metals, coal and gas, mining, cement, paper, automobile, and consumer goods. The impact is also expected to shock international supply chains due to disruption in exports from China.

Inflation has spiked as firms cope with increasing costs of compliance with environmental regulations and adapt to clean energy. Increased production costs will ultimately have to be shouldered by the consumer, and the middle class will be particularly vulnerable to inflationary trends in consumer goods and electricity.

Financial and social stability has also been disrupted as more than 60,000 jobs have been lost as a result of factory shutdowns. Employers who are unable to repay debts have left their factories closed and unproductive.

In many manufacturing sectors, small-scale firms are closing down, as they are unable to compete with larger rivals due to financial incapacity to adapt to clean energy. As a result, the firms that manage to survive and adapt to the new environmental regulations and successfully switch to clean energy will significantly benefit in the medium run as they gain the market share previously held by smaller firms.

The shutting down of small and medium scale firms has also resulted in greater consolidation among surviving firms in many industries like iron and steel, resulting in a steep increase in global prices.

The business impact of the anti-pollution drive has been particularly harsh in the north as well as Beijing-Tianjin-Hebei region. It is expected that these measures may reduce GDP growth by up to two percent in the short run due to disruption in manufacturing and supply chains across industries coupled with increased costs of compliance and technological upgrading.

However, experts opine that the anti-pollution drive will have minimal macro-economic impact in the long run and, if successful, will have huge health benefits for the country’s 1.4 billion citizens. Pollution and related health and safety issues are consistently among the top concerns of Chinese people, and addressing these issues would also boost China’s international reputation as an authority in green technology and climate change leadership.


Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region.


This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Trump And The ‘Normalisation’ Of Relations With Cuba

On 8 November, Washington imposed fresh sanctions on Cuba, targeting the tourism and business industries. The latest actions of the Trump administration, while serving to erode Barack Obama’s diplomatic efforts with Cuba, must be interpreted within the wider context of prolonged historical tension between Washington and La Havana.

New sanctions against Cuba

The latest US sanctions against Cuba pose a major obstacle in the way of trade and travel relations between the two countries. The restrictions, which directly target many state-owned Cuban businesses, aim to prevent the Communist government from benefiting from American capital. For Americans, travel and business opportunities in Cuba are significantly reduced. This is the latest example of President Trump’s determination to undermine the policies of his predecessor.

The new restrictions forbid American engagement with some 180 Cuban businesses. As part of the crackdown on US trade with Cuba, the hotel industry is targeted severely. 83 of the Island’s hotels are blacklisted, precluding American tourists from staying there. Such hotels include Ambos Mundos, where Ernest Hemingway frequently sojourned. In addition, tourist agencies, shopping malls, marinas, and liquor producers with links to the Castro administration are affected and fuel the threat to tourism on the island.

The travel restrictions imposed on Americans travelling to Cuba primarily target individual visits. Now, tourists can only visit Cuba ”under the auspices of an organisation subject to US jurisdiction” while they must be accompanied by a US representative of the organisation. Thus, the only means of travelling to Cuba for Americans is through an organised trip.

The sanctions also threaten US businesses seeking investment opportunities in Cuba.American industries will be prohibited from investing in the Mariel Special Economic Development Zone. This is a sprawling industrial hub west of La Havana that the Castro government is using to attract foreign investment. Currently, 27 companies from Europe, Asia, and Latin America have received permission to inaugurate business on the 115,000-acre site. This will be a blow to US companies with interest in the Mariel zone, as other international investors will benefit from the new investment constraints.

The reasoning

The actions of the White House against Cuba come after President Trump restored the annual tradition of voting against a UN resolution that denounces the US trade embargowith the island. Last year, Barack Obama signalled historic change in the dynamics of US-Cuban relations. His policy to restore diplomatic relations with Cuba and the abstention to vote against the UN resolution appeared to symbolise closer relations between the White House and the Castro administration. However, Trump’s revival of Cold War relations between the two countries appears to subvert Obama’s ambitious diplomatic efforts.

Those in favour of isolating the Castro government emphasise democracy and human rights as crucial elements underscoring Trump’s Cuba policy. Since the decision to impose a trade embargo on Cuba in 1962, Washington has argued that the government in La Havana has impoverished its people and failed to fairly distribute the capital that it has accumulated. Nikki R. Haley, the US ambassador to the UN, stated that Trump’s position on Cuba reflects “continued solidarity with the Cuban people and in the hope that they will one day be free to choose their own destiny.”

Along the same lines, Treasury Secretary Stephen Mnuchin posited that the latest sanctions aim to ”to channel economic activity away from the Cuban military and to encourage the government to move toward greater political and economic freedom for the Cuban people.” He believes this can only be achieved through supporting the ”private, small business sector” in Cuba, as the alternative means economically and politically supporting the Communist government.

In contrast, the Island’s political leaders assert that the sanctions directly damage the Cuban people. Josefina Vidal, Cuba’s main US affairs diplomat, stresses that revenue for the Cuban government is revenue for Cuban society, with strong investment in the areas of education and healthcare.

The position of Trump or the United States?

Since coming to power in January, eroding the Obama legacy has been a primary goal for Donald Trump. There is enough evidence to suggest that the President’s destruction of Obama’s Cuba-friendly policy is an attempt to differentiate himself as much as possible from his predecessor, already evidenced in healthcare and the Iran deal. On the other hand, Trump has only restored a position that accurately reflects US scepticism of Cuba since the Cold War era.

The new sanctions only reintroduce measures against travel and business that were present before Obama’s historic thawing of relations. The only change is that the latest restrictions emphasise the significance of the Cuban people. Under the ”Cuban people” category, authorised travelers must interact with private individuals and engage in activities that enhance civil society on the island.

It is also important to note that it took Obama until the end of his presidency to restore diplomatic relations with Cuba. His rush to ”get things done” before the end of his second term may have compromised a meticulously thought-out long term solution to the impasse between Washington and La Havana. In 2015, Roberta Jacobson, the chief US negotiator for the normalisation of US-Cuban relations, was cautious of raising expectations regarding the historic restoration of diplomatic relations between the two countries given the treatment by the Cuban government of its people. Despite this uncertainty, in 2015 US-Cuban diplomatic relations were normalised.

The sentiments of hardline politicians highlight the continued existence of distrust that America has towards Cuba. Cuban-American lawyer, Senator Robert Menendez, strongly opposes the Obama policy and claims the latest sanctions are too lenient on the Castro government. Although he recognises the sanctions as a step in the right direction, he is concerned with the fact that they don’t affect existing trade and travel transactions between the two countries.

Return to Cold War politics?

Since the election, Trump has displayed a conspicuous position regarding Cuba. During the 2016 presidential campaign, he stated that the US should not prop up the Cuban government, thereby taking a dig at Obama’s diplomatic efforts to normalize US-Cuban relations. In June, the president announced he was retracting Obama’s ”terrible and misguided deal” with Cuba. He also labelled the former president Fidel Castro a ”brutal dictator”, making the links between the revolutionary and current regime of Raul Castro clear.

The current stand-off in relations between Washington and La Havana continues, with the foreign ministers of North Korea and Cuba having met on 22 November to reinforce their unity against the United States and its ”unilateral and arbitrary lists and designations”. The 86-year-old Raul Castro is expected to leave power in 2018, but with his likely successor – Vice President Miguel Diaz-Canel – expressing a strong stance against US “imperialism”, the animosity is likely to continue, further undermining the prospects for US investment in the country.


Niall Walsh is an Analyst at Global Risk Insights. As originally appears at:

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Pre-Salt Auctions: Brazil’s Oil Industry Is Back In Business

Four years after the first pre-salt auction in 2013, Brazilians have a reason to celebrate. The country raised 6,15 billion reais ($1.88 bn) in the second and third rounds of auctions, proving that the country can still attract foreign investors.

In November 2007, state-owned oil firm Petrobras discovered large amounts of oil in the earth’s pre-salt layer, off the coast of Sao Paulo and Rio. These resources are located beneath about 4,000 meters of salt, sand and rock. The discoveries were seen as a turning point that would allow Brazil to emerge as a major oil producer.

Ten years later, investment and development in these pre-salt areas is still lagging. However, the recent auction rounds of eight pre-salt blocks, which hold an estimated 12 billion barrels of oil, prove that the country is moving in the right direction. The firstround, in the Libra area, came in October 2013. It took place under the previous auction model, which stipulated that Petrobras serve as the sole operator with a minimum 30% stake.

New rules and competing views

Due to significant energy reforms, the 2017 auctions are more market friendly and open to foreign investment than the previous auctions. The new rules for the auctions going forward are: 1) Petrobras is not required to be the sole operator in pre-salt production projects; 2) revision to local content rules; and 3) expansion of Repetro (Special Customs Regime applicable to the export and import of goods used in the exploration and drilling for oil and gas reserves). These pro-market regulatory changes have ultimately driven greater international interest in Brazil’s pre-salt blocks.

Currently, there are two competing views of how best to structure oil contracts with foreign corporations to maximize profit for Brazil. Under the concession model, the company that offers the highest signing bonus to the government is awarded the contract. Under the production sharing model, the company that offers the highest percentage of oil profits to the government is awarded the contract.

In general, foreign companies favor the concession model, viewing it as less complicated.Rodrigo Maia, the Speaker of the House, has expressed that he plans to arrange a full review of the current production sharing regime, as he believes that a concession regime would earn the government more revenue.

It is still unclear which model will earn the Brazilian government more revenue. While the initial payout under the concession model is higher than under production sharing, upcoming payments to the government in both cases are highly dependent on future oil production, prices and consumption.

Pre-salt auctions

The auction on 27 October was delayed due to a federal judge’s injunction, which claimed the auction would cause a loss to public assets. However, supporters such as the Minister of Mines and Energy, Fernando Coelho, expressed that it was a “tremendous success” upon completion.

The Brazilian National Agency of Petroleum, Natural Gas, and Biofuels (ANP) offered eight pre-salt blocks, in the Campos and Santos basins, and raised 6.15 billion reais, 20% less than the expected 7.75 billion reais. Two of the eight available blocks did not receive offers. Eleven companies from nine countries won blocks, while Petrobras and Shell each won three of the six as part of consortiums.

Two American companies participated, although only one won a block, and three Chinese companies won with consortiums. The number of foreign companies in the auction was surprising, given the current low price of oil, indicating that pre-salt areas remain attractive to foreign companies due to their potential for high productivity.

Under the current production-sharing regime, there is a fixed signing bonus for each area. The Brazilian government awards the contract to whoever offers the highest percentage of profit-oil above the required signing bonus. The percentage of profit-oil exceeded 200% of the minimum requirement, making the auction a success not only due to the high signing bonus, but also because of the level of foreign investment captured.

Furthermore, even though two areas did not receive offers, this high percentage means the government will be able to collect more revenue in the future. The ANP predicts that the eight blocks will generate U$36 billion in investment and U$130 billion in royalties. The profits and income taxes generated from production will help with the government’sfiscal problems and create jobs for the local population.

Regulatory success

Brazil produces 2.6 million barrels of oil per day and is aiming to almost double that amount to 5 million by 2027, making it the world’s fourth largest oil producer at current rates of production. The ANP expects that all the wells offered in these auctions should enter production stage within 5-7 years from the auction date and that the blocks that did not receive offers will be auctioned off at the next opportunity.

Currently, foreign firms are responsible for 21% of total production of oil and liquefied natural gas (LNG) in Brazil, and their participation is expected to increase to 30% in 10 years. Despite this, Petrobras’ significant role in the auction indicates that it is unlikely to lose its predominance in Brazil’s oil sector. Still, the auction showed that the regulatory changes have been well received by the market and that foreign firms are once again willing to invest in Brazil.

Lorena Valente is an Analyst at Global Risk Insights. As originally appears at:

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Vietnam Rises 14 Places In The World Bank’s Ease Of Doing Business Rankings

Vietnam climbed 14 places to 68th amongst 190 economies in the latest World Bank’s Ease of Doing Business 2018 rankings. It ranked fifth amongst ASEAN countries, with Singapore, Malaysia, Thailand, and Brunei leading the group. As per the report, significant improvements were made in the area of paying taxes, trading, enforcing contracts, access to credit, and electricity reliability.

The ranking measure the effectiveness and quality of regulations based on starting a business, resolving insolvency, enforcing contracts and paying taxes, as well as trading across borders, protecting minority investors, getting credit and registering property, along with getting electricity, dealing with construction permits and labor market regulation. The report covers the period from June 2 last year to June 1 this year.

ASEAN Rankings

In terms of the number of reforms implemented, Vietnam along with Indonesia leads amongst the global economies in implementing 39 reforms, the most in the last 15 years. Within the ASEAN region, Vietnam ranked fifth, after Singapore, Malaysia, Thailand, and Brunei.

Cambodia, Lao PDR, and Myanmar ranked the lowest at 135th, 141st, and 171strespectively.

Major reforms

The report highlights significant improvements in five indicators:

Getting electricity

The reliability of power supply has increased due to the implementation of a Supervisory Control and Data Acquisition (SCADA) automatic energy management system that monitors power outages and restoration. The SCADA systems were set up between the subsidiaries of Electricity of Vietnam (EVN) and ABB and Siemens in the last two years. Improving the power network and reliability are key to the 10-year roadmap for smart grid development as laid out by the government in 2012.

Vietnam ranked seventh in getting electricity amongst ASEAN countries, ahead of only Cambodia, Lao PDR, and Myanmar. Malaysia, Singapore, and Thailand led the rankings. In comparison to previous year, Vietnam’s ranking jumped from 96th to 64th, up 32 places, amongst all global economies.

Getting credit

Access to credit was strengthened by the adoption of a new civil code that broadens the scope of assets used as collateral. The new civil code came into effect on 1 January 2017.

Among the ASEAN nations, Vietnam tied with Singapore at the fourth place. Brunei, Malaysia, and Cambodia led the rankings. Since last year, Vietnam jumped three places in the global rankings to 29th.

Paying taxes

Paying taxes were made easier with the abolishment of the mandatory 12-month carry forward period for Value Added Tax (VAT) credit. In addition, the introduction of an online platform for filing social security contribution boosted the rankings. This year was the fourth year in a row that recognized the progress in tax reforms. Components of the indicators include the number of tax payments, time, total tax rate, and post-filing index (VAT refunds and corporate income tax audits).

Vietnam ranked fourth amongst its ASEAN peers, with Singapore, Thailand, and Malaysia leading the ranks. Paying taxes witnessed the highest growth amongst all indicators. Out of the 190 economies, Vietnam ranked 86th globally, a significant jump of 81 places from its previous year’s ranking at 167th.

Trading across borders

Import and Export procedures were made easier with the upgrading of the automated cargo clearance system and increasing the operating hours of the customs department. This has led to shorter customs clearance times and more transparency in customs procedures. This indicator also jumped last year with the implementation of an electronic customs clearance system.

In trading across borders, Vietnam follows Singapore, Thailand, and Malaysia at fourth place. Vietnam slipped one place in its global ranking to 94th.

Enforcing contracts

Enforcing contracts were made easier with the adoption of a new code of civil procedure and a new law on voluntary mediation. The commercial mediation law, which came into effect on 15 April 2017, has simplified the mediation process without the need for complicated legal procedures.

Singapore, Thailand, Malaysia, and Brunei lead the ASEAN rankings, with Vietnam in the fifth place. In comparison to the previous year, Vietnam’s global rankings increased from 69th to 66th.

Other indicators

Dealing with construction permits

In dealing with construction permits, Vietnam’s rank jumped four places to 20th, with the only change being in cost, which is calculated as a percent of warehouse value.

Registering property

Registering a property rank dropped from 59 to 63.

Protecting minority investors

The rankings jumped from 87th to 81st  this year, with minor changes in the sub-indicators.

Need to do more

The country ranked the lowest in resolving an insolvency and starting a business at 129thand 123rd respectively. Both indicators dropped since last year from 125th and 121strespectively. However, both witnessed a climb in scores.

For starting a business, the cost of official fees and fees for legal or professional services has increased from 4.6 percent to 6.5 percent of income per capita. However, the number of days to register a firm has reduced from 24 to 22.

With respect to resolving an insolvency, only one sub-indicator has changed in comparison to previous year. The recovery rate has changed from 21.6 to 21.8 cents on the dollar. The recovery rate calculates how many cents on the dollar secured creditors recover from an insolvent firm at the end of insolvency proceedings.

Going forward

According to the World Bank’s report, in 2003, an average businessperson in Saigon spent 61 days and 31.9 percent of their per capita income registering a new company. Now, it’s just 22 days and 6.5 percent of per capita income. This has been the result of numerous reforms aimed at streamlining business regulations. Vietnam along with Indonesia leads amongst the global economies with 39 business reforms, the highest in the last 15 years.

Going forward, the focus should be on improving the public infrastructure, increasing support for the development of the domestic private sector, and reducing the regulatory and administrative burden on enterprises.


Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region.


This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

China Repeals RO Law In Effort To Improve Business Environment

China recently abolished an archaic FDI law from 1995 regulating the establishment of representative offices (ROs) of foreign firms doing business in China.

The reform is part of a larger initiative to cut red tape in China and attract greater foreign direct investment (FDI) amid concerns from the foreign business community over the country’s business environment.

The repeal of the law streamlines the setup process for foreign investors establishing ROs in China, and marks another effort by the government to reform administrative processes.

What does the reform entail and how does it impact foreign firms?

ROs often play a pivotal role for foreign firms entering China, allowing them to establish a low-cost presence to formulate pre-entry market strategies. Investors typically use ROs to test market conditions before committing a heavier investment, as they are mainly engaged in conducting research and strategizing the foreign company’s future investments in China.

Since ROs are easier to form and involve lower expenses compared to other investment vehicles, it is common to see firms operating through an RO before setting up a full-fledged wholly foreign-owned entity (WFOE).

A set of federal rules enacted in 1995 governing the examination, approval, and administration of ROs of foreign firms in China was recently repealed. These rules entailed several cumbersome compliance requirements for foreign firms, such as necessitating them to apply for official approval and obtain multiple registrations within stringent timeframes. These rules frequently drew criticism from international business circles due to their rigorous application.

By abolishing these rules, the Chinese government has simplified the process for setting up an RO by lowering compliance costs and reducing procedural delays. According to the Ministry of Commerce, this move will deepen reforms in streamlining administration, delegating power, and optimizing services.

Why does China need to bolster its FDI landscape?

In recent years, China has experienced a fall in FDI and inbound M&A as foreign firms are growing increasingly wary of entering the Chinese market. Among the causes for this stagnation is the complexity of the China’s legal, regulatory, and tax framework, which acts as a deterrent for foreign companies. Due in part to these barriers, the Organization for Economic Cooperation and Development ranks China 59th out of 62 countries evaluated for openness to FDI.

These shortcomings are accentuated at the time when other emerging markets in Asia, like India and Vietnam, are liberalizing their economies and incentivizing FDI by introducing significant legal and regulatory reforms. Further, burdensome compliance requirements, the inadequacy of legal safeguards, rising costs, and competition from domestic Chinese firms have catalyzed many foreign firms to shift their focus from China to other emerging markets in Asia.

How does this reform fit in with the larger FDI Policy?

The repeal of the 1995 rules is a small but significant part of the larger FDI reform policy enacted by the Chinese government throughout 2017. Other key reforms undertaken this year include amendments to the Catalogue of Industries for Guiding Foreign Investment and the updated Free Trade Zone Negative List. China has also implemented some ancillary measures that complement the FDI reforms and encourage foreign firms to do business in China.

These measures include an enhanced and simplified IP regimecorporate tax cuts and certain tax exemptionssimplified procedures for corporate establishment; and reforms aimed to attract foreign talent to China.

What can foreign investors expect from the recent reforms?

One fundamental aspect common to all the recent reforms is the digitization and simplification of compliance procedures, which will reduce overhead costs and procedural time lags. However, despite the introduction of these beneficial reforms, foreign firms remain apprehensive about investing in China. This is because there are still several restrictions and underlying regulatory issues that need to be streamlined alongside the FDI reforms.

For instance, although the 1995 rules have been repealed, foreign firms establishing ROs are still required to comply with a separate set of rules enacted in 2013. While the 2013 rules may be less cumbersome than the 1995 ones, they still impose significant compliances and restrictions.

Per the 2013 rules, foreign firms are required to make detailed disclosures in their annual reports and undertake a document intensive registration process. ROs are also prohibited from engaging in profit making activities, face heavy restrictions in hiring staff, and are only permitted to engage in a very narrow range of activities.

Moreover, a closer look at the industry-specific liberalization measures reveals that many of the recently liberalized sectors are already dominated by large domestic companies, which may pose stiff competition for foreign firms and act as an effective deterrent.

Although the repeal of the 1995 RO law will not fundamentally shift China’s FDI landscape, it represents another small step in streamlining China’s business environment.


Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region.


This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Frontera Announces Partnership With Closir, Pioneering Digital Investor Relations Platform

Two Investment Technology Companies Cooperate to Democratize Access to Corporate Management Teams in Frontier and Emerging Markets

When the MSCI Emerging Markets Index was first launched in 1988, the entire market capitalization of the 10-country index was US$35 billion, equivalent to less than 1% of the world’s total equity market value.

Today, less than 30 years later, that index has grown to include 24 countries and its market capitalization now rests at over US$4 trillion, or approximately 10% of global market capitalization.

With index providers currently consulting on the potential reclassification of Saudi Arabia, Nigeria and Argentina to emerging markets, the coming years are expected to see an exceptionally large expansion.

Despite the increasing interest in these markets, most of the relevant research and data is most easily available to the largest financial institutions, and remains cost-prohibitive for smaller investors.

But recently the investment research and analysis industry, like many other elements of the traditional banking business model, has found itself under increasing pressure from rapid innovation in financial technology, or ‘FinTech’. The ongoing disruption and changing regulations are leveling the playing field to create new opportunities for companies that are able to efficiently address segments using technology.

One of the leading companies disrupting the model for delivery of data on emerging markets investment strategy is event-driven investment intelligence firm Frontera.

Frontera’s team of experienced emerging markets researchers and analysts provide daily support to asset managers, hedge funds, individual investors, and the broader global business community. Frontera covers capital markets and political risk analysis in over 100 countries within Frontera PRO, its premium research service.

Frontera also provides its premium clients with access to a number of technology-driven integrations to further enhance the platform’s capabilities.  Today Frontera is pleased to announce a strategic partnership with Closir, a digital investor relations and corporate access platform based in London.

Closir’s innovative platform helps buy-side institutional investors to organize face-to-face management meetings, conference calls and bespoke investment trips with emerging markets companies that fall outside of mainstream broker coverage, effectively automating what has traditionally been a grueling process for market participants.

The new partnership between the two companies will provide Frontera clients with full access to Closir’s automated digital investor relations technology.

According to Frontera, equity research on companies that are not typically covered in mainstream sell-side research are in high demand amongst Frontera PRO subscribers.  The partnership with Closir enables Frontera clients to build their own coverage map and directly request calls and meetings with publicly listed companies of any size in frontier and emerging markets.

“Frontera’s mission is to become the emerging markets investor’s most valuable information resource.  Our partnership with Closir provides yet another useful service that helps our clients to better analyze the opportunities in our coverage universe,” said Kevin Virgil, Co-founder and CEO of Frontera.

“We’re looking forward to working with Closir,” said Tyler Cicirello, Co-founder and COO at Frontera. “Both companies have an intense commitment to support the global finance and investment industry that we serve and we’re excited to grow together.”

“We believe emerging and frontier markets present significant investment opportunities and are leveraging technology to make a global investor feel local, anywhere. We look forward to working with Frontera to empower global investors as traditional business models are challenged by structural changes,” said Michael Chojnacki, founder and CEO of Closir.

As two leading next-generation investment technology companies, Closir and Frontera are unified by a common mission to democratize emerging markets investing, and help both institutional and individual investors gain full access to under-represented capital markets.

African Companies Battle Back Against The Global Sharing Economy Giants

The sharing economy a la Uber and Airbnb threatens African businesses and society when imposed from outside: Made in Africa solutions are fighting back.

The emergence of the sharing economy has disrupted many industries, with vanguard companies like Uber and Airbnb leading the way. Despite emerging from Silicon Valley and flourishing in traditional Western markets, proponents of the sharing economy are increasingly turning their attention to Africa as the next big, billion person opportunity. It is not just American companies looking to expand into Africa, but also China’s Tencent, which selected Namibia as one of its choice locations for the initial global roll out of its QQ app – the third largest social media app in the world after Facebook and Whatsapp. Africa’s economic, demographic and infrastructural profiles all point to a viable environment for the ideas of the sharing economy.

With an emphasis on cost and risk sharing, disruption of stagnant business models and consumer choice, companies like Uber and Airbnb see the continent as a perfect fit. Indeed, Airbnb saw a 143% increase in users in Africa in 2016, with aims to double that number in 2017 to 1.5 million. The company is looking to capitalize on growing tourist numbers as well as the lack of sufficient brand name budget and mid-tier hotel establishments. Similarly, Uber’s rapid global expansion has not missed Africa, with the firm having become the continent’s dominant ride-sharing app.

Proponents of the sharing economy tout the economic and social benefits that companies like Uber and Airbnb are bringing to African countries; however, the question remains who exactly is benefiting. Similar questions have been raised elsewhere, but they are doubly pressing in Africa, given the region’s development goals and aspirations.

Old game, new rules

The fundamentals driving the sharing economy are nothing new to Africans, who have long relied on personal connections, individual entrepreneurship and organic networks to meet their needs. Kenyan blogger Limo Tabor explains further: “Kenyans have always had a second job, or rented out a spare room, or shared their cars, making bargains here and there. What is new is that companies like Uber and Airbnb have formalized the sector.”

On the one hand this longstanding affinity for sharing economics positions Africa as a good match for companies like Uber and Airbnb. The key behind the sharing economy is enabling people to monetize existing assets, yet many ordinary Africans are already doing this. Given the prominent roles that the informal economy plays in most African nations, combined with limited state oversight and enforcement, and prevalence of mobile technology, Silicon Valley is not bringing anything new to the equation.

This is not exactly true, what companies like Uber and Airbnb are doing is inserting themselves into existing informal sharing dynamics, acting as corporate middlemen and facilitators. This causes two main problems. The first is that the entrance of multi-billion corporate giants into informal economic models drastically shifts the balance of power, disrupting existing livelihoods. This has been documented by the pushback against companies like Uber across the world. The issue is that many Western Uber and Airbnb users use these apps as ‘gigs’ – sources of additional income, which in turn provide greater flexibility.

The under-developed formal sectors and high unemployment (especially among youth) in many African countries has independently created the sharing economy out of necessity. Companies like Uber and Airbnb also take a share of profits that African ‘sharers’ would normally keep. Moreover, existing networks are organic, local, and far more responsive than mega-corporations headquartered on the other side of the planet. The ‘contractualization’ of work has been blamed for the erosion of workers rights and protections, a trend which only undermines the already existing, substandard working conditions and benefits many African employees face.

The second issue is that the entry of companies like Uber and Airbnb stifles local entrepreneurs seeking to build formal, grassroots businesses by capitalizing on their informal networks. This means that the sharing economy – as imposed from outside – retards economic activity at both ends of the informal / semi-formal sector. This is not to say that all the externalities of Silicon Valley’s version of the sharing economy are bad for Africa. Rather it highlights the dangers to homegrown African businesses, as well as opportunities for Africans to leverage their local knowledge and networks to beat Uber and Airbnb at their own game.

Taking on Uber

East Africans are well used to taking the ubiquitous matatus; privately owned minibuses often brightly coloured and blasting catchy music to attract customers. East Africans also know that as soon as it rains the matatu fares rise sharply. While Uber also (controversially) implements flexible pricing, the company quickly grew in the region by presenting itself as a safer, more reliable and more convenient (accessible via smartphone) option. While this may hurt the business of matatu and taxi drivers, Uber’s first mover monopoly hinders local companies from also exploiting the market.

Nevertheless, African companies are looking to their local expertise to out maneuver Uber. Taxify, launched in 2015, has secured 10% of South Africa’s ride sharing market, offering 15% lower fares than Uber while providing higher proportional driver payouts. Similarly, Zebra Cabs – an existing South African taxi firm – has adopted electronic taxi hailing via its own app. Even more locally, Jozibear – launched in late 2016 services Johannesburg, Cape Town and Durban.

The most successful has been Kenya’s Little Cabs. Run by Safaricom, the company behind another African success story, M-Pesa; Little Cabs has seen explosive growth, hiring 2,300 drivers and gaining 90,000 active accounts in its first five months. M-Pesa, which has 30 million users across 10 countries, offers mobile money services, and has been a significant regional economic driver. By leveraging its large user base and dominant mobile money market position, Safaricom is connecting M-Pesa with Little Cabs. Specifically, Little Cabs offers users riders free wi-fi as well as the option buy discounted airtime, with drivers earning a merchant’s fee. Little Cabs also allows payment with M-Pesa, a step-up over Uber which waited months before introducing cash payment options.

Safaricom’s superior knowledge of its market allows it better serve African riders, as well as capitalize on consumer demographics – such as the low rates of credit card use – a stumbling block for foreign competitors used to Western markets. Little Cabs plans to expand to Uganda and Nigeria in 2017.

Taking on Airbnb

Airbnb’s impressive African growth rate has also led to increasing criticism of the sharing system which it fosters. Given the importance of tourism for many African economies, the potential disruptive power of Airbnb is substantial. While Airbnb can certainly benefit African economies by broadening accommodation choices, thus increasing potential tourist numbers, it also threatens what for many African countries is one of the few, large non-resource based employers. In order to attract foreign tourists, African hospitality sectors have had to cultivate responsive and accountable industries. This represents an important boost to both economic and social capital and helps reinforce transparency and accountability.

The rise of Airbnb users in countries such as Namibia has seen a rise in lodgings not registered with national tourism boards and therefore not properly taxed by governments. “Everyone thinks that tourism is the answer, and so all are jumping on the bandwagon for a quick buck. Neither HAN [Hotel Association of Namibia] nor the NAB [Namibia Tourism Board] has problems with people wanting to come on board, but they have to follow the same procedures as registered members,” argues HAN’s Anett Koenig.

One alternative to Airbnb has been a focus on national and local listings in order to provide deeper results than Airbnb’s international selection. This is the approach taken South Africa’s Accommodation Direct, which boasts 20,000 listings for some 2,000 locations across South Africa. Drawing on local knowledge and contacts, Accommodation Direct’s country-specific focus gives it an advantage in providing more varied and cheaper offerings than Airbnb. This is clear given that Airbnb only has 77,000 listings (out of its over three million global total) for the entire continent, compared to Accommodation Direct’s 20,000 for a single country.

African takes on the sharing economy

There are a host of exciting African inroads into the sharing economy, some 100% domestic, others a beneficial blend of Western and African know-how. One example of the latter is Medici – a healthcare app which allows for remote consultation and medical advice. Founded by South African chiropractor Clinton Phillips, Medici draws on his frustrations with the American healthcare system. Drawing on his experiences with America’s fragmented healthcare system, Phillips partnered with Israeli-founded Hello Doctor, a group already serving 400,000 in South Africa. Together they are working on amplifying the power of healthcare providers by increasing availability, lowering costs and increasing patient flow. Hello Doctor and Medici are also targeting specific local hurdles including refining the app for low-bandwidth environments and non-smartphone users.

Then there is Nigeria’s answer to Amazon, Jumia – an online retailer with five million subscribers, 15 million monthly users and a presence in 16 countries. Jumia was also the first African company to win the World Retail Award in 2013.

In Tanzania there is the newly created Worknasi, an online platform for office and meeting space sharing for businesses, freelancers and other users. While similar apps exist elsewhere, the office sharing market is virtually untapped in Africa. Co-founder Edgar Mwampinge hopes his company can help other African entrepreneurs access the kinds of facilities traditionally closed to them. “As a startup you can’t afford to spend huge amounts of money for an office: that is too risky because you can’t predict what will happen in a year, let alone three months.”

In Ghana, Swiftly has entered the sharing economy by facilitating the sharing of shipping containers. “If there can be ride sharing or apartment sharing, there can also be the sharing of shipment space,” explains CEO Edem Dotse. By seeking out empty space in shipping containers, Swiftly reduces shipping inefficiencies, and facilitates shipping for SMEs and individuals who could otherwise not afford to do so. By sharing costs and collaborating, Ghanaian businesses and individuals can access land, sea and air goods transport. This is especially important for economic diversification and the key role played by SMEs in overall economic health. Moreover, greater access to shipping facilitates more access to international markets, allowing more companies and individuals to export sooner, helping drive sustainable export driven growth in Ghana and beyond.

While similar services exist outside Africa, Swiftly aims to corner the regional market and distinguish itself by not charging consumers a matching fee. Instead, Swiftly generates income from fees leveraged on freight forwarders, who in return save money on advertising budgets and are connected with more customers, hassle free.


Jeremy Luedi is a Senior Analyst at Global Risk Insights. Article as appears on Global Risk Insights:

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