Bloomberg Businessweek Middle East 31 January 2018

1-15 February, 2018
Saudi Arabia’s
multi-billion dollar
plan to reduce its
dependence on oil
p12
Algeria…..…..…........DZD 215 Egypt……............…......EGP 18 Jordan....….........….......JOD 2 Lebanon..............LBP 4000 Oman…….................…..OMR 1 Saudi Arabia.........…SAR 10 UAE...…....…..…........…AED 10
Bahrain….......................BHD 1 Iraq……...…..…...... IQD 3200 Kuwait….......…......KWD 0.75 Libya…........................LYD 3.5 Qatar……….................…QR 10 Syria............................SYP 200 Yemen…..................YER 600
PHOTOGRAPH BY JOHNATHON KELSO FOR BLOOMBERG BUSINESSWEEK
44
▲ Life and Death on the Third Shift
1 February, 2018
1
◼ CONTENTS Bloomberg Businessweek Middle East 1 February, 2018
◼ IN BRIEF
6 ● Lula loses in court ● Driver Niki rescues airline Niki ● Apple loves Africa’s bobsledders ● Kiwis in space
◼ REMARKS ◼ VIEW
8 The cosine is: a) some triangle 10 Italy’s politicians are dreaming big,
but the country needs them to come
thing, b) what you do on a mortgage, down to Earth
or c) who cares?
BUSINESS TECHNOLOGY FINANCE

1 2 3
12 Saudi pumps funds 16 A bamboo ceiling 20 Women are still
into low carbon tech is sending Chinese waiting for
talent back to China #MeToo to make it
13 Morocco and Egypt catch to Wall Street
the renewables bug with
major investments in wind 17 In London, restaurant
and solar delivery without the 21 The man in charge of
restaurants regulating bitcoin
2 14 Emirates’ order gives
Airbus’s A380 programme 23 Mark Mobius, evangelist of
a much-needed lift emerging markets, retires
ECONOMICS POLITICS
4 31 “It’s already
very tough, 5
as we try to
24 Libyan oil recovery push forward 30 Turkish offensive in
spurs dollar sale the peace Syria gives Putin a
process, when headache
26 Oman seeks to shore up
its balance sheet with $2 Assad is being 32 Trump reveals timing of
billion loan unconstructive U.S. embassy move to
and the Jeruslaem
26 Positive IMF forcast fails to
ignite confidence in Saudi
opposition
33 It’s lonely at the top:
economy groups are El-Sisi becomes the sole
refusing to candidate in Egypt’s
27 Mysuru, India, tries take part.” presidential elections.
turning trash into cash
◼ CONTENTS Bloomberg Businessweek Middle East 1 February, 2018
Management:
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44 Working the third shift at one-of-a-kind road
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62 Critic: A (macro)
America’s most brutal job economic approach
to weight loss
Those Intel chip flaws?

63 The One: Pretziada’s 1-15 February, 2018
50 Ceremony
The company’s blasé

fireplace set
MOTORCYCLE: COURTESY REVIVAL CYCLES
response doesn’t
64 Game Changer:
C.W. Nicol, the Welsh
compute
philanthropist Saudi Arabia’s
multi-billion dollar
plan to reduce its
dependence on oil
who’s saving Japan’s

p12
Algeria…..…..…........DZD 215 Egypt……............…......EGP 18 Jordan....….........….......JOD 2 Lebanon..............LBP 4000 Oman…….................…..OMR 1 Saudi Arabia.........…SAR 10 UAE...…....…..…........…AED 10
Bahrain….......................BHD 1 Iraq……...…..…...... IQD 3200 Kuwait….......…......KWD 0.75 Libya…........................LYD 3.5 Qatar……….................…QR 10 Syria............................SYP 200 Yemen…..................YER 600
forests
00_COVER.indd 1 28/01/2018 22:57
Cover:
Photo illustration by SJC
◼ IN BRIEF
Asia Europe
● “India is
● The Presidents Club ● French pharmaceutical
Charitable Trust dissolved conglomerate Sanofi
after a blistering Financial agreed to buy Bioverativ,
removing the red

Times report detailed which specialises in a
numerous incidents of haemophilia drug, for
$11.6b
harassment and groping
tape and laying out

at its annual dinner, held
in mid-January.
the red carpet.”

Speaking at the World Economic Forum in Davos, Prime Minister Narendra Modi
promised India would become a $5 trillion economy by 2025.
● Turkish soldiers
streamed into Northern
Syria, attacking Kurdish
forces backed by the
U.S. Having encouraged
6 the Kurds to help defeat
Daesh, U.S. diplomats
urged Turkey to stand
down.
ROCKET: COURTESY ROCKET LAB. MACRON: THIBAULT CAMUS/AP PHOTO. STALEY: FACUNDO ARRIZABALAGA/EPA-EFE/REX/SHUTTERSTOCK.
LULA: PAULO LOPES/ZUMA PRESS. WASHING MACHINE: COURTESY LG. BOBSLEDDERS: OBI GRANT. DATA: COMPILED BY BLOOMBERG
● French President Emmanuel Macron wooed about 140 Davos-bound tech

executives at the Palace of Versailles. The guest list at the opulent economic-
development event, dubbed “Choose France,” included Facebook Chief Operating
Officer Sheryl Sandberg and SAP Chief Executive Officer Bill McDermott.
● Vietnam ● The terrorists ● Formula One

champion Niki Lauda
sentenced Trinh behind the August rescued Niki Luftfahrt,
Xuan Thanh, an 2017 van attack a Vienna-based
executive at its in Barcelona may discount airline named
after him. The collapse
state-owned have been planning of its parent company,
oil company, to a bombing at Air Berlin, had left
life in prison for the Eiffel Tower, the carrier insolvent.
corruption. according to a
report by Spanish
● Rocket Lab, a New Zealand-based
researchers.
startup, launched … literally. The
company’s Electron rocket slung into
orbit three small satellites, which His trial was part of a crackdown that
would otherwise have had to hitch meted out long prison terms to several
rides on larger rockets. senior company officials.
By Kyle Stock Bloomberg Businessweek Middle East 1 February, 2018
Americas
● “I do feel ● Kimberly-Clark ● A Brazil appeals court
upheld Luiz Inácio
● Fulfilling a promise to
domestic manufacturers,
said it would cut its
it’s a little bit global workforce
Lula da Silva’s
2017 conviction on
the Trump administration
imposed tariffs of as much
like 2006, by as much as charges of graft and money

laundering. The unanimous
as 50 percent on imported
solar panels and washing
13 percent, or
when we 5,500 jobs.
verdict increases his prison
sentence from 9½ to
machines.
were all 12 years and significantly

complicates the popular
talking former president’s quest

to reclaim the office in
whether The maker of Kleenex tissues and

Huggies diapers is closing 10 of its
October.
we’ve solved
91 factories as it retools to compete
with Amazon.com’s private-label
paper products.
the riddle ● Meg Whitman, whose ● The dollar fell to its lowest level in three years after
of economic last day as HP CEO is

Feb. 1, will lead Hollywood
U.S. Treasury Secretary Steven Mnuchin told reporters
at Davos that he backed a weaker currency in the
crises.” superproducer Jeffrey

Katzenberg’s mobile video
short term.
venture, tentatively known 7

as NewTV.
Dollar spot index
1200
1100
Barclays CEO Jes Staley warned 1000

Davos attendees that markets are
getting complacent. 1/24/14 1/24/18
● European Union antitrust

regulators fined Qualcomm Africa
$1.2b
for paying Apple to use
● Egyptian authorities
arrested former General
Sami Annan, who’d
● Nigeria’s Olympic bobsled team, the first on the
continent, has scooped up endorsement deals from
Apple, Under Armour, and Visa ahead of the opening of
its chips exclusively announced he would the Winter Games in Pyeongchang.
in the company’s challenge incumbent
iPhones and computers. Abdel-Fattah el-Sisi in
Qualcomm said it strongly March’s presidential
disagrees with the elections.
decision and will appeal.
◼ REMARKS
A Case Against
Education
This Is What
A Headline Looks
Like Teekay
ILLUSTRATION BY JACI KESSLER LUBLINER
◼ REMARKS Bloomberg Businessweek Middle East 1 February, 2018
● A tenured professor says most tenaciously argued and thoroughly documented, with
42 pages of notes and 44 pages of references.
of what we learn in college, and even Kindergarten is when Caplan began to sense that some-
high school, is useless thing was wrong with education. By junior high, he writes,
he learned to game the system, “working as little as pos-
sible to get A’s in all the classes I deemed boring and use-
● By Peter Coy less.” Whatever tricks he picked up seem to have worked.
He earned a bachelor’s degree from the University of
California at Berkeley, a Ph.D. from Princeton, and a ten-
Last April, Vermont independent Senator Bernie Sanders ured job as a professor at George Mason University.
introduced the College for All Act, which would eliminate The standard economics case for education is that it
tuition and fees at public four-year colleges and universi- builds “human capital”—skills, knowledge, and habits that
ties for students from families that earn up to $125,000 per are valuable in the workplace. More human capital bene-
year. It would also make community college tuition-free for fits both the student and the economy. But Caplan argues
everyone. Good idea or bad? that human capital isn’t the main story. He concedes that
Advocates of lowering the barriers to college say doing so everybody needs to learn to read, write, and do basic
helps both the students and the U.S. economy. Sanders, one math, but says most of what people learn in high school
of 21 co-sponsors of the bill in the Senate and House, noted and college is unnecessary and quickly forgotten. On the
that Germany, Finland, Denmark, Iceland, Norway, and international level, he cites studies finding no correla-
Sweden already have tuition-free public colleges and uni- tion between a country’s education level and its national
versities. The U.S. must do the same, he said in a statement, income, holding other factors equal.
“if we are to succeed in a highly competitive global econ- What, then, explains such a fat premium for people
omy and have the best-educated workforce in the world.” with college degrees? One possibility is that people who get
The evidence of the benefits of a higher education seems degrees tend to be more capable and would earn more even
indisputable: People with a bachelor’s degree earn 73 per- without going to college. Another reason—the one Caplan
cent more than those with a high school diploma on average, focuses on—is that the diploma conveys useful information
up from a 50 percent advantage in the late 1970s. It stands to employers who can’t afford to probe each job applicant 9
to reason that, as computers and robots get more power- in depth. It tells them that the prospect, in addition to being
ful, humans will have to be more educated to master them. reasonably intelligent, is willing to slog through four years
On the other hand, anyone who’s been to college has to of arduous and often boring classes and knows how to fit in.
have some qualms about its value. Anatomy is essential if Notice that this signal has nothing to do with what he
you’re going to be a doctor, and history if you plan to teach or she may have learned. The signal to employers—of
Western civ. But most of us don’t need to understand the diligence, persistence, and conformity—is just as strong
Krebs cycle or the Peloponnesian War. Honestly, how much whether the applicant studies Sanskrit or cement mixing.
do you remember, let alone use, from Spanish or chem or Notice, too, that signaling is a zero-sum game. Earning a
calculus? For many students, college is mostly about jump- college degree sends a message to employers only if other
ing through hoops on command to show potential employ- people don’t have college degrees. If everyone gets a bach-
ers you’re ready, willing, and able to jump through hoops on elor’s, you need to earn a master’s or a doctorate to stand
command. High school isn’t much different. As somebody out, even if the job doesn’t require one. This rat race leads
named @bdylan234 tweeted on Jan. 11, “I feel like my entire to overeducation and the devaluation of credentials. (High
high school education but especially math was like ‘ok, pre- school really was considered high in the past.)
tend that Google doesn’t exist: how would you do x?’ ” Lots of economists and even educators are willing to
A forthcoming book by economist Bryan Caplan takes admit that signaling is part of why degree holders earn
whatever misgivings you had about education and cranks more. Caplan estimates it accounts for fully four-fifths of
the amplifier up to 11. You probably won’t agree with a degree’s value, leaving just one-fifth for human capital.
everything he says in The Case Against Education: Why the He doesn’t stop there: Likening education to a useless toe-
Education System Is a Waste of Time and Money, but his nail fungus cream, he favours cutting way back on public
broadside is worth considering carefully given that the U.S. funding for it. In a December interview about the book
spends $1 trillion or so a year on education at all levels, with Tucker Carlson on Fox News, Caplan said that only
more than the budget for defense. about 5 percent of Americans should go to a four-year col-
Caplan is a big deal in libertarian circles. In 2007 he lege. The rest would do better learning a useful trade in
wrote a book called The Myth of the Rational Voter: Why vocational education. “By temperament,” he writes in the
Democracies Choose Bad Policies. The writer Michael Lind, book, “I am an extremist.”
in a 2014 piece for Salon, said, “Even though I disagree Michael Spence, Kenneth Arrow, Joseph Stiglitz,
with him, Caplan may turn out to be one of the most Thomas Schelling, and Edmund Phelps, all Nobel laure-
significant thinkers of our time.” Caplan’s new book is ates in economics, have contributed to the theory of
◼ VIEW Bloomberg Businessweek Middle East 1 February, 2018
signaling over the past half-century. But most scholars would never need in their career. “You’re having large
haven’t been willing to follow the theory to its logical con- swaths of people dropping out because they’re not able
clusion, Caplan says. People who criticise today’s system to get through these barriers,” Cohn says. Some colleges
get stomped, he writes. “Education’s like John Gotti, the of the City University of New York are experimenting with
legendary ‘Teflon Don’: guilty as sin, but everyone’s pet- alternatives to conventional math because it’s a “killing
rified to testify against it.” field” for many students, Chancellor James Milliken says.
Even strong believers in public education find some Caplan’s solution—slashing public support for public
points of agreement with Caplan. Linda Galipeau, chief education—is what’s problematic. He argues that if subsi-
executive officer of staffing provider Randstad North dies were taken away, poor youths who couldn’t afford col-
America, says credentialism is a problem for lots of job lege would be unharmed, because employers would begin
prospects. “Their first interview today is with an algorithm. to view a diploma as a signal of family money, not brains.
They’re getting shut out by a robot.” A study in October Maybe. But those strivers would also be deprived of the
by Harvard Business School and others found that in 2015, human capital that college builds—which even Caplan esti-
67 percent of production-supervisor job postings asked for mates at a fifth of the value of a degree and some other
a college degree, even though only 16 percent of employed economists say is substantially higher. In a 2015 column for
production supervisors had one. “We’ve trundled into an the Hechinger Report, an education website, Andre Perry,
over-academicised form of higher education,” says econo- a fellow at the Brookings Institution, writes that the cliché
mist Tharman Shanmugaratnam, the deputy prime minis- “college isn’t for everyone” is code for “those people aren’t
ter of Singapore. smart enough for college.”
I talked to Andrew Cohn, director of a poignant 2016 Caplan is right that higher education consumes too
documentary, Night School, about the struggles of low- much time and money for too little benefit. But the sys-
income adults in Indianapolis to complete their high tem needs to change in a way that would narrow society’s
school degrees. Many stumbled on algebra, which they gaps, not widen them. <BW>
◼ VIEW
10 To read Joe Nocera on the dream of
digital currency and Adam Minter on
the once-virtuous cycle of clothing
donation, go to Bloombergview.com
national income. The country’s leaders promises on the need to do business

Italy’s Pols should be arguing about how to bring with coalition partners.
this debt under control, not promising A precious opportunity to discuss the
Need to to make it bigger still. towering public debt is therefore going
Two factors account for the surge in to waste. The subject could hardly be
Get Real irresponsibility. One is the country’s more urgent. The European Central
economic recovery, which has helped Bank has begun to scale back purchases
to reduce the government’s budget of bonds, and the program is set to end
● With elections approaching, the deficit to 2.3 percent of gross domestic in September. As the ECB’s extraordi-
parties are debating how to spend product. The next government could nary stimulus comes to an end, Italy’s
money that isn’t there use that upswing to cut borrowing fur- borrowing costs are likely to rise.
ther, making space to raise spending Rome also needs to show more fiscal
when the next recession hits. Instead, responsibility if it’s to have any influence
Politicians in Italy aren’t known for the better outlook is prompting calls for in the debate on the future of the euro
their sober realism, but the campaigns fiscal relaxation. Matteo Renzi, leader zone. The Italian government has long
ahead of elections on March 4 take of the centre-left Democratic Party, argued for greater risk-sharing among
fantasising to new heights. The politi- would like to raise borrowing to 2.9 per- member states—making the case for a
cal parties are outbidding one another cent of GDP for the next five years. joint unemployment insurance scheme,
with the most lavish pledges—ranging The second reason is the new for instance. Germany is unlikely to
from Silvio Berlusconi’s flat tax to electoral law—a mixture of first- agree to such measures unless Rome
the Five Star Movement’s “citizens’ past-the-post and proportional proves its fiscal rectitude.
income”—while offering no credible ex- representation. The rules will now Italy’s politicians seem intent on
planations of how to pay for them. make it impossible for any party to demonstrating the opposite. The lon-
This kind of fiscal daydreaming is govern alone. As a result, leaders know ger their fiscal daydreaming goes on,
especially reckless in Italy, where sov- they won’t have to keep their word. the more certain it is to end with a rude
ereign debt has topped 130 percent of They’ll be able to blame their broken awakening. <BW>
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1
B Saudi
U Arabia
S in Low
I Carbon
N
E Energy
12
S Push
Country plans investment in renewables and
S makes plans for nuclear reactor
Saudi Arabia plans to start up to $7 billion of renew- megawatts of wind, Al Shehri said. Winning bidders
able energy projects in 2018, with solar plants will cover financing costs while the government
leading the way. guarantees to buy power produced from the proj-
Tenders will be issued this year for eight projects over 25 years, he said.
ects totalling 4.125 gigawatts of capacity, Turki The kingdom plans to have 3.45 gigawatts of
Mohammed Al Shehri, head of the kingdom’s renewable power online by 2020, according to Al
Renewable Energy Project Development Office, said Shehri. That includes 700 megawatts of solar and
Jan. 16 in an interview in Abu Dhabi. The cost will wind power already tendered, he said. Saudi Arabia
be $5 billion to $7 billion, he said. expects final bids to build a 400-megawatt wind
Saudi Arabia and other Middle Eastern oil pro- plant at Dumat Al Jandal in the country’s north-
ducers are looking to renewables to feed growing west on March 20, according to an email from Al
domestic consumption that’s soaking up crude Shehri’s office.
they’d rather export to generate income. The Saudi Arabia also plans to award contracts in
kingdom wants to have 9.5 gigawatts of solar and December for the construction of its first nucle-
wind capacity installed by 2023. Developers have ar-power plants, according to a government offi-
been cutting their bids for solar power to record cial involved with the project.
lows in recent years. The kingdom has received requests from five
“We do hope to continue breaking records,” Al bidders from China, France, the U.S., South Korea
Shehri said. and Russia to perform the engineering, procurement
1 February, 2018
The Saudi projects this year will include 3.3 and construction work on two nuclear reactors,
Businessweekme.com gigawatts of solar photovoltaic power and 800 Abdulmalik al Sabery, a consultant in the business
◼ BUSINESS Bloomberg Businessweek Middle East 1 February, 2018
development department at King Abdullah City for reserves of oil and natural gas, unlike neighbour-
Atomic and Renewable Energy, said in an interview ing Algeria and Egypt. The North African country is
in Abu Dhabi. He declined to identify the bidders. seeking to reduce its dependency on imported fossil
“By April we will sign a project development fuels and plans to produce 42 percent of its electric-
agreement with two to three selected vendors,” al ity from renewables by 2020, Energy Minister Aziz
Sabery said Jan. 15. “We are going to have only one Rabbah said on Jan. 14 in Abu Dhabi.
winner that will be building the two reactors.” The ACWA Power’s Chief Executive Officer Paddy
government expects construction to start next year Padmanathan confirmed its bid for the project and
and is “shooting for” commissioning the facilities said his company expects to submit a financial pro-
in 2027, he said. posal by April or May. Media officials at Engie and
Saudi Arabia is seeking to diversify its economy EDF Energies Nouvelles had no immediate comment.
and lessen its dependence on oil sales for most of Development banks are likely to provide financ-
its official revenue. As part of these reforms, the ing for the solar facilities, and a bond sale is also an
country wants to meet a larger share of its energy option, Amrane said. Morocco plans by 2020 to have
needs from renewables. Its neighbour the United 6 gigawatts of installed renewable capacity, includ-
Arab Emirates plans this year to complete the first ing solar, wind and hydropower, he said.
of four reactors. Each of the Saudi nuclear reactors Adding intermittent renewable energy sources
will be able to produce as much as 2.2 gigawatts to such as solar and wind to electricity grids raises the
3.3 gigawatts, depending on the technology they use, need for grid-balancing services. Batteries are seen as
al Sabery said. They will be combined in a single a solution, as they can be charged with excess clean
power station, he said. Financing will be provided power and switched on and off quickly.
by the vendor and the Saudi government, which will Other countries in the Middle East with large
contribute the bigger share of funds. Saudi Arabia is renewable energy programmes have also begun
currently setting up a nuclear regulator, al Sabery programmes to add batteries to their grids. Jordan,
said. � Mahmoud Habboush for example, will host a tender for 30 megawatts of
● Percentage of
storage early this year. Morocco’s energy that
THE BOTTOM LINE Saudi Arabia is awarding lucrative contracts
for renewable energy projects and two nuclear power stations Morocco will probably make greater use of battery is imported
technology to store power generated from renewable
this year.
resources, Amrane said. “We anticipate a lot of inno- 97% 13
vation and price decrease in that market.”
In neigbouring Egypt, renewable energy also
received a boost when three companies including
Morocco and Egypt Japan’s Marubeni Corp. and Abu Dhabi Future Energy
Co., also known as Masdar, teamed up to invest about
Set to Expand $900 million in Egyptian wind parks.
Egypt’s ElSewedy Electric is also involved in the
Renewables plan to build more than 700 megawatts. A first project
of about 30 percent of the total capacity is near finan-
cial close, the company’s vice president Wael Hamdy
● Morocco to award contracts for said in an interview in Abu Dhabi.
800-megawatt solar-power project “Marubeni is leading the financing part, so we
while Egyptian wind parks attract hope to achieve financial closure as soon as possible,”
$900m investment he said after signing the agreement in Abu Dhabi.
“Most probably we will leverage on Japanese finance.
The lead arrangers and the syndication is something
Morocco, which relies on energy imports for most of we are working on currently.”
its needs, plans to award contracts to add 800 mega- Marubeni signed an MOU with the other compa-
watts of solar-power capacity by the end of this year. nies to develop the project and expects total costs
Three groups -- led by Engie SA, EDF Energies to be about $900 million, according to a company
Nouvelles and ACWA Power International -- made spokeswoman. A commercial startup date for the
technical bids in December for the engineering, pro- project hasn’t been decided, she said.
curement and construction work, Obaid Amrane, a The whole project is expected to cost about 1
management board member at the Moroccan Agency million euros ($1.2 million) per megawatt, in line
for Sustainable Energy, said Jan. 15 in an interview in with the industry average for onshore wind, he said.
Abu Dhabi. The project, consisting of two 400-mega- The Egyptian government had earlier awarded
watt facilities, will probably take as many as two and the projects to the three companies. � Mahmoud
a half years to complete once construction begins, Habboush
he said.
THE BOTTOM LINE Morocco plans to award contracts to add
Morocco imports 97 percent of its energy, accord- 800 megawatts of solar-power capacity while wind parks in Egypt
ing to a World Bank report in 2015, and it has few are set to gain $900 million investment.
◼ BUSINESS Bloomberg Businessweek Middle East 1 February, 2018
Emirates Orders A380s

Worth $9 Billion
● Dubai-based airline throws A380 project a lifeline and also arranges $1 billion sukuk with HSBC and Citi
UAE carrier Emirates agreed to buy 20 Airbus SE Emirates will join a list of regional issuers seeking
A380 superjumbos worth $9 billion at list prices, funding from international bond markets before
sealing a vital order for a programme that the man- expected increases in U.S. interest rates push up
ufacturer said earlier could be terminated follow- borrowing costs. Issuers from the six-nation Gulf
ing a sales drought. Cooperation Council, which includes the two biggest
Dubai-based Emirates signed a memorandum of Arab economies of Saudi Arabia and the United Arab
understanding for the planes and also has options Emirates, raised a record $84.9 billion from bond
to buy 16 more, the carrier said Jan. 18 in a state- sales last year as they sought to take advantage of
ment. The aircraft will be delivered from 2020, with low interest rates and sidestep tight liquidity in the
“We are
engine options still under evaluation. local-loans market amid low oil prices.
Already by far the biggest A380 customer, “Emirates always seeks diverse sources of funding, continually
Emirates had repeatedly stalled on the follow-on including bank finance, operating leases, Islamic engaged in
deal, putting the future of the double-decker in financing, sukuk and bonds,” Emirates said in an discussions
doubt after it failed to win any new orders for two emailed response to questions. “We are continually
with various
years. If the airline takes all of the planes the pur- engaged in discussions with various financial institu-
14
chase will safeguard production through 2029, an tions. We will not offer comment unless a deal is for- financial
Airbus spokesman said. mally announced as per financial market regulations.” institutions”
Several days after the announcement regarding Emirates, which has built its Dubai operations
the A380s, it emerged that Emirates mandated eight into a hub for transcontinental traffic between the
banks including HSBC Holdings Plc and Standard U.S., Europe and Asia, typically raises financing
Chartered Plc to manage a sale of Islamic bonds, each year from a combination of commercial loans,
according to two people with knowledge of the operating leases and export credit agency backed
transaction. facilities. It last sold a bond in 2015, when it raised
The carrier also picked Citigroup Inc., BNP $913 million from a 10-year sukuk, guaranteed by
Paribas SA, Emirates NBD PJSC, Dubai Islamic the U.K.’s export-finance agency, to help pay for
Bank PJSC, Abu Dhabi Islamic Bank PJSC and Noor four Airbus A380-800s. �Archana Narayanan and
Bank PJSC, said the people, asking not to be iden- Arif Sharif
tified because the information is private. The issue
is scheduled for the next few weeks and will aim to THE BOTTOM LINE Emirates has agreed to buy 20 Airbus
SE A380s worth $9 billion, handing Airbus a lifeline for the
raise about $1 billion, they said. superjumbo project.
Bloomberg Businessweek Middle East 1 February, 2018
T Out From Under the

E ‘Bamboo Ceiling’
C The couple left the balmy Bay Area for Shanghai,
and six years later Wang’s startup, Liulishuo (also
known as LingoChamp), has raised more than
H
$150 million in venture funding for its English-
teaching app, which has 60 million users and
1 million paying subscribers and is planning its
expansion into other markets. Wang says he and
N
his wife still miss the parks.
Stories like his are becoming more common
among Silicon Valley’s talented Chinese-born
engineers, even as President Xi Jinping toughens
O
China’s harshest-ever crackdown on internet free-
dom. While many recent Chinese college graduates
still covet American citizenship and a prestigious
Valley name on their résumés, many are quickly
L tiring of what they call a “bamboo ceiling,” a rela-

16
tive lack of opportunities to advance to leadership
● Silicon Valley is losing roles. Often, their home country seems to offer a
better chance to work on grander problems—and,
O
talented Chinese engineers perhaps, become fabulously wealthy.
to, well, China Tech has supplanted finance as the biggest
industry drawing Chinese expats home, account-
ing for about 1 in 6 returns, according to a 2017
G
Even before Wang Yi learned that his wife, Cao Jing, survey of 1,821 people conducted by the think
was pregnant, he’d started to feel another kind of tank Center for China and Globalisation and jobs
clock ticking. Since graduating from Princeton in site Zhaopin.com. (That’s up 10 percent from their
2009, he’d spent two years working at Google’s last poll, in 2015.) “More and more talent is moving
Y
headquarters in Mountain View, Calif., attend- over, because China is really getting momentum in
ing meeting after meeting as a product manager the innovation area,” says Ken Qi, who leads the
shepherding projects from search ads to YouTube technology practice at headhunter Spencer Stuart.
upgrades through the company’s mammoth “This is only the beginning.”
bureaucracy. I can’t do this anymore, he told Cao Recruiters seeking to fill jobs in China regularly
soon after the pregnancy test came back positive. approach expats in Mandarin-language WeChat
Let’s go home. Back to China, for good. and Facebook groups of Chinese engineers and
It was a fight. Cao was happy in the spacious managers, Qi says, often leading off with banter
condo she and Wang had just bought in nearby or animated GIFs. If you’re a desirable enough
Sunnyvale, and they loved touring America’s worker to have scored permanent residency and
national parks in their new Subaru Outback. are childless or have kids prepping for college,
Together, they were making more than $200,000 expect a knock on your digital door, he says. Jay
a year and had a stable future to look forward to. Wu, a co-founder of Global Career Path in San
ILLUSTRATION BY SAM ISLAND
China seemed like a big question mark. “It was Francisco, says he’s poached more than 100 engi-
a very uneasy few weeks before we made our neers from U.S. companies for Chinese ones in
decision,” Wang recalls. A lot of pacing, a lot of three years.
1 February, 2018
tense hourslong debates with graphs of the pros Usually, the pitch quickly turns to money.
Businessweekme.com and cons. “But in the end, she came around.” In China’s bubbly startup environment, one
◼ TECHNOLOGY Bloomberg Businessweek Middle East 1 February, 2018
engineer’s compensation package is said to have less binary. Alibaba, WeChat maker Tencent
reached $30 million for a four-year deal. “More and Holdings Ltd., search engine Baidu Inc., and ride-
more Chinese engineers who’ve worked in Silicon hailer Didi Chuxing are all building or expanding
Valley for an extended period of time end up labs in the Bay Area. “Moving back to a Chinese
finding it’s much more lucrative for them career- company can give a sense of belonging,” says
wise to join a fast-rising Chinese company,” says Spencer Stuart’s Qi. “The critical factor is still the
Hans Tung, a managing partner at venture firm career, the ability to move into a Chinese company
GGV Capital who’s organised events to recruit where they can actually make some decisions.”
talent. “At Google, at LinkedIn, at Uber, at Airbnb, �David Ramli, with Lulu Chen
they all have Chinese engineers who are trying to
figure out, Should I stay, or should I go back?” THE BOTTOM LINE While most Chinese AI engineers remain
in the U.S., tech has supplanted finance as the biggest industry
The headhunters say Chinese engineering drawing expats home for career opportunities and cash.
expats began to take a rosier view of their home
country after Alibaba Group Holding Ltd. went
public in 2014. (Its $25 billion initial public offering
holds the world record.) Chinese venture capital
briefly eclipsed that of the U.S., and three of the
world’s five most valuable startups are based in
Beijing. But more interesting for some engineers is
An App That
the sheer volume of data available in China, where
privacy protections are weaker and tech com-
panies have teamed with law enforcement officials
Comes With
to create an unparalleled surveillance machine.
That may not sound appealing—or good—but some
engineers are drawn to the challenge.
A Kitchen
“I didn’t go to the U.S. for a big house. I went for
the interesting problems,” says Xu Wanhong, who ● Deliveroo is pushing an unorthodox solution 17
left Carnegie Mellon University’s computer science to food delivery as it struggles to make money
Ph.D. program to work on Facebook’s news feed. At
Kuaishou, a Beijing video-sharing service valued at
more than $3 billion, he’s senior director and head Food delivery apps don’t make money. That’s one
of the community science department, a powerful of the big lessons venture capitalists have taken
voice in debates over ways to use the company data away from the past few years, as the startup
and address user feedback. graveyard has filled with names such as Sprig,
Homesickness was a factor for Chongqing native Jinn, and Take Eat Easy. Despite the $100 billion
Yang “Seth” Shuishi, who grew up idolising the market, margins are thin or nonexistent, and apps
West and landed a series of dream gigs at Microsoft, haven’t been able to wring much extra efficiency
Google, and Facebook. But he, too, grew disillu- out of logistics algorithms trying to organise
sioned with his day-to-day jobs. “You’re just work- orders from restaurants spread within a given
ing as a cog in the huge machine, and you never customer’s delivery radius.
get to see the big picture. My friends back in China Deliveroo, one of Europe’s biggest startups, is
were thinking about the economy and vast social bringing an unprecedented amount of money to
trends,” he says. “Even if I get killed by the air and bear as it bets on a different approach. Although
live 10 years shorter, it’ll still be better.” unknown in the crowded U.S. market, which it
The growing wave of departures could even- has purposely avoided, the five-year-old London
tually become a problem for U.S. companies that company is ubiquitous in Europe’s capitals, avail-
depend substantially on Chinese engineers to able in 200 cities and on four continents, and it’s
advance their artificial intelligence products. Of raised a little less than $1 billion in venture fund-
the more than 850,000 AI-related workers across ing—more than half of it last year—from the likes of
America, about 1 in 12 has Chinese heritage, accord- T. Rowe Price Group Inc. and Fidelity Investments.
ing to a 2017 report from LinkedIn. There are fewer It’s pushing money into a series of kitchens that
Chinese AI specialists in China (about 50,000), it’s leasing to already successful restaurants inter-
meaning there remain plenty of expats who don’t ested in expanding their delivery services.
feel a strong urge to flee Silicon Valley. The company has opened 105 of these shipping-
The choice between the comfort of the Valley container-size kitchen spaces, each big enough for
and the stimulation of China’s startups is becoming about five cooks, across a dozen cities, and in the
18
next few months it will announce five additional

cities, such as Manchester and Cambridge. It’s
part of a broader plan by Deliveroo, including a
reported move into India, as the startup faces rivals
Amazon.com Inc., Delivery Hero, and Uber Eats,
among others.
Deliveroo says its kitchens, initially meant to
help popular eateries manage overflow deliver-
ies, now reach customers who didn’t have enough
quality food nearby. “The goal is to help restau-
rants expand in areas they wouldn’t otherwise
consider going,” says Rohan Pradhan, the VP over-
seeing the effort. In the parking lot of a closed
brewery in London’s Camberwell neighbourhood,
separate kitchens are set up for Indian and Thai
cuisine, rotisserie chicken, burgers, and pizza.
When customers place orders, the app prints
tickets that tell cooks what time to have the food oven. One of the first businesses at the Camberwell
ready, and gofers hand the food off to drivers. The site, Moore’s is a successful food truck that now
whole thing is designed to minimise the kinds of gets about a quarter of its sales from Deliveroo
real estate and staff costs that make the restaurant and is opening another delivery-only kitchen in
business a struggle. When the weather is bad or London. Deliveroo fronts the costs for all the kitch-
a big event is on TV, the dinner rush brings more ens, including Moore’s oven, imported from Italy.
than 200 orders an hour, Deliveroo says. The company says it will recoup its investments
“We can get a pizza prepped and cooked in through either lease fees or revenue-sharing deals,
three minutes,” says Joe Moore, the 27-year-old and that it’s carefully selected partners based on
owner of Crust Bros, standing in front of a 900F delivery data, searching for, say, neighbourhoods
with unmet demand for pizza. Karam Sethi, owner neighbours, some of whom have complained ▼ Deliveroo has opened
105 shipping-container-
of Michelin-starred Trishna in London, opened about traffic and noise. In London a local coun- size kitchens it leases
the delivery-only Motu with Deliveroo last year. cil has threatened to shut down operations in to restaurants looking
to expand their delivery
“Overheads certainly aren’t as high,” Sethi says. He Camberwell until the startup obtains proper per- services
signed on because Deliveroo’s data showed “high mits. (Deliveroo says it has a licence and is negoti-
demand for the product and an audience with dis- ating a compromise.) Throughout Europe, where
posable income that will be ordering.” labour rights are relatively strong, the company
Pradhan, previously an Amazon executive who is also struggling to keep its drivers classified as
helped start its one-hour delivery service, says contractors, with the lesser employment protec-
restaurateurs don’t need traditional storefronts tions that entails, even after a U.K. labour regulator
if diners can discover their food online. Last year, helped it defeat a unionisation effort in November.
Twisted, a maker of food videos with more than For now, though, the company’s biggest ques-
9 million Facebook followers, opened a delivery- tion mark is its margins. It says it’s profitable
only setup in East London. Even Domino’s Pizza in several undisclosed cities, but annual losses
Inc. is enjoying an app-driven resurgence. “We’re quadrupled, to £129 million ($176 million), on sales
only going to see the trend expand,” Sethi says. of £129 million in 2016, the most recent figures
Deliveroo’s kitchens haven’t endeared it to filed with U.K. regulators. If successful, the kitch-
ens may help by increasing delivery volumes in ◀ Each prep kitchen is
big enough for about
certain areas. Deliveroo is being watched closely five cooks; when
as a bellwether for the broader food delivery busi- customers place orders,
the app prints tickets
ness, an industry that Sucharita Kodali, an ana- that tell cooks what time
lyst at Forrester Research Inc., says has structural to have the food ready
flaws. “It all comes down to how much people
are willing to pay for the service,” she says. “It’s
often not as much as venture capitalists think.”
�Adam Satariano
19
THE BOTTOM LINE Deliveroo, which rents out delivery kitchens,
raised almost $500 million in venture funding last year but lost
$176 million in 2016.
PHOTOGRAPHS BY ANA CUBA FOR BLOOMBERG BUSINESSWEEK

3
F
I
N
A
N
C
E
20
● Finance hasn’t had its up with across top companies. That’s not the
case, according to interviews with 20 current
#MeToo moment. Women say and former Wall Street women, who asked not
the culture of banking and a to be identified describing personal experiences
web of legal agreements keep and observations.
Some say they’ve been grabbed, kissed out
harassment hidden of the blue, humiliated, and propositioned by
colleagues and bosses but have stayed quiet
because of cultural and financial forces that are
Three women who’ve had long careers in bank- particularly strong in banking. They say they
ing sat down for lunch together in Manhattan on have a lot to lose by speaking out, no certainty
the first Wednesday of the year. It didn’t take long about what they’d gain, and legal agreements
before they asked one another the question: Why that muzzle them.
hasn’t the Harvey Weinstein effect hit finance? Few industries have been as savvy about stay-
After the movie mogul was accused last ing out of court, where cases can receive atten-
October of sexual harassment and assault, pow- tion from the press and the public, by getting new
erful men have been pushed out of jobs in the employees to sign away their rights to sue. That
media, the arts, politics, academia, and the means when women in trading and banking are
restaurant business because women spoke up harassed, many have to arbitrate their complaints
to allege egregious behaviour. Something is in a private system. “If you consider why you’re
different on Wall Street. While the #MeToo move- not hearing anything, it’s most likely around
ment spreads far and wide, these companies arbitration,” says Ana Duarte-McCarthy, who ran
have seemed practically immune. diversity efforts at Citigroup Inc. until she left in
Some bankers and executives will tell you 2016. She does credit Wall Street for focusing on
that’s because the industry cleaned out bad anti-harassment training before other industries.
1 February, 2018
behaviour more than a decade ago, after a string But the arbitration system, she says, “creates the
Businessweekme.com of lawsuits revealed what women were putting potential for a cloak of invisibility.”
◼ FINANCE Bloomberg Businessweek Middle East 1 February, 2018
Financial companies were among the earliest her to his hotel while “sticking out his tongue
to adopt the arbitration system, says Alex Colvin, and wiggling it at me.” After leaving in 2002 for
a professor at Cornell University. “Arbitration is Citigroup, she found out her harasser was about
almost always a private system where nobody else to get a job at the bank. When she told its CEO
has a right to know what’s going on,” he says. what the man had done, the boss suggested
Jennifer Hatch, who runs wealth manager maybe it was all a misunderstanding. She threat-
Christopher Street Financial and started her ened to quit before Citigroup agreed not to hire
career at JPMorgan Chase & Co. and Bear Stearns him, she wrote.
Cos., says some women feel pressure to remain Jacki Zehner, the first female trader to become
silent because of the amount of money they a Goldman Sachs partner, shared an account
stand to lose. “People spend their entire educa- of being pulled out of a cab by a colleague who
tional and professional career trying to get to this wanted to take her into his home after drinks. “I
pot of gold, and some guy dropping his drawers was hanging onto the door handle on the other
is not going to get in the way of that,” she says. side,” she wrote. “Finally, the driver intervened.”
And much of Wall Street pay gets handed out in Zehner, who left the bank in 2002, says she’s still
bonuses controlled by bosses. “Access to this pot too afraid to name that colleague. Krawcheck
of gold is based on, ultimately, the complete dis- wrote that she’s withholding her harasser’s name
cretion of the men in this club,” Hatch says. because she got her revenge when she blocked
That club can be so intimidating that some his job. “My hope is that women who work in
of the women interviewed say they worry that the financial-services sector take inspiration and
pointing fingers would permanently alienate courage from women’s voices in other industries,”
bosses, colleagues, and even rivals. They look Zehner says. “I want to be a person not afraid to
around and see companies that prize discre- speak truths. We’re talking about big forces.”
tion, expect sacrifice, fixate on reputation, and �Max Abelson
are built on relationships.
According to the biggest U.S. banks, whose THE BOTTOM LINE Although Wall Street women say they’ve
experienced harassment, the industry is unusually savvy about
chief executive officers are all men, the situa- keeping disputes with employees out of the public eye. 21
tion is improving. “Half our company’s senior
leadership team and half of our employees are
women,” says Brian Marchiony, a spokesman
for JPMorgan Chase. “And we strive every day to
foster diversity and a workplace environment of
mutual respect and trust.” According to Andrew
Who Wants to Be
Williams, a spokesman for Goldman Sachs Group
Inc., the company has reinforced its policies “to
Bitcoin’s Watchdog?
make it even easier for women, or any other
employee, to come forward.” ● The U.S. Commodity Futures Trading Commission has raised its
When women complain to employers in hand. Some think it’s going too fast
the finance sector, as in other industries, they
often agree to settlements that keep them from
going public. One of the women at the lunch in At a meeting with staff of the U.S. Commodity
Manhattan said she didn’t want to be named Futures Trading Commission late last year,
because of a nondisclosure agreement she signed Chairman J. Christopher Giancarlo ticked off a list
decades ago. of the watchdog agency’s achievements. Among
Wall Street has seen some changes since them: It emerged as the federal overseer of dig-
Weinstein’s fall. Morgan Stanley fired former ital currencies like bitcoin. For better or worse,
Congressman Harold Ford Jr. after investigating Giancarlo added.
his behaviour with a woman outside the firm. He That may have been meant as a humourous
PHOTOGRAPH: ANDREW HARRER/BLOOMBERG
denies a claim that he grabbed her. aside, according to people who were there, but
● Giancarlo
And as the Weinstein allegations fueled the some in the crowd saw it as an unusually frank
#MeToo movement, two Wall Street veterans assessment. Cryptocurrency gives regulators a
published posts online in October about being lot to be nervous about. Bitcoin prices are swing-
harassed, though their stories take place years ing wildly but are still up about 1,500 percent over
ago. Sallie Krawcheck wrote about a man at a the past year. It and other virtual tokens have cap-
conference run by Sanford C. Bernstein & Co., tured the imaginations of investors who hope to
where she was research director, who invited get in on the money of the future, even though
◼ FINANCE Bloomberg Businessweek Middle East 1 February, 2018
it’s challenging to actually buy things with digi- greater swaths of territory to police. This includes
tal cash. The CFTC, a government agency created the $483 trillion market for financial derivatives
in 1974 to monitor agricultural futures and less called swaps. The agency’s $250 million budget
well-known than the U.S. Securities and Exchange hasn’t risen in step with the new authority, driv-
Commission, has an opportunity to increase its ing down employee morale and leading the agen-
profile by becoming a key regulator in this new cy’s workers to unionise. It even ran out of cash
market. That also means that any blowups will be several years ago and was forced to borrow from
on its watch. the Treasury just to keep its doors open.
Giancarlo, a former executive at a swaps broker- To critics, that’s not a recipe for successful
age firm who became an agency commissioner in oversight. “Ultimately regular investors are going
2014 and chairman last year, is fond of referring to to lose money,” says Lee Reiners, a former Federal “Ignoring
the CFTC as a “21st century regulator.” In December Reserve Bank of New York supervisor who is now bitcoin trading
he took the agency headlong into the cryptocur- director of the Global Financial Markets Center at doesn’t make
rency fray when he allowed two exchanges to offer Duke School of Law. “The CFTC will end up hav- it go away”
futures contracts based on bitcoin—which will allow ing to bear some responsibility for that.”
investors to bet on the price rising or falling with- Giancarlo says the agency was able to demand
out buying the cryptocurrency itself. This could some tougher safeguards for bitcoin futures inves-
clear the way for new investment products and tors. For one, he says, traders will have to put up a
make it easier for large institutional investors to get much steeper amount of collateral than they would
involved. “Ignoring bitcoin trading doesn’t make it for a typical, much less risky futures trade in, say,
go away,” Giancarlo says. “Technology is a given, oil or wheat. And in asserting its jurisdiction in
and the agency needs to keep pace.” futures trading, he adds, the CFTC will be in a bet-
The fast-tracking of bitcoin futures provoked ter position to protect the public by gaining insight
a storm of criticism, including from the biggest into the underlying cash markets where bitcoin and
banks, which are responsible for settling the other cryptocurrencies are traded directly.
trades, as well as some Democratic lawmakers. A CFTC advisory on its website warns consum-
22 Both Secretary of the Treasury Steven Mnuchin ers that many exchanges where virtual currency
and Securities and Exchange Commission is traded are unsupervised by regulators and that
Chairman Jay Clayton privately questioned why prices may be manipulated, among other risks.
the process was moving so quickly, according to Using its authority to go after fraud, the agency
people familiar with the discussions. SEC spokes- has brought enforcement cases against platforms
man John Nester says “the characterisation is
inaccurate.” A spokeswoman for the Treasury
Department declined to comment. Crypto, You Say? I’m In
The CFTC chairman maintains that he could Traders are piling into stocks claiming any connection to virtual currency or
do little to stop the two exchanges, CME Group the blockchain technology behind it
Inc. and Cboe Global Markets Inc., from going

forward. That’s because they used a process set Eastman Kodak share price Long Blockchain share price
up under U.S. commodities law known as self- $7 $7
certification. It lets regulated exchanges launch Jan. 9, 2018: Dec. 21, 2017:
their own products and bypass any formal review The longtime maker The company
of film announces
as long as they pledge not to run afoul of the agen- its “photo-centric
changes its name
from Long Island
cy’s rules. Giancarlo, in an interview, took pains cryptocurrency” Iced Tea and says
called KodakCoin
to point out that the CFTC “did not approve” the it’s getting into
blockchain
new futures products.
Indeed, one risk is that individual investors
could interpret the emergence of a regulated 5 4
futures market as a stamp of approval for a volatile

and little-understood asset—at a time when some
classic signs of a bubble are emerging. For exam-
ple, in an echo of the 1990s dot-com boom and
DATA: COMPILED BY BLOOMBERG
1960s ’tronics craze, stocks with even the slight-

est connection to cryptocurrency or blockchain Nov. 8, 2017:
Third-quarter
are suddenly shooting up in price. earnings
Meanwhile, Congress has chronically under- announced 3 1
funded the 700-person CFTC even as it has given it 10/9/17 1/9/18 10/9/17 1/9/18
◼ FINANCE
Careers Global Guru

offering bitcoin trading to retail customers and
in September filed suit over an alleged bitcoin Mark Mobius, 81, who became one of
Ponzi scheme. the most recognised authorities on
Giancarlo says that despite his inability to investments in Africa, Asia, Eastern
slow the new bitcoin futures markets, his agency Europe, and Latin America, plans to retire
is ready to watch over digital currencies. He’s from Franklin Templeton Investments on
asked Congress for a 13 percent budget increase Jan. 31. Hired in 1987, Mobius headed
to add three dozen workers and boost technology one of the first emerging-markets equity
to monitor cryptocurrency derivatives. The CFTC funds available to U.S. investors.
first identified bitcoin as a commodity in 2014, ——Ben Bartenstein and Charles Stein
Giancarlo says, before he was made chairman.
The agency “has been well prepared,” he says.
One of his first steps after being named chairman
Going Mainstream
was to set up an office called LabCFTC, which
focuses on digital markets.
The chairman’s embrace of new technology
Over the course
of Mobius’s career,
Emerging markets’ share
of the MSCI All Country
World Index
5
Emerging-market
has been praised by some lawmakers and for- developing nations 14%
nations Franklin
mer CFTC members as necessary and forward- came to represent Templeton invested
in when Mobius
thinking. “It’s actually pretty gutsy of the CFTC a significantly larger joined the firm in
to have taken this on in a full-throated way,” portion of the global 7 1987. Today the
company invests
says Bart Chilton, a former Democratic commis- equity market as in about
sioner who also has an interest in digital cur- investors sought
rency. Chilton is helping launch one backed by
oil reserves. Under Clayton, the SEC has refused
profits in fast-
growing economies. 1988 2017
0
50
to allow bitcoin exchange-traded funds, mostly
because of concerns that the underlying markets
for bitcoin are opaque and unregulated. In January,
Clayton issued a statement on initial coin offerings, “People on the “He was a 23
in which people raise money for projects or compa-

ground had missionary for the
nies by selling their own virtual tokens. “There are
tales of fortunes made and dreamed to be made,” a distinctive whole concept
Clayton wrote. “We are hearing the familiar refrain,
of emerging
PHOTOGRAPH: RAZAN ALZAYANI/BLOOMBERG. DATA: VANGUARD ANALYSIS OF MSCI DATA, FRANKLIN TEMPLETON, BLOOMBERG INTELLIGENCE
‘this time is different.’ ” He wrote that currencies advantage,”

issued in ICOs often fit the legal definition of secu-
says Michael Rosen of Angeles
markets,”
rities and fall under the SEC’s jurisdiction. Investment Advisors. Based in
Mnuchin heads a council of regulators that Singapore, Mobius travelled about says Dan Fuss, a longtime bond
250 days a year. “When he started, manager at Loomis, Sayles & Co.
monitors risks to the financial system; it’s put there was no internet and you could “It was seen as high-risk, exciting,
cryptocurrencies on its agenda. He often quotes barely make a phone call.” and off the wall.”
JPMorgan Chase & Co. Chief Executive Officer

Jamie Dimon on the subject. The banker has
called bitcoin a “great product” for criminals Once, individual investors who wanted to place a bet on
and derided its investors as “stupid,” though he’s stocks in developing nations were restricted to a handful of
recently softened his stance. mutual funds, some with steep commissions and management
In the wake of the criticism over the futures fees. Now they can buy a variety of low-cost ETFs.
markets, the CFTC has been working to deal with
Emerging-markets ETFs
some concerns. It’s scheduled public meetings ◼ Assets under management at yearend New funds launched during the year
later this month that will address the CFTC’s over-
sight of digital currencies. It also issued a flurry $200b
of papers to explain bitcoin trading and its deci-

sion on the futures contracts. Among them was
12
that advisory for consumers. One of its tips: “Do 100
not invest in products or strategies you do not

understand.” �Robert Schmidt and Ben Bain 1
0
THE BOTTOM LINE The CFTC has allowed futures trading in
2002 2017
bitcoin to move forward. Its chairman says the agency is ready to
handle the new market.
4
Libyans Ditch
E Dollars as
Oil Recovery
C Gathers Pace
O Rising oil prices have

relieved financial pressure
N
on Libya, allowing
authorities to channel
more dollars to importers
O Libya’s powerful black market traders are encoun-

tering an unfamiliar sight: people showing up with
M
bundles of dollars for sale.
Rising oil prices have relieved financial pres-
sure on Libya, allowing authorities to channel
more dollars to importers since the start of the
I year. Meanwhile, the central bank has eased restric-

24
tions on currency transfers that had made the black
market the primary supplier of hard currency, fuel-
ing record inflation and impoverishing wage-earn-
C ers already struggling since the 2011 NATO-backed

rebellion.
The sudden hard currency influx strength-
ened the dinar by 50 percent on the black mar-
As dollar-earnings dwindled, the central bank
stopped granting letters of credit to most import-
ers. That forced them into the black market, where
S
ket mid-January. By Jan. 22, the rate had stabilised a weakened dinar drove inflation to a record 31 per-
around 6.25 per dollar after languishing between cent in the second quarter of last year.
9 and 10 for much of last year. The official rate is Central Bank Governor Sadiq Al-Kabir refused to
pegged at 1.34 per dollar. devalue, even as other oil-exporters from Nigeria to
The development could offer some respite to Russia did. With crude prices recovering to three-
the fragile internationally-recognised government year highs near $70 a barrel mid-January, Kabir’s
in Tripoli, which has faced public anger over the stubbornness might yet pay off.
rapid deterioration in living standards and security. Oil revenue nearly tripled to $14 billion in 2017
“It’s all come together at the same time,” said from $4.8 billion in 2016, according to central bank
Ziad Layas, a Tripoli-based textile importer. “This data. Royal Dutch Shell Plc and BP Plc recently
might be a pain for drivers and bill-payers world- approved annual deals to buy Libyan crude for the
wide but is a blessing for a country that relies on first time in years.
oil as its sole source of cash.” “When oil prices fell worldwide combined with
Since the war that ousted Muammar Qaddafi, a decline in oil production domestically in 2015, the
Libya has been carved up among dozens of mili- rates on the black market skyrocketed,” said Libyan
tias, with rival administrations in the east and in analyst Said Ali ElSalh. “Now, we’ve started to see
Tripoli. In 2014, infighting crippled shipments of the opposite.”
crude oil, Libya’s main source of income, devas- Black market traders said Libyans began off-
tating the import-dependent economy. Oil exports loading their dollars savings after the central bank
resumed in September 2016 and output last year announced it would raise the annual amount of
1 February, 2018
reached its highest level in four years, but a col- foreign currency available to individuals to $500
Businessweekme.com lapse in global prices delayed economic recovery. from $400, effective Jan. 15. It eased restrictions
◼ ECONOMICS Bloomberg Businessweek Middle East 1 February, 2018
dollars until the price stabilises.

“I’ll wait for a while to understand more about
this collapse and who’s behind it,” said Tripoli-
based Ali Mahmoud.
In other news, Libya’s state energy producer
National Oil Corp. announced the restart of produc-
tion at Wintershall AG’s Sara oil fields more than
two months after they were closed by protests, in
the latest sign that the OPEC nation’s oil industry
may be stabilising.
The fields will increase the North African coun-
try’s crude output by 57,000 barrels a day, accord-
ing to an NOC statement on Jan.21. Wintershall
confirmed that crude output at the fields resumed ◀ Fuel storage tanks at
the same day, according to an emailed statement the Zawiya oil refinery
near Tripoli, Libya.
from the company.
The shutdown since November resulted in
the loss of 4.4 million barrels of production at a
cost to the economy of $281.5 million, NOC said in
the statement. The municipality of Jikharra had
decided to reopen the area following pressure from
NOC and the public prosecution, it said. The fields,
located in the Jikharra area, were closed in early
November due to protests by people demanding
jobs and more local development projects.
NOC Chairman Mustafa Sanalla said the restart
in Jikharra was a setback for a parallel Libyan oil 25
administration based in eastern Libya, which for
several years had tried to gain control over the
country’s central and eastern oil facilities and
export the crude independently. It failed to do so
on foreign currency transfers and bank cards, too. as major international oil companies only recog-
The Tripoli government also gave the central nise the Tripoli-based NOC.
bank until the end of February to clear the back- “The perpetrators and others considering using
log in letters of credit to importers approved by the tactic should remember this is a very serious
the Economy Ministry in 2017. A ministry table offense for which there is no statute of limitations,”
published Jan. 8 suggests 5,557 requests worth Sanalla said. ● The official exchange
rate of the Libyan dinar
$4.1 billion were authorised between August and NOC board member Abulgasem Shingheer met per dollar is
December. with a Wintershall official to discuss restoring pro-
Importers and economists estimated at least duction to normal levels, the NOC said in another 1.34
2,000 letters of credit worth $1.5 billion had been statement on its website Jan. 22.
processed so far. Talk that a letter of credit was The restoration of Libyan oil despite the coun-
opened for an underwear shipment buoyed the try’s divisions has put the spotlight on Sanalla,
dinar, as the central bank had been prioritising whose influence has waxed in a country dependent
essentials like food and medicine. The central bank on oil exports. In another sign the sector is stabilis-
didn’t respond to requests for comment. ing, Royal Dutch Shell Plc and BP Plc have agreed
Though received as a harbinger of economic to annual deals to buy Libyan crude. Production
recovery, the rapid turnaround has hurt some remains well below the level of 1.6 million barrels a
importers, speculators and ordinary people. day reached before the revolt in 2011, however, and
Ali Jhawi, who bought dollars at 9 dinars some efforts to increase output and exports are compli-
months ago to pay for his wife’s surgery in Tunisia, cated by Libya’s commitment to an OPEC campaign
was back on Jan.21 to sell the leftover cash before to reduce a global surplus. �Ghaith Shennib,
the price falls further. “I know the price is low com- Saleh Sarrar, Lin Noueihed and Salma El Wardany
pared to a few days ago but there’s no money in the
banks,” he said. THE BOTTOM LINE Libya’s government is easing currency
transfer restrictions as oil prices rise, throwing a lifeline to the
Some black market dealers are refusing to buy country’s official government.
Oman Weighs $2
Billion Loan After
Multi-Billion Bond
● Loan talks follow closely from issuing of bonds
as country shores up its finances
Oman is considering raising a loan of as much as 2020, the imbalances will only widen.”
$2 billion, two people familiar with the plans said, The country last year raised $7 billion from two
just weeks after the Middle East’s biggest non- bond sales as it sought to bridge a budget defi-
OPEC producer sold $6.5 billion of bonds. cit brought on by lower oil prices. The sultanate
The government is in talks with international expects to sell $7.5 billion in 2018 to help meet
banks about pricing for the loan, the people said, spending requirements. That will push the ratio
asking not to be identified because the talks are of government debt to economic output to 50.8
private. Discussions are preliminary and may percent from 15.3 percent in 2015, according to
not result in a deal, they said. Repeated calls to data from the International Monetary Fund.
Oman’s Ministry of Finance weren’t answered. “Oman needs to reduce spending to bring it
Oman became the first Gulf Cooperation in line with the new reality of lower oil revenue,”
26 Council country to tap international capital mar- said Daoud. “But with financing readily available
kets this year to bridge a budget deficit brought on from financial markets now and probably from ● Oman sold bonds in
by lower oil prices. Its neighbours are expected to its Gulf neighbours later, this option doesn’t look January worth
follow. Kuwait, Saudi Arabia and Abu Dhabi are

planning to sell bonds, according to people famil-
politically appealing at the moment.”
Oman’s sovereign wealth fund plans to start a
$6.5bn
iar with the matter. Saudi Arabia is also said to be $1 billion infrastructure fund to boost investment
seeking to increase a $10 billion sovereign loan by in projects including road, transport and energy
$2.5 billion. systems, people familiar with the matter said
“Oman can secure enough financing to meet earlier this month. �Archana Narayanan and
its needs this year but the current spending Matthew Martin
trajectory is unsustainable,” said Ziad Daoud,
Bloomberg Economics chief Middle East econo- THE BOTTOM LINE Oman plans to arrange a loan of
up to $2bn to strengthen its finances but will still need
mist. “And with plans to issue more debt through to curb spending to make its economy more sustainable.
IMF Raises Saudi Arabia’s 2018 Growth

● Despite improved growth forecasts, economists predict difficulties for Saudi economy
The International Monetary Fund has raised its Washington-based lender also revised its 2019 eco-
economic growth forecasts for Saudi Arabia as oil nomic growth forecast to 2.2 percent from 1.6 per-
prices rise, though the pace of expansion remains cent. The government expects GDP to grow 2.7
below government estimates. percent this year.
Gross domestic product will likely grow 1.6 “While stronger oil prices are helping a recov-
percent this year, the IMF said Jan. 22, com- ery in domestic demand in oil exporters, includ-
pared with an earlier forecast of 1.1 percent. The ing Saudi Arabia, the fiscal adjustment that is still
needed is projected to weigh on growth pros-
Can India
pects,” the IMF said in an update to its World
Economic Outlook report.
Saudi Arabia’s economy contracted 0.5 per-
cent last year as the kingdom struggled to cope
with crude oil prices and spending cuts aimed to
lowering its budget deficit. A surge in oil prices to
almost $70 a barrel has given a tailwind to the gov-
ernment’s efforts to revive growth.
Turn Garbage
Into Cash?
The government plans to raise public spend-
ing to a record in 2018, and King Salman ordered
extra pay for government workers this month to
help offset the impact of measures such as subsidy
cuts and the introduction of value-added taxation.
While Saudi Arabia’s government expects ● A southern city pioneers a blueprint
record spending to deliver a strong economic for how the country could clean up
rebound in 2018, economists say it’s too optimis-
tic, with officials underestimating the impact of
new taxes, subsidy cuts and oil prices. It’s 6:30 a.m. in the Indian city of Mysuru
Even after King Salman ordered additional cash (formerly known as Mysore), and the streets
handouts this month to mitigate the toll of aus- are filled with the sound of whistles blowing as
terity on households, the median estimate of five workers in olive-green aprons and rubber gloves
economists surveyed by Bloomberg is 1.6 percent begin a door-to-door search. They’ve come to
growth -- well below the 2.7 percent in the Saudi collect one of the country’s biggest unexploited
budget -- with predictions ranging from 0.7 per- resources: garbage.
cent to 2 percent. The southern metropolis is in the vanguard of
But despite Saudi Arabia’s efforts to diversify, a campaign by Prime Minister Narendra Modi to 27
oil remains key, and the budget includes a 12 per- clean up India and recycle rubbish into compost
cent jump in crude revenue. That’s based on a and electricity. The task is gargantuan, but the
price of about $63 per barrel, according to esti- approach in Mysuru—which relies heavily on the
mates by Bloomberg Economics. involvement of civic groups and private compa-
Brent crude is trading at almost $70 a barrel. nies—may provide a blueprint for how the coun-
But the price was $115 as recently as 2014, and the try can build an economy around trash. “We
still only partial recovery weighs on the broader don’t want waste to be waste. We want to get
economy and not just the oil sector, said Raphaele wealth out of it,” says D.G. Nagaraj, health officer
Auberty, MEcountry risk analyst at BMI Research, of Mysuru City Corporation, a municipal agency.
which predicts overall growth of 1.6 percent this “Zero landfill is our motto.”
year. “We’re definitely more cautious than the Investment in facilities to turn waste into com-
Saudi government,” she said. post and energy could reach $3 billion by 2027,
Several of the economists raised their growth according to a 2015 report commissioned by
estimates after Saudi Arabia said it would spend Assocham, an umbrella group that represents var-
an additional 50 billion riyals to boost civil servant ious industry chambers.
ILLUSTRATION BY JORDY VAN DEN NIEUWENDIJK; DATA: CKINETICS PROJECTIONS
salaries and ease the burden of a new value-added India’s cities are among the largest genera-
tax and subsidy cuts on citizens. tors of garbage in the world, producing about
Though significant, it won’t be enough to bring 62 million tons of solid waste every year. And that ● Projected cumulative
investment in facilities in
non-oil growth in line with the government’s 3.7 could increase fivefold by 2051, spurred by rising India to convert waste
percent forecast, according to Ziad Daoud, chief wealth and consumption along with urbanisation, into compost or energy
Middle East economist for Bloomberg Economics. according to a 2016 paper by researchers at New
That’s up from 1.5 percent in 2017. Delhi’s Jamia Millia Islamia University. $12b
“It’s really hard to get that 3.7 percent figure -- About 82 percent of India’s garbage is col-
even if we assume that people will spend all the lected, and of that only 28 percent is treated and
additional income they’ll get from the govern- processed, according to a report commissioned 6
ment,” he said �Vivian Nereim by India’s Parliament. Much of it winds up in open

dump sites, which lack systems to prevent toxins
THE BOTTOM LINE Despite revising growth forecasts up,
economists expect subsidy cuts, taxes and low oil prices to weigh
from leeching into the soil and groundwater, or 0
on Saudi Arabia’s economy. it’s tossed anywhere, where it’s consumed by 2022 2052
goats and cows or clogs drains and waterways. August from 0.2 million tons in March 2016. Modi’s ▲ The compost plant
in Mysuru is eligible for
Mysuru, a city of about 1 million famed for its administration has also made it mandatory for the federal subsidies
28 palaces built by kings and maharajahs, has long electricity board to buy power from the country’s
been a model of urban management for the rest seven existing waste-to-energy plants. An addi-
of India. It introduced public street lighting in tional 56 such generating plants are under con-
1908 and built an underground drainage system struction, though Mysuru is too small to make one
by 1910. In 2014 the city began requiring house- viable at present.
holds to segregate wet and dry waste into green In Mysuru, trash collection is funded by a
and red bins. levy that’s collected along with property taxes.
Of the 402 tons of garbage the city produces Radio jingles, WhatsApp messages, street plays,
each day, about half is treated at a compost plant and door-to-door campaigns have been deployed
and almost a quarter is manually sorted at nine to raise public awareness of the program, and
recycling centres. As an incentive, the city allows authorities report there’s been a fair degree of
the centres to retain most of what they make cooperation so far. Still, officials anticipate that
from the sale of scrap and compost. “Waste is penalties may need to be deployed to encourage
not a problem if it is converted into money,” says more households to segregate their waste, says
D. Madegowda, 75, one of the volunteers who set Nagaraj of Mysuru City Corp.
up a recycling plant near a graveyard in the neigh- Environmental activist Almitra Patel, who led
bourhood of Kumbar Koppalu, where scrap items litigation in 1996 in the Supreme Court against
such as used rubber gaskets are for sale. open dumping, which paved the way for the
As an additional incentive, India’s central gov- introduction in 2000 of the nation’s first regula-
ernment last year began offering subsidies for tions for municipal solid waste management, says
compost plants. “Hopefully we will now be able that while progress has been slow nationwide,
to break even,” says Chandra Shekhara, assistant “there are sparks of hope everywhere.” She cites
manager of Mysuru’s only compost plant, which Suryapet, Warangal, Kolar, and Vengurla as other
is run by Mumbai-based Infrastructure Leasing & Indian cities that are making headway. “Wherever
SAMYUKTA LAKSHMI/BLOOMBERG
Financial Services Ltd. Shekhara says that before the commissioner, mayor, and local representa-
the federal grants, only about 70 percent of the tives work together for the cause, there is great
costs of the facility were being covered through success,” she says. �Bibhudatta Pradhan
the sale of fertiliser to farmers.
The incentives have helped boost the nation’s THE BOTTOM LINE Investment in facilities to recycle India’s
waste into compost and energy could reach $3 billion by 2027,
production of compost to 1.3 million tons in spurred by recently introduced federal incentives for new plants.
ea w s a t
5
H Ne ive ri gh
ch ict tin
G Sy u
O ish
P
e ory
in la
da V Pu
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rk
O Tu
L
I
T
I
C
30
S The latest turn in

Syria’s civil war
threatens to derail
Putin’s master plan
It’s only been a month since Russian President to peace talks hosted by Russia. So Putin’s Syrian
Vladimir Putin made a flying visit to Syria to congress in the Black Sea resort of Sochi, which
declare victory in the civil war he helped turn was due to take place as Bloomberg Businessweek
around. Winning the peace -- or even preserving Middle East went to press and was trumpeted as
it -- already looks like a huge challenge. the moment when the country’s main factions
Like almost everything that happens in Syria would take a stride toward settling its future,
now, Turkey’s unfolding attack on Kurdish militias looked set to turn into an assembly of Assad allies
just south of its border is Putin’s problem. Russia’s talking among themselves.
army helped Syrian President Bashar al-Assad Inside Syria, Russian soldiers have faced risks
wrest back control of much of his country. Phase all along -- but in January brought a new one when
two of the plan was to shift the contest from mili- a swarm of satellite-guided drones attacked its air
tary to diplomatic ground, and legitimise Assad’s and naval bases. The raid was foiled and its perpe-
1 February, 2018
rule. Those efforts are in trouble. trators remain a mystery. Russia pointed the finger
Businessweekme.com Western-backed opposition groups are hostile at the U.S., which denied involvement.
◼ POLITICS Bloomberg Businessweek Middle East 1 February, 2018
Most urgent is Turkey’s intervention on Jan. 20 Turkey angrily condemned those plans, “Russia’s still
against the Kurdish-held town of Afrin in north- though its current operation is targeting Kurdish
dealing with
west Syria, which threatens to open a new front areas where there are no American soldiers.
the same
in a conflict Russia is trying to end. It was a dip- Russia accuses the U.S. of seeking to partition
lomatic coup for Putin last year when Turkish Syria instead of helping negotiate a settlement conundrum
President Recep Tayyip Erdogan signed up to that would include the Kurds. and has no idea
his plan to stabilise Syria. Russia sees the Syrian The American presence is “one of the most how to solve it.”
Kurds, who control large territories near the destabilising issues,” said Ayham Kamel, head of
Turkish border, as a potential ally and key part of Middle East and North Africa research at Eurasia
any settlement. Erdogan sees them as a terrorist Group. “It’s very difficult to imagine’’ that Assad’s
menace -- one he’s vowed to destroy. government will accept a U.S.-controlled enclave
“The Turks are making things a lot more diffi- in the long run, he said, and even if it might, a key
cult,” said Irina Zvyagelskaya, a Middle East expert Syrian ally probably won’t: “The Iranian regime
at the state-funded Institute of Oriental Studies will push it toward a conflict.’’
in Moscow. “It’s already very tough, as we try to Russia is right that “the balance of power is
push forward the peace process, when Assad is shifting away” from the exiled opposition, which
being unconstructive and the opposition groups is largely based in Turkey and Saudi Arabia,
are refusing to take part. If there’s also a major Eurasia Group’s Kamel said. Its armed wing con-
military escalation, we’ll find ourselves in a very trols practically no territory inside Syria.
serious situation.” But the exiles hold one trump-card as the sole
In the short-term, Russia may have turned the opposition bloc represented at United Nations-
situation to its advantage. sponsored peace talks. Russia has sought to
Turkey began its offensive after Russia pulled impose an agreement in Sochi, then get an offi-
out its military observers from the Kurdish-held cial seal of approval at the UN talks in Geneva,
area. On Jan. 22, the Defense Ministry in Moscow said Maxim Suchkov, an analyst at the Russian gov-
announced that Syrian government forces had ernment-affiliated Valdai International Discussion
encircled 1,500 fighters linked to al-Qaeda in the Club who edits Al-Monitor’s Russia coverage. The 31
last major rebel bastion of Idlib, which is under exiles can “torpedo the process.”
Turkish influence. The U.S. has made it clear that it views UN talks
Meanwhile, exiled Syrian opposition chief, Nasr as the only diplomatic track that counts. “We
al-Hariri, who’s been touring Western capitals, stand firmly by the Geneva process and expect
held talks in Moscow on Jan. 22. He told Russian Russia to fulfill its pledge by bringing Syria to the
Foreign Minister Sergei Lavrov that his umbrella table,” the State Department said in an e-mailed
group, which has denounced the Kremlin for try- statement on Jan. 22.
ing to block any talk of Assad’s departure, hasn’t
yet decided if it will attend the Sochi summit.
Western powers have another lever in their
efforts to get rid of Assad. An estimated $300
$300b
● The sum needed to
rebuild war-shattered
When Putin sent troops into Syria in 2015, his billion is needed to rebuild the war-shattered Syria
U.S. counterpart Barack Obama predicted they’d country.
end up in a quagmire. It didn’t turn out that way: The U.S. and its allies will “withhold recon-
With a relatively limited force, Russia achieved its struction aid to regime-held areas” as long as
main goal. Analysts point out that, whatever the dif- Assad is in power, Acting Assistant Secretary for
ficulties facing Putin now, they’re not on the scale Near East Affairs David Satterfield told Congress
that a much larger American force encountered in on Jan. 11. There’ll be “no certification of victory,
Iraq after toppling Saddam Hussein in 2003. either for Moscow or the regime,” he said.
Still, there’s no quick fix in sight. Turkey’s All this leaves Putin in a difficult spot. “Russia’s
incursion is one reason -- and the U.S. decision still dealing with the same conundrum and has
to stay in Syria after the defeat of Islamic State is no idea how to solve it,” said Yury Barmin, senior
another. Middle East analyst at the Russian International
Officially, there are about 2,000 American Affairs Council, a research group set up by the
troops in Syria, embedded with the Kurdish fight- Kremlin.
ers who control about one-quarter of the coun- “No one is saying that the war will end this
try. They’ll be there for the foreseeable future, year and the political settlement will kick in -- it
Secretary of State Rex Tillerson said, to counter will take years.” �Henry Meyer
Assad and his Iranian allies as well as the rem-
nants of Islamic State. The U.S. said it will help THE BOTTOM LINE Russia’s plan for a clean exit from Syria’s civil
war looks less likely as Turkey’s latest intervention complicates the
the Kurds create a 30,000-strong security force. situation on the ground.
Trump to Move
U.S. Embassy to
Jerusalem in 2019
● PA president Mahmoud Abbas appeals to
Europe to recognise a Palestinian state
President Donald Trump will act on his recogni- with their wives, using the occasion to announce ● Palestinians want
East Jerusalem as
tion of Jerusalem as Israel’s capital by transferring on behalf of the White House that the U.S. govern- the capital of a future
the U.S. embassy there from Tel Aviv in 2019, Vice ment shutdown had been settled. Palestinian state.
President Mike Pence told the Israeli parliament. At a pre-dinner press conference, Netanyahu
“In the weeks ahead our administration will praised Trump for taking a tougher stance against
advance its plan to open the United States embassy Iran, saying time was running out to “fix” the inter-
in Jerusalem, and that United States embassy will national deal to contain Iran’s nuclear programme.
open before the end of next year,” Pence said in a Israel would “unequivocally” support the president
speech Jan. 22 at the Israeli Knesset, eliciting gasps if he decides to walk away from the agreement,
of approval from the audience. Trump had directed Netanyahu said.
the State Department to “immediately begin prepa- “You’re on the right side of history,” Netanyahu
rations” for the move, Pence said. told Pence, adding that Iran’s people will “thank
At virtually the same moment as Pence was tight- Washington when they are free.”
ening Trump’s embrace of Israeli Prime Minister A new U.S. embassy in Jerusalem could
32 Benjamin Netanyahu in Jerusalem, Palestinian take years to design and construct. The State
Authority President Mahmoud Abbas was appeal- Department is weighing plans to accelerate the
ing to Europe to recognise a Palestinian state and timetable by retrofitting the existing consulate,
emerge as an alternative diplomatic sponsor. located in the western part of the city, which was
Accepting an independent Palestine would Israeli territory before the 1967 Middle East War.
“open the doors to peace” and give his people Pence insisted Trump’s approach would ulti-
hope, Abbas told E.U. foreign ministers gathering mately provide new momentum to peace talks.
in Brussels. Palestinian officials refused to meet He noted that Trump, in his Dec. 6 statement, said
with Pence over Trump’s recognition last month the two sides would have to decide between them-
of Jerusalem as Israel’s capital, saying it disqual- selves the boundaries of Israel’s claim to Jerusalem,
ified the U.S. as a mediator. Palestinians hope to as well as other contentious issues. He told the
make the eastern part of the city their own capital. Knesset the U.S. supports a two-state solution to
The sensitivity of Jerusalem’s status was evi- the conflict -- provided that’s what the parties them-
dent throughout Pence’s visit. Meeting ahead of the selves want.
Knesset speech, Israeli Prime Minister Benjamin Palestine Liberation Organization Secretary
Netanyahu told Pence, “This is the first time that I General Saeb Erekat described Pence’s speech as “a
stand here where both leaders can say those three gift to extremists,” saying on Twitter it had shown
words: ‘Israel’s capital, Jerusalem.’ ” the U.S. administration to be “part of the problem
Palestinians expressed their outrage. A brief rather than the solution.”
fracas erupted just before Pence addressed the Pence arrived in Israel after stops in Cairo and
Knesset as Israeli Arab lawmakers, holding signs Amman, where he asked Egyptian President Abdel- ● Mike Pence
declaring Jerusalem the capital of Palestine, were Fattah El-Sisi and Jordan’s King Abdullah to try to
wrestled by the parliament’s ushers from the cham- bring Palestinian leaders back to the table with the
ber. The previous night, as Pence landed in Israel, U.S., according to a person familiar with the matter.
Palestinians in the West Bank set fire to posters Abbas cursed Trump at a PLO Central Council
of the vice president with the words, “Pence Go meeting after Erekat presented a purported sum-
Home.” A general strike to protest his visit was mary of the emerging U.S. peace plan. American
called for Jan. 23 in the West Bank. officials said the description of the peace plan was
Pence later joined Netanyahu for dinner at the inaccurate.
prime minister’s official residence in Jerusalem In Brussels, Abbas told EU foreign-policy chief
Federica Mogherini that there is “no contradiction” Ali made headlines in Egypt last year by chal-
between unilaterally recognising a Palestinian state lenging in court a maritime border pact between
and also backing negotiations with Israel. Israel Egypt and Saudi Arabia touted by the leaders of
argues the Palestinians should have a path to state- both countries. He said that many of his campaign
hood only through negotiations. workers had been detained before he had even
Palestinians say they will no longer deal with announced his candidacy formally, and now faced
U.S. officials, but Mogherini held out the idea of charges.
joint U.S.-European sponsorship of the diplomatic El-Sisi is a career military officer who won
process. Israel traditionally has been hesitant about the presidency a year after a military-backed
European sponsorship, viewing Europe as biased popular uprising that ousted Islamist President
toward the Palestinians. Mohamed Mursi from power in 2013. Since then,
“There is a space for a common effort, and I he has launched a broad crackdown on the Muslim
believe this could be done in the coming months,” Brotherhood, which backed Mursi, leaving hun-
she told reporters Jan. 22. “We are both looking dreds dead and thousands in jail.
for ways to restart the engine of negotiations.” The offensive has since been extended to tar-
�Margaret Talev and Jonathan Ferziger get activists and other dissenters, prompting crit-
ics to accuse the president of building a de facto ● El-Sisi
THE BOTTOM LINE The US confirmed the timing for moving its
embassy in Israel to Jerusalem. The move has already prompted
police state.
Palestinians to look to Europe to negotiate peace. The president, who filed his nomination on
Jan.14, said in a speech marking police day that
Egypt was moving along a path of reform and that
everyone should focus on that goal. “We’re talking
about building, reconstruction and development,”
Last Rival to Egypt’s he said, clenching his fist in the air. “No one should
take us left and right, trying to get us lost with talk
El-Sisi Drops Away that is worth nothing, please.”
Even if they had been allowed to contest, few 33
commentators believed any of the challengers
● Sami Annan had emerged as the most stood a real chance of victory over El-Sisi, given
serious challenger to El-Sisi, but dropped out his loyal following and dominance of the power-
of the race ful state apparatus. Ali and Annan are just the lat-
est to fall away. ● El-Sisi’s popularity
has been dented by a
Ahmed Shafiq, a former premier who ran soaring inflation rate of
The last credible challenger to Abdel-Fattah El-Sisi against Mursi in the 2012 race, disappeared briefly
in Egypt’s presidential election bowed out on Jan. after announcing his candidacy, only to resur- 33%
24, clearing the way for an incumbent who appears face and say he’d reconsidered. Former lawmaker
more intent on cementing his policies than appeas- Mohamed Anwar Sadat, a nephew of former
ing any concerns about a fading democracy. President Anwar Sadat, withdrew his candidacy,
Khaled Ali, a former presidential nominee and also citing the failure to uphold democratic norms.
constant thorn in the side of the government, said Another candidate, the little-known Colonel
he would not submit his papers to the electoral Ahmed Konsowa, was arrested shortly after
commission for the March ballot, citing what he announcing in December he’d contest, and was
described as a pervasive undemocratic climate and sentenced to six years in prison by a military court
the crackdown against other potential candidates. for violating rules that bar active duty officers from
A day earlier, the military announced it was running for office. Ali, himself, was fighting a court
investigating another potential rival to El-Sisi, conviction for making a rude gesture that could
Lieutenant General Sami Annan, on a number of have disqualified him.
allegations, including “incitement” against the “Even many of the state’s backers believe
armed forces. Annan’s arrest was overkill,” said Hani Sabra,
El-Sisi views this election as a “purely routine founder of the consultancy Alef Strategies. “If Sisi
event,” said Riccardo Fabiani, senior analyst for indeed runs unopposed, the state will confront
North Africa with the Eurasia Group. criticism for the likely low voter turnout.” �Tarek
“He knows that he’s under no pressure from El-Tablawy
abroad to play by the rules, so there’s no incentive
domestically or internationally to make this a free THE BOTTOM LINE El Sisi is the only candidate in March’s
presidential elections. But even supporters of the president believe
and fair election.” the elimination of other candidates looks dubious.
SPECIAL ADVERTISING SECTION
SPECIAL REPORT: FINTECH

HEALTHCARE
INSIDE THE
S1
FINTECH REVOLUTION
Fintech promises a brave new
with thousands of companies devel-
oping technology including software
investment remains strong, hitting
$8.2 billion across 274 deals in the
world of financial solutions and apps for the financial services
industry. One man close to the action
third quarter of 2017, according to
the ‘The Pulse of Fintech Q3 2017’
is Ben Robinson, chief strategy report from KPMG.
officer of Temenos, a Geneva-based Al Mazrouei points to a range of
W
provider and curator of fintech so- different technologies that are trans-
hile blockchain and lutions for financial institutions. He forming – or on the cusp of trans-
cryptocurrencies may says that at least one top business forming - the financial services
have done their level school defines fintech as “any busi- industry. “Artificial intelligence, in-
best to dominate the ness that seeks to improve custom- surtech, regtech, and blockchain
term ‘fintech’ in the er experience or reduce costs using remain the key areas of finvest-
past year or so, experts in the fintech technology”. “As I understand it, it’s ment along with biometric security,
arena are all too aware of the tech- typically fast growing companies robo advisors and multiple currency
nologies that are currently driving that have innovative products to sell digital wallets.”
change in finance, and they are - by related to financial services. They Temenos works with about 60
and large - unrelated to distribut- also typically don’t have easy access fintech companies, and has an in-
ed ledger technology. Indeed, most to consumers,” he adds. depth knowledge of their technol-
experts in the field agree that while But however the term is defined, ogies, allowing it to offer a broad
distributed ledger technology holds the growing global clout of fintech is range of complementary solutions
immense potentially and could po- undisputed, and is well backed up by to its clients, and this gives Robin-
tential transform the financial servic- recent research. The global fintech son a clear overview of the indus-
es sector, it remains somewhere on sector has attracted more than $50 try. In terms of what is currently
the periphery in terms of current use billion in investment since 2010, ac- trending, Robinson says that testing
cases, although this is changing. cording to Raja Al Mazrouei, Acting and application management soft-
While the size and scale of the Executive Vice President of FinTech ware for banking infrastructure are in
fintech industry partly depends on Hive, a unit specialising in fintech at demand. Security software and ap-
the definition of the word ‘fintech’, Dubai International Financial Centre. plications are also performing well.
it is generally viewed as being huge, Furthermore, overall global fintech “There is a lot of stuff around wealth,
$8.2b
risk data, collaboration tools, things working together. What this means
like that sell well,” Robinson says. is that all companies involved in fi-
One company that Temenos nancial services should understand
started working with recently is their own strengths and weakness-
Blue Code which has developed a es in order to prosper. “If you’re a
payment app and payment scheme technology company and you are in-
that is generating a lot of interest,
Value of fintech deals globally in Q3 novative and quick to market at cre-
according to Robinson. Indeed, pay- 2017 ating a new user experience, stick to
ments is an area that Robinson finds that - don’t try to build a bank. And
particularly exciting in large part really combative - fin versus tech. if you’re a large financial services in-
due to the ability of some apps to Technology was developing new user frastructure company with a diffi-
transform the way millions of people interfaces and those were seen as a cult tech stack, partner with technol-
live. “One of the things we forget is threat to banks and wealth manag- ogy companies that can develop that
that there are still 1.2 billion people ers, but then we got into a second thin front-end more quickly than you
out there who don’t have access to wave where some of those new en- could do internally,” Hansen advises.
formal banking services; they are ex- trants realised they were actually
cluded from formal banking infra- small and maybe not as well capital- BLOCKCHAIN FINDS ITS FEET
structure and that is not because ised as the other big organisations. As anybody who keeps an eye on
they don’t want to have access, it’s The infrastructure to manage wealth business and financial news will be
because it’s too expensive.” is quite complicated and that’s well aware, distributed ledger tech-
Another company that is heavily where ‘fin’ or financial services com- nology has come to dominate finan-
involved in fintech, both as a de- panies have real strength: brand, cial news in the past 18-months to
veloper of technology and a user, capital, resources, regulatory exper- two years. While expectations re-
is Saxobank, an international tise,” Hansen says. garding the technology are chang-
trading platform and bank based in In the new wave of fintech that is ing, it is clear that the initial wave of
Denmark. Jennifer Hansen, global taking place now, the financial com- excitement is giving way to a more
head of sales, strategy and exe- panies and the technology compa- sober appraisal of how distribut-
cution at Saxo Markets, has seen nies are working in a more collab- ed ledger technology can be used in
fintech develop from its early days orative way, and “tapping into each real life applications.
having worked at Credit Suisse Asset other’s resident strengths” accord- Indeed, financial institutions
Management and Goldman Sachs ing to Hansen. This is an important and technology companies do now S2
Asset Management, before joining development, as the financial servic- appear to be discussing distribut-
Saxobank in 2010. “Fin and tech is es industry itself is changing rapidly. ed ledger technology in a more mod-
by definition about how those two Indeed, whereas in the past a single erate tone and many are also taking
sides of the equation work togeth- financial institution would “own” the concrete steps to explore the poten-
er. It has really evolved over the past customer experience from beginning tial of the technology.
three years,” she says. to end, this is increasingly rare. Cus- Motasim Iqbal, head of transac-
One of the main changes in fintech tomer-facing financial institutions tion banking, Standard Chartered
that Hansen has seen is a change are now far more likely to tap into the UAE, believes the technology has
in relationship between the two key skills and expertise of other compa- immense potential as a global finan-
components of fintech: “The fintech nies – often classic fintech players cial infrastructure, for everything
craze has been going on for three to – and so the customer experience is from trade finance and payments to
five years and when it started it was shared by a number of companies securities services as well as proving
identity for ‘Know-Your-Customer’
requirements. “To achieve the ben-
“Artificial intelligence, efits of distributed ledger technol-
ogy more quickly, banks and other
players in the financial ecosystem
insurtech, regtech, and need to take key steps so that they
can move faster towards making dis-
blockchain remain the key

tributed ledger technology a main-
stream technology,” he says.
Over the past couple of years,
areas of finvestment along Standard Chartered Bank has ex-

plored about 80 use cases as it
looked at how to optimise the ben-
with Biometric security, efits of distributed ledger tech-

nology for its clients, according to
Iqbal. After conducting that exten-
robo advisors and multiple
– Raja Al
sive review, the bank initially priori-
Mazrouei, Acting
tised two proof-of-concept initiatives,
Executive Vice
one for trade and one for cash. The
currency digital wallets.” President of
FinTech Hive
results were encouraging. The trade
finance proof-of-concept, for in-
stance, provided faster transactions

and achieved efficiency via disinter-
mediation, with records processed
and verified in real-time and obliga-
tions or commitments fulfilled auto-
matically when pre-defined criteria
were met, Iqbal explained.
“Delivering a seamless and excel-
lent user experience will be what dif-
ferentiates one bank from another.
Data, distributed ledger, artifi- ties together, and facilitate trade and ernment entities, such as the Smart
cial intelligence, chat bots, regu- commerce,” Iqbal adds. Dubai Office, international compa-
latory technology, cybersecurity, The UAE plays a major role in pro- nies such as Cisco, IBM, SAP, and Mi-
digital payments, robotic automa- moting this, fulfilling its tradition- crosoft, and blockchain start-ups.
tion, customer satisfaction/custom- al role of promoting trade corridors Increasingly, banks are looking at
er journey – these are some of the between Asia, Africa and Europe, in ways to incorporate blockchain tech-
hot areas of technology banks are addition to its strategic position in nology in to their operations, Iqbal
looking at,” he adds. leading the digitisation agenda in dif- says. “After starting to look into
Standard Chartered also recent- ferent fronts, which is expected to Bitcoin and what could be done with
ly initiated proof of concept projects benefit the country in the long run it, in 2015, Standard Chartered Bank
for robo-advisory for wealth man- following any development on digitis- quickly realised that the underly-
agement and regulatory technolo- ing trade, according to Iqbal. ing technology of distributed ledger
gy using distributed ledger technol- Iqbal also appears upbeat about technology was most promising. The
ogy for which Iqbal expects to see the development of distributed bank then decided to be focused and
demand in the future. Moreover, in ledger technology in the UAE. “The look primarily at distributed ledger
S3 January Standard Chartered estab- UAE has been quick to acknowledge technology’s trade and cash applica-
lished a new business unit, SC Ven- the potential of such a technology. A tions rather than at other uses of the
tures, to spearhead digital innova- recent example of this development technology.”
tion across the group. This includes was seen last year when the UAE an- This led the bank to start working
making investments in fintech and nounced that it was working with with Ripple, an enterprise blockchain
other start-up companies, and pro- Saudi Arabia’s central bank to issue solution for global payments, in De-
moting rapid testing and implemen- a digital currency based on block- cember 2015. Standard Chartered
tation of new business models. chain that would be accepted in gov- completed a proof of concept with
“Blockchain holds the promise ernment transactions between the the company to deliver an applica-
of bringing greater efficiency and two nations,” he said. tion of distributed ledger technolo-
transparency to the banking indus- Even before this, the country was gy to enhance the overall security of
try, for instance, allowing cross-bor- positioning itself as a regional leader trade finance invoicing. In September
der transactions to be made in real in the technology. Earlier in February 2016, Standard Chartered invested
time, and money to be exchanged 2016, Dubai’s Museum of the Future, in Ripple with the aim of leveraging
at the speed with which information an innovation centre, announced Ripple technology to accelerate its
moves today. Banks should be taking the formation of a research group digitisation agenda.
a lead in this because if you look at focused on blockchain technology. Following on from this, in No-
the original purpose of setting up a The Global Blockchain Council con- vember 2017, Standard Chartered
bank, it was to connect communi- sists of 32 members including gov- launched a cross-border payment
service using Ripple’s distributed
ledger technology with Axis Bank,
“Blockchain holds the promise of bringing India’s third largest private sector
bank, allowing corporate payments
greater efficiency and transparency to the from clients of Standard Chartered
(Singapore) in SGD to accounts in
banking industry, for instance, allowing Axis Bank.
“At Standard Chartered we believe
cross-border transactions to be made in that as new technology continues to
play an ever more important role in
real time, and money to be exchanged at the banking, there is a huge opportuni-
ty for us to promote more innovation,
speed with which information moves today.” –Motasim Iqbal,
and at the same time develop and
deliver digital solutions that work for
Standard Chartered our clients and for us,” Iqbal says.
What’s next for

BLOCKCHAIN?
The initial wave of excitement in blockchain, or
S4 distributed ledger technology, has passed. But a more monetary transactions across Britain’s banks, at the
start of 2016. However, in May 2017, the Bank that the
realistic phase of use appears to be imminent technology was too immature and issued a statement
saying: “The Bank has decided not to build the renewed
by Chris Skinner RTGS service on Distributed Ledger Technology, in light
of its findings that the technology is not yet sufficiently
E
veryone got very excited a few years ago about mature to provide the exceptionally high levels of robust-
blockchain technologies, the ledger system that ness required for RTGS settlement.”
was spawned by the arrival of bitcoin in 2009. Those high levels of robustness are pretty impor-
It allows the recording of transactions to be automat- tant, as the Bank processes over GBP500 billion of pay-
ed and completely trusted, as the ledger system is tam- ments per day, and it is clear that blockchain and DLT
perproof. The resulting excitement was that this could is still in early days. We could see that when one of the
therefore replace many systems of contracts that are most popular corporate DLT systems, Ethereum, had
paper-based with smart, digital contracts. This would to restart after a hack in 2016. At the time the hack oc-
be transformational as it would allow us to replace ev- curred, the founder of Ethereum stated that you have
erything from clearing and settlement systems to pass- to remember this is still “an experiment”. You cannot
ports to land deeds registries to supply chains that are develop the next generation of systems for government
paper-based, with a new software structure that would and finance on an experiment.
reconcile and manage everything without a human hand Equally, many blockchains are based upon crypto-
involved. Just in clearing and settlement, this was esti- currencies such as bitcoin or ether. These cryptocur-
mated to deliver savings of over $20 billion a year, due rencies have risen dramatically in value over the last
to the inefficiencies of the current systems. year, and become the hot topic at many parties: “have
This excitement then plateaued as firms started to you brought some bitcoin?”; “how much will bitcoin be
realise the challenges of developing blockchain-based worth this time next year?”; “what’s the next hot curren-
systems or, as it is better known today, distributed cy I should buy?” These cryptocurrencies are not valu-
ledger technologies (DLT). Distributed ledgers are just able of themselves, but are valuable if they become the
that, a ledger system shared across the network. Every- backbone of tomorrow’s structures, such as our clear-
one has a copy of the ledger and the ledger is updated in ing and settlement systems. That is why they are of in-
real-time automatically. In recent years, many firms tri- terest. Equally, there may well be new digital currencies
alled these technologies for their robustness and trust- based upon these cryptocurrencies, issued by govern-
worthiness, and many firms concluded that the tech- ments. For example, Estonia, Sweden and China have
nology is not quite ready yet. For example, the Bank of all announced that they are testing digital currencies
England looked at using DLT to replace their Real-Time to replace their paper currencies, using these DLT and
Gross Settlement (RTGS) system, the core system for crypto technologies.
It was estimated that in clearing and settlement

alone, blockchain annually could save
$20b
In other developments, we are also seeing some gov-
ernments commit to change. The Australian Stock Ex-
change has committed to replace its current settlements
systems with DLT, as has the Dubai emirate. Dubai has
actually gone further in its commitments than any other
city, vowing to replace all government systems with DLT-
based digital structures by 2020. This would mean that
all visa applications, bill payments and license renewals,
which account for over 100 million documents a year,
would be transacted digitally using blockchain DLT. Ac-
cording to Smart Dubai, this will save the emirate over
25 million man hours a year and over $1.5 billion per
year in reduced costs. Equally, it will be the world’s first
paperless government and, with savings of this mag-
nitude, you can see that many institutions will migrate
toward DLT over time. In fact, returning to the Bank of
England’s RTGS investigations, they did state that DLT
was not mature enough in 2017 for their needs but prob-
ably would be by the time they need to implement their
next refresh in the 2020s.
This is why many refer to DLT as a foundational tech-
nology as important to our future as the very basics of
the internet: TCP/IP, HTTP and HTML. In fact more so, S5
as DLT is the foundational technology for tomorrow’s gov-
ernmental and financial systems. Maybe. There is one
small spanner in the works that may change the future of
DLT and blockchain and it is quantum computing.
Quantum computing is in very early research today,
although IBM did recently announce the Q Network, a
group of Fortune 500 companies, academic institutions
and national research labs that are working with the firm
“Quantum computing is to experiment with potential real-world applications on
its quantum bit (qubit) processor. This includes some big
some years away however,

banks, such as JP Morgan and Barclays, who can see that
quantum computing could rethink the way in which finan-
cial institutions implement security and encryption in the
and most forecast that DLT future. The fact that one of the mainstream use cases of
blockchain DLT is around digital identities and encryption
means that quantum computing could therefore replace
and quantum computing the very systems being developed today in DLT.
Quantum computing is some years away however, and
most forecast that DLT and quantum computing will
will be complementary be complementary technologies, rather than competi-
tive systems. It just shows how difficult it is to predict
the future. For me, the one thing that has always held
technologies, rather than true with technology is that we usually over-estimate the
speed and under-estimate the impact. It is clear that
competitive systems. It just

blockchain DLT is a transformational technology that will
reimagine most of the ways in which we currently trade
and transact. It will rethink our government, finance and
shows how difficult it is to commercial systems within the next five years, and that
is the fundamental reason why we all need to invest time
in this space.
predict the future.” Chris Skinner is an independent consultant and author of

ValueWeb, a book that explores the impact of blockchain
technologies on financial services in depth.
◼ DEBRIEF
1 February, 2018
Alain ‘We are in an era

Bejjani that requires us
CEO, Majid Al
Futtaim Holding to support our
people on lead-
ership in order to
continue to win.’
40
The head of UAE-based retail, entertainment and prop-

erty giant Majid Al Futtaim tells Bloomberg Businessweek
Middle East editor Roger Field about expansion plans,
leadership, investments in virtual reality and how data
analytics is transforming business
Majid Al Futtaim Holdings is a huge company: 39,000 plus employ- holds immense potential. It is a market that is going
ees, 21 shopping malls, supermarkets and hypermarkets across 15 to give us more and more opportunities: Vision 2030
countries, plus healthcare and facilities management – the list goes and all of the measures the government has been
on. Your biggest market for malls is currently the UAE and the Gulf. putting together in the past two to three years all
What projects are you developing and where do you see most poten- go in the right direction.
tial for this side of the business in 2018? What are you developing in Saudi Arabia at the
There are a number of projects on the way. We continue to be very com- moment?
mitted to Saudi Arabia which we see as an important part of our develop- We are developing two malls in Riyadh; City
ment. We have been there for about 11 years with Carrefour and various Centre Ishbiliyah and Mall of Saudi for an aggre-
fashion brands. The country recently announced that it will be allowing gate 14 billion Saudi riyals ($3.7 billion) but we are
cinemas, and that is a fantastic opportunity for our Vox Cinemas unit also expanding Carrefour and all of our other busi-
to expand. It also presents an opportunity to grow the Majid Al Futtaim nesses there. There is plenty of upside for growth.
business in general with Magic Planet, family entertainment centres and It has a very young population and is a very good
so forth. We’re very happy about these developments and we expect to market to be in.
see the relevant legislation out soon, and then we will be able to start In addition to that we have committed to devel-
announcing our plans. opments in Oman, Egypt, Lebanon and the UAE
Saudi Arabia is a key market in the region and with 32 million people with projects such as the expansion of Ajman City
Centre. 2017 was a great year for us in terms of growth: We in some other markets. We’ll be expanding in East Africa, and
have continued to grow organically in a very difficult environ- we’re committed to growth and gaining scale in Asian markets,
ment but also inorganically with some strategic acquisitions. We as well as central Asia.
consolidated the market here in the UAE, Bahrain and Kuwait In December Majid Al Futtaim and Image Nation Abu Dhabi
with the acquisition of 26 Geant stores from Retail Arabia and took part in series-b fundraising for the U.S.-based virtual
we also acquired cinemas in Bahrain and Oman. reality start-up Dreamscape Immersive. Other investors
Egypt also has a lot of potential. It has gone through quite are Nickelodeon and VRSense Solutions Limited, and the
a challenging time but is coming out of it and the government project is backed by Hollywood giants including Steven
has taken steps like introducing VAT and structural reforms. Spielberg. The company is set to open VR centres in Los
We are also in Kenya, Pakistan and Georgia. We continue to Angeles this year, so will Majid Al Futtaim bring similar
be committed to all of these markets. We’re also going to open centres to the Middle East?
◼ DEBRIEF Bloomberg Businessweek Middle East 1 February, 2018
Dreamscape is a fantastic technology that is going to objective, which we couldn’t achieve with the old way of doing
deliver the most immersive VR experience that exists. In the things. Technology allows a more intimate relationship between
coming months we will bring it to Dubai and then also to other the customer and the brand, which helps ensure we turn con-
parts of the region. It is going to be a leap in terms of experi- sumers into customers. Customer experience has to come
ence for this part of the world. across as a personal relationship between the brand and the
The deal with Dreamscape Immersive gives us access to customer, and in order to do that we have to recreate those
content and the technology itself. I don’t want to say more experiences that the generation of our grandparents had with
about it before we reveal it, but it is the most immersive tech- retailers but which do not exist anymore because of the scale.
nology that currently exists. It’s going to be a step change in How are you using technology to achieve this?
VR globally and in the region. We will introduce the first VR We have been investing in our infrastructure and we have
centre in Mall of the Emirates in Dubai at the end of the first launched A² which is our data analytics centre. This allows us to
quarter or at the start of the second quarter of 2018. We want better understand the customer by leveraging the data that we
to give access to the widest possible array of our customers collect across our businesses to give us a 360-degree view of
in Dubai and in the region. It is going to be a great addition to the customer through our different business units, which are all
the Majid Al Futtaim landscape. This is something that is in line complementary. This understanding allows us to create a view
with our commitment of creating great moments for everyone about what the customer wants and needs and how we can
in this part of the world. continually delight them. It also helps us to understand how we
As a company you’re also investing in innovative start-ups can improve the customer experience through technology. We
in Silicon Valley. What particularly interesting firms have do this by leveraging our loyalty programme, which allows for
you invested in? individual customer recognition and offers from brands. Loyalty
Fetchr, an app-based last-mile delivery service, is one cards including MyClub and Vox Rewards are an effective way
start-up that we have invested in. Fetchr works with us and to gather data and we are working to expand and refine it in
other clients. They deliver last mile from the malls for Carrefour order to enrich the data we have. We are working with some of
and other clients, but the technology they use is quite inter- our partners, mainly outlets in our malls, to develop loyalty pro-
esting. It is also a start-up that we are very proud of because grammes with them. We plan to aggregate those programmes
it has the best technology and it is growing tremendously well. together so that people can earn and burn within the MAF envi-
It is acquiring more and more customers and gaining ever ronment. This will allow us to move ahead in developing cus-
more market share in the region so holds a lot of promise. tomer-tailored experiences that we couldn’t have done before.
42
It’s a great technology with a great commitment to the cus- It will enable us to develop a new dimension to our business
tomer. It fits well with our retail business because last mile is that is greater than each individual business. We can do this
so important and in retail generally, most disappointments because we have an ecosystem of experiences that the cus-
stem from last mile, so it was important for us to invest in that. tomer benefits from: We have bricks and mortar – a physical
This is going to be one piece in our overall customer proposi- presence – and by offering digital and omni-channel experi-
tion along with omni-channel, digital and so on. We made this ences we can expand our relationship with the customer. We
investment alongside some other strategic partners such as can see how they shop, what they like and dislike, how they
NEA in Silicon Valley and others. entertain themselves.
How do you go about scouting for potential investments We get that information from a number of touchpoints: first
in Silicon Valley? through the loyalty cards of course, and also through the POS
We are quite connected and we have some very good part- systems we are putting in our malls, in addition to all the touch-
ners there that help us and understand us well. This is con- points we have, from which we collect data continuously.
tinuous work of looking at what is there and being focused In the past we lacked the analytical capabilities to leverage
in terms of our choices, always asking ourselves the ques- that data. We have numerous touch points with the customer
tion ‘what do we really need?’ At the end of the day, we want in the different businesses where we collect data continu-
to bring real solutions to real problems; we want to add value. ously, and now we are using that data in ways that is respon-
We’re not just doing it for the sake of doing it, but really want sible and compliant with best practices covering privacy issues
to add value for the customer. It is extremely important that and so on. We implemented European legislation, in addition
we are capable of doing that. Part of innovating is of course to the UAE legislation.
internet innovation but also to invest whenever there is a smart We recently signed an MoU with Smart Dubai in order to
idea, a bright idea or innovative capability to deal with a real leverage their data as well as our own data and work on use-
issue, and I think Fetchr fits into this category. cases together based on our insights. We currently have the
Majid Al Futtaim revealed plans to invest heavily in data ana- largest database of reference customers in the UAE, with 7.7
lytics in December and is now establishing a dedicated unit million customers.
to work on this. Why is data so important for the company? How do you make use of all this data?
In order for us to be fresh, competitive and relevant to the We ask ourselves how we can use this data responsibly
customer there are two main pillars that help us to achieve our and in the best interests of our customers, as well as in the
long-term strategic objective and deliver our mission: One is best interests of our tenants in the malls, our stakeholders,
human capital, and the other is the customer, including every- suppliers and service providers. Our aim is to make sure our
thing around customer experience and customer-centricity. ecosystem becomes rich and conducive to better business.
The new enablers today are technology and digital, and they Our ultimate aim is to make sure the people working with us
allow us to increase the capacity of delivering against that do better business with us. We are creating this partnership
◼ DEBRIEF Bloomberg Businessweek Middle East 1 February, 2018
whereby we leverage data and provide insights to our part-

ners that help them to improve their offerings. For example
we have insights around category and brand performance
“Saudi Arabia is a key
allowing retailers to see which products are performing best
among rival products. It is something that we are building but
market in the region and
we want to apply it to all tenants. It’s about us continuing to
improve on that partnership that exists between us and our
with 32 million people
tenants, suppliers and so forth.
Who is actually crunching through the numbers of all the
holds immense potential.
data you collect?
It’s done by the staff we’re hiring for A², our data analytics
It is a market that is going
centre. We’re hiring around 250 people in total. Currently there
are about 65 people who have joined or are about to join, so
to give us more and more
the unit is operational but will keep evolving. By June 2018 we
will have a dedicated space for the team here in our Dubai HQ.
opportunities: Vision
It’s a big investment. How did you choose to do this in-house
rather than outsource it?
2030 and all of the
We looked at various models. Different companies go about
data analytics in different ways. One of the important things
measures the govern-
for us, as an organisation, is the complementarity of our busi-
ness units which gives us the capability of leveraging data from
ment has been putting
all of these businesses. All of the strands of our business are
complementary – whether it’s insurance, contracting, cars or
together in the past two
electronics. What we have is an ecosystem of businesses with
customers at the centre, which is why we’re leveraging all of
to three years all go in
this information in a smart way.
Can you tell me more about Majid Al Futtaim’s Leadership
the right direction.”
Institute? It’s interesting that you have made leadership
43
and skills a key focus for the business, as it’s all too often
overlooked in the region. East is a region that is maturing. It is a very volatile region, and
The Leadership Institute is a cornerstone of our future it is a region where you need strong leadership to be able to
growth because the future is all about talent. I really believe deal with the challenges that exist. I really believe the more
that talent wins. It is very important for us to invest in talent as you invest in your talent the better you will perform. The key
much as we invest in the other parts of the organisation. Our to success and the key to the future is talent. Talent will define
aim is to support our managers with their leadership develop- who wins in the future as opposed to previously when it was
ment and to support them in their career development. We live more about capital. This is why we changed the name of our
in an environment that is much more complex than it was previ- human resources function to human capital, to really empha-
ously and it takes greater leadership to be able to do as well as sise the importance of people.
before. In this way the Leadership Institute is an enabler for Which side of the business is most significant or fastest
the whole organisation. growing at the moment?
The institute has 11 or 12 faculty members, some of whom They are all growing but at different rates because they are
are internal and some external, and we develop and deliver our at different levels of maturity, so a new small business might
own curriculum and programmes. We have courses that take be growing at 30-40% while another business which is much
care of every step of one’s career. They cover all types of lead- more mature will have single digit growth, which is a lot for that
ership including leading yourself, leading others, leading busi- business. Growth is across the board, so despite the volatility
nesses and leading change. We have programmes around these in the market and the devaluation that happened in 2017, we
that are all developed around the Majid Al Futtaim Leadership are growing and we are very happy with like-for-like growth
model, which defines what is expected from a MAF leader and across the business.
how they meet the bar, fail or exceed expectations. This is a What is the biggest challenge that a CEO faces today?
cornerstone of the leadership institute and all of the other cur- The biggest challenge that a CEO faces is leadership. We
riculums are developed on that. Everyone is eligible for differ- are in an era that requires us to support our people on leader-
ent curricula. We have specific dedicated course for our top ship in order to continue to win. There is a lot of volatility driven
talent and some others for other people. We have different by rapid changes in technology, especially digital. In terms of
courses depending on where people are in their career and consumer consumption trends, we are moving from goods
performance and so on. Last year we had 1,500 graduates. and services to experience. The common thread that can deal
What are your views on the state of training in the with these challenges is leadership. That’s why we are working
Middle East? diligently on leadership. Having the right talent doesn’t mean
It is the most underinvested part of business in terms of getting the right people, it means supporting people to be able
money and focus. There is a lot of talk about leadership, but to do their job in the best possible way and empowering them
there isn’t as much walk. At the end of the day the Middle to face challenges that are ever changing. <BW>
Bloomberg Businessweek Middle East
L I F E A N D D E AT H
44
The nightly dangers

and horrors of cleanup
at the slaughterhouse
By Peter Waldman
and Kartikay Mehrotra
Photograph by
Johnathon Kelso
1 February, 2018
ON THE THIRD SHIFT
45
A sanitation worker heads into Mar-Jac Poultry in Gainesville, Ga.

NO ONE KNEW HER REAL NAME. AT WORK supervisor heard her scream and shut and blenders, can be treacherous. From
she was Tiffany Sisneros, until her arm down the line. Maintenance workers had 2015 through September 2016, Packers
got crushed in a conveyor belt. She filed to dismantle the guards and rollers to get had the 14th-highest number of severe
for workers’ comp as Martha Solorzano, her out. The radius and ulna bones could injuries—defined as an amputation, hos-
born 1966. The doctor who evaluated her be seen sticking out of her arm, in shards. pitalisation, or the loss of an eye—among
wrote down her last name as Torres. Most accidents at the Holcomb plant the 14,000 companies tracked by OSHA in
We’ll call her Martha, the name her are covered by Tyson’s workers’ comp 29 states, according to data analyzed by
lawyer uses. Like millions of undocu- insurance. But Martha didn’t work for the National Employment Law Project, or
mented immigrants, Martha lived in the Tyson. The cleaning crew was employed NELP. Even that statistic understates the
shadows. She slept by day, worked at by Packers Sanitation Services Inc., the risks. With about 17,000 workers, Packers
night, shifted names as circumstances nation’s largest cleaning contractor to the is a fraction of the size of the 13 compa-
demanded, and supported her family food industry. The meatpacking industry nies above it on NELP’s danger score-
with scraps that fell her way from the has a hard enough time filling daytime card, including the U.S. Postal Service
U.S. labour market. production jobs, so many bigger plants (No. 1), Tyson (No. 4), and Pilgrim’s Pride
She worked as a cleaner on the grave- staff the night shift through contractors (No. 6). Adjusting for size, Packers topped
yard shift at Tyson Foods Inc.’s cavern- such as Packers. These companies pay the danger list by a wide margin, with a
ous meatpacking plant in Holcomb, Kan. their largely immigrant workforce up to rate of 14 severe injuries for every 10,000
Every day up to 6,000 cows clamber off a third less than what production employ- workers. Its amputation rate of 9.4 dis-
18-wheelers lined up at the facility, 200 ees earn during the day. Martha was memberments per 10,000 workers was
miles west of Wichita. They’re watered, getting $202 a week. Packers pays current almost five times higher than for U.S. man-
then ushered into the kill box, knocked employees an average of $11.86 an hour. ufacturing workers as a whole in 2015.
unconscious by a bolt gun, hung upside Such is the genius of American out- “Sanitation workers face some of the
down with their hearts still pounding, and sourcing. In an era of heightened concern harshest and most dangerous conditions
bled to death by a slash to the jugular. about food safety, meat and poultry pro- in American industry, and there’s no
After the heads, hides, and hooves ducers are happy to pay sanitation com- outcry because they’re largely low-paid
are removed, the carcasses are sawed panies for their expertise. The sanitation immigrants hidden away on the grave-
in half, checked by U.S. Department of companies also assume the headaches yard shift,” says Deborah Berkowitz,
Agriculture inspectors, and sent down a and risk of staffing positions that only senior fellow at NELP and a former OSHA
46
network of conveyor belts to be butch- the destitute or desperate will take—very chief of staff. “That’s the cost of American
ered, boxed, and bar-coded by 3,800 often undocumented immigrants. And consumers wanting cheap protein and
workers in two shifts. The journey, they relieve the big producers, includ- the meat and poultry industry demand-
from carcass to cargo ramp, takes about ing household names such as Tyson and ing huge profits.”
40 minutes. Pilgrim’s Pride Corp., of responsibility On the morning of Martha’s accident,
After 11 p.m. the procession halts, and for one of the most dangerous factory Packers dispatched a technical-services
the sanitation crews move in. The only jobs in America. manager, Salvador Diaz, to investigate. He
slaughterhouse job worse than eviscer- The North American Meat Institute, drove north from Texas, arriving at the
ating animals is cleaning up afterward. an industry trade group, says OSHA data Holcomb plant at 6 a.m. to look around
The third-shift workers, as the cleaners show that the injury rate is lower among before going to interview Martha at the
are often called, wade through blood sanitation workers than among meat pro- hospital. He caught her shortly after she
and grease and chunks of bone and flesh, duction employees, and that total U.S. woke up from three hours of surgery.
racing all night to hose down the plant meatpacking injuries are at an all-time She said the conveyor belt “grabbed”
with disinfectants and scalding water. The low. The industry has given “tens of thou- her as she was trying to clean beneath
stench is unbearable. Many workers retch. sands” of sanitation workers safety train- it, though she blamed herself for the
It was about 3:30 a.m. on July 7, 2011, ing with OSHA grants and made safety a accident, according to Diaz’s report. “I
when Martha finished cleaning conveyor “major focus,” the group says. understand I have done wrong but never
belt FC-3A on the main factory floor. After But no one knows how many sanita- thought that it would catch my hand,”
powering the machine back on, she real- tion workers get sick and injured on the Diaz quoted Martha as telling him.
ised she had forgotten to wipe down a job, according to the U.S. Government Packers fired her. The company and
spot where fat collects under the side Accountability Office, an arm of its insurer argued in workers’ comp court
rail. Such deposits, if neglected, can shut Congress. The Occupational Safety and that Martha wasn’t entitled to compensa-
down a processing line, at considerable Health Administration doesn’t require tion beyond medical expenses, because
cost in lost output, if a USDA inspector plants to report contractors’ injuries, and she had recklessly disregarded its safety
discovers it during daily swab tests. the highly fragmented sanitation industry rules about powering down machines.
So Martha reached under the moving uses multiple job codes, so cleaners fall Martha said she had cleaned under
belt to get at the smudge and lost her through the data cracks, the GAO says. moving conveyor belts many times in her
balance, she testified in her workers’ Judging from Packers’ record, the 22 months on the job without Packers
comp case. As she tried to brace herself, nightly storm of high-pressure hoses, managers ever saying a word.
her left hand got caught in the machine’s chemical vapors, blood, grease, and The doctor who evaluated Martha
roller, which reeled her in past her elbow, frantic deadlines, all swirling in clouds wrote that her left hand had suffered
twisting and cracking her forearm. A of steam around pulsing belts, blades, permanent nerve damage resulting in a
green cards, and, by some accounts,

Last November—35 months and at least 19 more able. “It’s sad to say, but it’s the
amputations later—Packers refinanced its loans and gospel truth: Seven out of 10 Americans
in the Deep South, whether black or
paid its investors a dividend of $339 million white, will fail the drug test,” says Randy
Hadley, local president of the Retail
“9% whole person impairment,” which After reporting 14 amputations to Wholesale and Department Store Union
could have entitled her to a maximum OSHA in 2015, Packers reported only 3 in Birmingham, Ala., which represents
workers’ comp payout of $150,000. But in 2016. Mitchell called NELP’s analysis about 6,000 poultry workers in Alabama,
the court sided with Packers, ruling the of OSHA’s severe-injury data “inflated Mississippi, and Tennessee. “Immigrants
accident was entirely Martha’s fault. She and incomplete,” in part because the pass the drug test. That’s what compa-
got nothing. Martha vanished after that, data included companies Packers had nies tell us.” Nationally, about a third of
melting away like many undocumented recently acquired and at which it was poultry workers and roughly two-thirds
workers who are injured on the job. She trying to improve safety practices. of beef and pork workers are union-
could not be located for comment. ised, but affiliation is much lower among
Packers fared better. On the same I N U P TO N S I N C L A I R’S 1 9 0 6 N OV E L undocumented workers. “They’re too
day in December 2014 that the Kansas The Jungle, the protagonist is injured in a scared to sign union cards,” Hadley says.
judge rejected Martha’s workers’ comp meat plant and, like Martha, summarily Gilberto Gonzalez, a 47-year-old
claim, Packers announced it had been fired. Sinclair likened the “unspeakable” Guatemalan immigrant who has been
bought by Leonard Green & Partners LP conditions for European immigrants in cleaning poultry plants in Alabama for 11
of Los Angeles, its third private equity Chicago’s meatpacking plants to slavery, years, says smaller plants and sanitation
owner in seven years. The purchase was only “there was no difference in colour contractors ask few questions of undoc-
financed with more than $550 million of between master and slave,” he wrote. umented hires and accept virtually any
debt. Last November—35 months and at A century later, the racial compo- supposed proof of employment eligibil-
least 19 amputations later—Packers refi- nent is back. Almost 30 percent of the ity. “They have a way of working it out
nanced its loans and paid its investors a nation’s half-million meat and poultry to get people on,” he says. (“Gonzalez”
dividend of $339 million. workers are foreign-born noncitizens, is a pseudonym he provided for this
The profit-taking was aggressive, compared with 10 percent of manufac- article in order to speak openly about
47
wrote a debt analyst at Moody’s Investors turing workers overall, according to the his experiences as an undocumented
Service; S&P Global lowered Packers’ U.S. Bureau of Labor Statistics. More sanitation worker.)
credit rating. But the company’s outlook than a third of meatpacking workers He lives with three of his sons in
remains stable, they said, partly because are Hispanic. The proportion of sanita- a decaying mobile home just outside
of strong industry demand and rising tion employees who are immigrants isn’t Albertville on northeastern Alabama’s
labour productivity. Packers brings in tracked, but many workers and industry Sand Mountain, famous for its snake-
more than $800 million a year in revenue executives estimate it’s the vast majority handling preachers. He sent for each
from about 500 plants. To David Michaels, in many places. son separately in recent years. Just teen-
who ran OSHA during the Obama admin- Meatpackers tend to be scrupulous agers when they came, the boys paid
istration, big debt is a potential red flag. these days about checking the papers smugglers $10,000 apiece to spirit them
“Are they reducing costs to pay debt by of production-line hires. Landing a job along the 2,300-mile trek from Guatemala
pressuring workers to work faster?” he on the third shift, however, is easy for through Mexico, across the Rio Grande,
asks. “That’s a common danger with undocumented workers, especially at and on to Alabama, the last leg in the
highly leveraged companies.” smaller plants and with cleaning con- back of 18-wheel trucks. They’re still
Packers executives declined to discuss tractors, immigrants say. All workers mostly invisible. They work at night, stay
specific employee injuries and rejected in the U.S. must have proof of identity inside during the day, use back roads to
the notion that debt or dividends have and employment authorisation, which avoid police, and never open the door
any effect on work conditions. “We recog- companies are not obligated to verify as for anyone they don’t know. Once, the
nise the hazards are high in the sanitation authentic. Employers are responsible family huddled inside as Immigration and
industry,” wrote Todd Mitchell, Packers’ only for misrepresentations the govern- Customs Enforcement agents snooped
vice president for safety, in response to ment brings to their attention. All sides around the trailer park and knocked
emailed questions. “Our sole concern is know the feds rarely raid at night. on their door for several minutes. “We
making sure our team members perform Outsourcing sanitation is “driven just prayed to God, and they finally left,”
their job safely.” purely by profit,” says Tim Cox, who Gonzalez says.
Packers’ “aggressive approach” to runs a consulting firm in North Carolina He works now at a Tyson plant, an
minimising areas of concern such as that specialises in sanitation for meat and employee of a large cleaning contractor
amputations has “greatly reduced” such poultry producers. “It’s less costly to hire called QSI, owned by the Vincit Group
incidents, Mitchell continued. Since someone with no documentation who of Chattanooga. (QSI and Packers say
2015 cleaners have been instructed not doesn’t understand his worker rights they use the federal E-Verify system to
to run blenders and augers while clean- than to hire someone who does.” confirm employment authorisation.) The
ing them, and supervisors increasingly They’re also more willing to do the work is good, as these things go. He’s still
power down all machines themselves. work than U.S. citizens and holders of haunted, though, by his previous job.
For about 15 months, he and his oldest Fresh did not respond to inquiries for investigate an electrical explosion that
son, who is 22 and identifies himself as comment for this story. injured a maintenance worker, Mar-Jac
Miguel, worked sanitation at a small pro- Gonzalez wants to stay in Alabama allowed them to examine the site of the
cessing plant called Farm Fresh Foods another year or two to finish paying off incident but nothing else. OSHA discov-
LLC in Guntersville, Ala. The facility is the family’s home in Guatemala, where ered a rash of other injuries in the plant’s
typical of the makeshift warehouses that his wife and youngest son still live. But he injury log and tried to expand the search,
dot the back roads of chicken country, worries the decision won’t be his to make but the company’s lawyer sent them away.
picking up deboning work and other in an era of highly publicised ICE raids. When an OSHA inspector returned
butchering jobs from the big poultry pro- “We just work and sleep and stay off the four days later to examine the blast vic-
ducers. Most operate on thin margins— street,” he says. “What choice is there?” tim’s tools, Mar-Jac’s attorney, Mark
bad news for workers, particularly the Waschack of Wimberly Lawson Steckel
undocumented, who are always the most OSHA’S POWER HAS ALWAYS LAIN MORE Schneider & Stine in Atlanta, said the
vulnerable to abuse. in its capacity to shame than punish. The inspector could walk through the plant
Farm Fresh’s sanitation supervisor fines for serious safety violations seldom to the locker room where the tools were
rode the cleaning crew without mercy, exceed $20,000, a trifle for most manufac- located, but only if he agreed to wear
according to the Gonzalezes and other turers. Now OSHA doesn’t shame much, a cardboard box over his head to blind
former colleagues, who filed a com- either. In the past, the agency called out him to any safety hazards. “Mr. Waschack
plaint with OSHA in 2016. They were safety violators in press announcements, stated that he had previously done this
forced to work at punishing speeds in often resulting in embarrassing home- to two [inspectors] in two previous
ankle-deep water with floating fat and town headlines about injured workers. OSHA inspections,” wrote OSHA’s Robin
chicken guts. They were enclosed in But in 2017, under President Trump, OSHA Bennett in a court affidavit.
poorly ventilated rooms with chlori- issued 123 press releases, compared with Bennett refused to wear the box.
nated cleaning products wafting in the 546 in 2016 under President Obama. Instead, OSHA issued a search warrant,
air and severely limited in bathroom The Trump administration has which, at Mar-Jac’s request, a Gainesville
and water breaks. The chemical vapor also stripped OSHA’s website of data federal judge quashed, saying OSHA
caused heart-pounding insomnia, Miguel on workplace fatalities, replacing it lacked probable cause. The agency fined
says. Several workers had to seek medical with highlights of the agency’s coop- Mar-Jac $20,000 for violations linked to
help. Workers who didn’t keep up the erative safety initiatives with industry. the explosion and appealed the search-
48
pace were moved to an extremely cold Among the Obama regulatory propos- warrant ruling last March to the 11th Circuit
area of the plant as punishment. als that Trump’s OSHA has dropped is an Court of Appeals in Atlanta, arguing the
After pushing the 20-man crew all updated standard for lockout/tagout, the injury logs and electrical blast provided
night, the supervisor would make them crucial procedures workers should follow a “reasonable suspicion” of safety viola-
play a devious game before going home, to shut down dangerous machines before tions. The appellate court has yet to rule.
Gonzalez says. To prepare the facility for working on them. And this fall, after the Poultry producers across the
the morning shift, the cleaners had to dis- GAO reported that meat and poultry Southeast, using Wimberly Lawson
tribute 80-pound crates of raw chicken workers were suffering health problems lawyers, have blocked at least 13 other
on the cutting tables. There were more from being denied bathroom breaks and OSHA searches. One, Fieldale Farms
workers than crates, and anyone caught feared punishment if they complained, Corp., limited OSHA’s access in 2015
empty-handed faced possible suspension OSHA rejected the GAO’s recommenda- after a Burmese sanitation worker lost
or firing. As a result, workers raced one tion that its inspectors ask about bath- five toes in its Gainesville plant. Another,
another across the wet floor to get the room access during plant visits. “OSHA Gold Creek Foods LLC in Dawsonville,
heavy loads, causing injuries. does not routinely ask questions about Ga., blocked OSHA from inspecting all
“When we complained, they only any potential hazards that go beyond the but a single machine after one of its san-
got meaner,” Gonzalez says. After the scope of a complaint investigation, unless itation workers, just 18 at the time, lost
cleaners met with Farm Fresh’s man- those hazards are in plain sight,” wrote an arm in a chicken cuber. OSHA fined
agement to discuss work conditions, the the agency’s Loren Sweatt to the GAO in Fieldale $9,800 for the shorn toes and
company suspended them and refused to response to its findings. Gold Creek $21,000 for the dismembered
issue their last paychecks. The Southern Meat and poultry companies have arm. Both plants had been fined before,
Poverty Law Center helped them file operated without much fear of OSHA but OSHA has still been denied access to
safety and whistleblower complaints since well before Trump took office, par- do a full safety inspection. Fieldale did
with OSHA, which has an agreement ticularly in the Southeast. In 2016, when not respond to questions for this story.
with other federal agencies not to act three OSHA investigators showed up at Gold Creek’s general counsel, Robert
against undocumented workers at job Mar-Jac Poultry in Gainesville, Ga., to Weber Jr., said the company cooperated
sites while complaints are pending. OSHA
fined Farm Fresh $29,000 for having Mar-Jac’s attorney said the inspector could walk
inadequate drains and failing to provide
proper protective gear against contam- through the plant, but only if he agreed to wear
inated water, chicken waste, and chem-
ical solvents and vapors. The company
a cardboard box over his head to blind him to any
settled with the workers separately. Farm safety hazards
The Tyson plant in Holcomb, Kan.

OSHA fined Tyson $35,000 in the
Sherman case. Sherman is suing the
company and Cozzini for negligence in
state court, and both defendants deny
wrongdoing. Tyson spokeswoman
Caroline Ahn declined to comment on the
case or the company’s injury rate. “We
don’t want to see anyone hurt on the job,”
she wrote in an email. Tyson promptly
investigates accidents to avert recurrences
and monitors sanitation contractors to
ensure they abide by all training, health,
and safety standards, Ahn wrote.
Mel McCrary, a former OSHA inspec-
tor in Kansas City who worked the case,
says Tyson has tried to improve its safety
systems since Sherman’s injury. But a
long history with the industry suggests to
with OSHA, but he did not respond to “The plant says if you were cleaning him that safety will never be a significant
questions about blocking the agency’s it with five people before, you’re clean- priority. “People are getting cut up, but if
expanded inspection. ing it with five people now,” says Greer. the company is performing, life is good,”
J. Larry Stine, the Wimberly Lawson “These guys are so pressed for time, it says McCrary, who retired last year after a
partner in charge of the poultry litigation, creates a big temptation for shortcuts.” 21-year career investigating meatpacking
says that in preventing OSHA from con- Brent Sherman, 37, couldn’t keep injuries. “Sanitation workers are treated,
ducting broad inspections, his clients “are track of all the modifications at Tyson’s at best, with apathy.”
asserting their rights under the Fourth meatpacking plant in St. Joseph, Mo. And at worst? In 2013, Hugo Avalos-
Amendment of the U.S. Constitution to Early one morning in 2015, he was hosing Chanon, 41, was cleaning a hamburger
be free from unreasonable searches and down a Cozzini meat blender, capable of blender at Interstate Meat Distributors
49
seizures.” Putting boxes on the heads of grinding 8,000 pounds at a time, when it in Clackamas, Ore., when, investiga-
inspectors, he says, is “a little hyperbole did something he didn’t expect. Before tors believe, his hose got caught in the
to illustrate the point.” starting, Sherman had set the blender’s machine’s paddles and pulled him in. His
controls on sanitation mode, ensuring it widow in Mexico is suing Interstate for
HUNDREDS OF PAGES OF OSHA REPORTS wouldn’t power up for 60 minutes; safety negligence and wrongful death, claim-
and other investigative documents sensors on the machine were meant to ing the night shift was a veritable death
obtained by Bloomberg through pub- keep it powered off until he reinstalled trap. There were no safety guards on
lic-records requests point to a dark place all the pieces, even if it took him more dangerous machines, and workers were
in U.S. industry. And a protein boom than an hour. required to clean the equipment while it
could make matters worse. U.S. produc- What he didn’t realise was that was running, according to court filings.
tion of red meat and poultry is expected someone had disarmed the sensors so Based on pretrial testimony, a Clackamas
to hit a record 103 billion pounds in 2018, it would automatically restart after the County judge is letting the widow seek
up 3 percent from 2017, according to the sanitation cycle, making it easier—but punitive damages at trial.
USDA. Processors are straining to add infinitely more dangerous—to hose down, Interstate did not respond to ques-
capacity and workers in order to keep up. according to OSHA’s investigation. When tions for this story. In legal filings, the
With their allies in Congress, the poultry the hour was up, the blender suddenly company acknowledges safety problems
industry is pushing the USDA to lift limits jerked back to life, snagging Sherman’s but says Avalos-Chanon’s employer, and
on factory line speeds, a move the Obama hose and snapping off both his arms hence the company responsible for his
administration resisted as unsafe. below the elbow. safety, was the sanitation contractor DCS
PHOTOGRAPH BY ADAM SHRIMPLIN FOR BLOOMBERG BUSINESSWEEK
To meet output targets, produc- OSHA’s investigation found a sani- Sanitation Management Inc. Interstate
tion lines are operating later into the tation culture at the plant of wanton claims it paid DCS, which has since
night, leaving fewer hours for sanitation bravado. Many sensors had been sim- been purchased by Packers, a flat fee to
workers to scrub down equipment before ilarly disabled for faster cleaning, the assume full responsibility for the night
morning inspections, says David Greer, agency discovered. A night-shift worker shift. Oregon OSHA fined DCS $6,300
who’s managed chicken plants and san- was a plant legend for his speed and after Avalos-Chanon’s death.
itation crews for Pilgrim’s Pride, Perdue daring, based on his refusal to power “DCS managers knew it was possible
Farms, Gold Creek, and others since down a single machine during sanitation. to clean the machines without turning
1991. And the third shift is getting more Cleaning workers told OSHA that the only them on,” Interstate argues in a court
complex and hazardous, as meatpackers time they felt any pressure from Tyson filing, in a rare burst of industry candor,
add automated blades, belts, and other managers to properly lock out machines “but they believed doing so would not
gear to the nightly steam bath, with many was when a government inspector was make financial sense.” <BW>
not adding to crew sizes. expected at the plant. �With Shruti Singh
Bloomberg Businessweek
Month 00, 2018
PHOTO ILLUSTRATION BY 731; PHOTO: JUSTIN FANTL

Even without the aid of Hunter S. Thompson’s favourite

drugs, CES, held in Las Vegas each January, has always
been a little surreal. This year’s bacchanal was crammed
with drones, self-driving cars, and internet-connected toi-
let seats—and the opening keynote speech was stranger than
any of that. On Jan. 8, 5,000 ticket holders made their way
through a sea of hired models and ultra-high-definition TVs
to the Monte Carlo Resort and Casino on the Strip, where
they squeezed into a theatre to watch a two-hour psychedelic
variety show. The opening act, a Blue Man Group-style quar-
tet called Algorithm ’n Blues, pantomimed a performance of
Human by the Killers, backed up by a digital bassist on a giant
LCD screen, flying drones that played keys on a giant piano,
and a trio of acrobats, dressed like extras from Tron, who per-
formed a trampoline routine. And that’s not the weird part.
Intel’s chips have After the music came Brian Krzanich, chief executive of
Intel Corp., doing about the best Willy Wonka impression
one can do in a button-down blue dress shirt and jeans. “I’d
two staggering love nothing more than to simply put my phone away and
take this evening to truly celebrate innovation with you,”
security flaws. The the 57-year-old CES regular said, bragging about his compa-
ny’s advances in virtual reality and new partnerships with
company’s autonomous-vehicle technology companies. Former NFL

quarterback Tony Romo appeared onstage to talk up Intel’s
work in 3D video, and Krzanich showed off a full-size pilot-
nothing-to-see-here less helicopter before capping the evening by suggesting they
head outside to see a light show over the famous Bellagio 51
crisis response fountains involving hundreds of drones—all, of course, either

made by Intel or running on Intel chips.
does not compute The whole thing was a dizzying reminder that although
Intel isn’t the household name it was during the PC boom
of the 1990s, it can still put on a show. The company makes
about 90 percent of the world’s computer processors and
99 percent of the server chips in the data centres that effec-
By Max Chafkin tively run the internet. While the world’s largest chipmaker
has struggled to expand beyond those core businesses, it
and Ian King reported $60 billion in 2017 revenue at a gross margin of
63 percent, an unimaginable profit for most factory owners.
What made the Intel keynote so surreal was that Krzanich
barely mentioned the potentially catastrophic news that
was on everyone’s mind. The previous week, the Register,
a British technology journal, reported that independent
researchers had discovered flaws in Intel’s chip designs that
hackers could exploit to steal data thought to be the most
secure. These vulnerabilities, known as Meltdown and
Spectre, are a very, very big deal, allowing hackers to peek
at the part of the computer where companies and individuals
store passwords, encryption keys, and most anything sensi-
tive. The flaws are unprecedented. Every PC, every smart-
phone, and every server in the world is exposed. The episode
has already led to lawsuits and calls for investigations, and
undermines more than a decade of Intel’s technical wizardry.
For the past few years, major cloud providers have sought
ways to reduce their dependence on Intel’s server chip
monopoly, quietly developing their own models or funding
nascent competitors. And just days before Krzanich took
the stage in Vegas, Intel gave those companies—and every- “flaws,” describing them as merely a new field of “research”
body else—a massive incentive to accelerate those efforts. into an industrywide phenomenon. It said any slowdowns
Even the researchers who discovered Meltdown and would be minimal, close to zero for most people, and that
Spectre initially didn’t believe what they were seeing. “That the episode would have no impact on Intel’s business. At CES,
would have been such a major f--- -up by Intel that it can’t after Algorithm ’n Blues but before Romo, Krzanich briefly
be possible,” researcher Michael Schwarz recalls thinking. addressed the not-flaw by thanking Intel’s peers for “coming
Spectre affects all modern chips, including those made by together” to “address the recent security findings.”
competitors, but the easier hack, Meltdown, applies almost Intel’s clients, including the biggest companies in the tech-
exclusively to chips made by Intel. nology industry, have mostly kept quiet. They have no alter-
The flaws can be patched, but those patches could slow native supplier. Privately, some are seething. The day after
the Intel chips by as much as 30 percent, the equivalent of Krzanich’s big show, Microsoft Corp. published a blog post
turning a state-of-the-art server chip into one from 2013. disputing Intel’s earlier assertion that users wouldn’t notice
“There is no playbook for something like this,” says Charles the slowdowns. Navin Shenoy, an Intel executive vice presi-
Carmakal, a vice president at Mandiant, the arm of security dent, said in a statement that customer security is a “critical
company FireEye that consults on high-profile hacks. “I don’t priority” for the company. But in private conversations with
think I’ve ever seen a vulnerability that worked across so clients, Intel’s top managers haven’t always acted that way,
many different operating systems and devices.” treating a disaster that threatens the security of every com-
If the slowdown turns out to be anywhere near as bad as puter user and the profits of a whole category of businesses
some think it could be, it’ll amount to a major price increase as no big deal, according to an executive at one of Intel’s large
for data centre owners, who could in turn demand that Intel customers. The potential fallout isn’t an academic concern,
cover the cost. (So far, the big cloud providers have said their the executive says, “it’s f---ing scary.”
customers won’t be affected. Their plans, and the costs,
remain unclear.) And because Intel is so reliant on chip rev- Part of what makes Meltdown and Spectre so terrifying is
enue, there’d be no easy way to make up those losses. Intel’s that they upend more than a decade of conventional wisdom
stock is down 5 percent since the Register report; shares of about information security. Starting in the mid-2000s, Intel
Advanced Micro Devices Inc., its only real competitor for PC added a layer of security within its chips and began encour-
52 and server chips, are up 11 percent. aging developers to store users’ most sensitive information
During the six months Intel was quietly working to try to in the walled-off area rather than in regular software mem-
fix the vulnerabilities, Krzanich sold $24 million in company ory. Only about two years ago did researchers first notice,
shares. Intel says the stock sale was part of a plan that had and begin trying to crack, a feature called speculative execu-
been in place before anyone there knew about Meltdown tion that Intel uses to speed up its chips. It essentially allows
or Spectre, but the day after Krzanich’s CES speech, two a chip to access any data it guesses a user is about to ask for,
U.S. senators sent letters to the Securities and Exchange even if it’s inside the secure area, before checking whether
Commission and the Department of Justice demanding inves- the user is allowed to access it. This is a big reason comput-
tigations. Consumer and shareholder lawyers have filed a ers and smartphones have kept getting faster year after year.
dozen class actions against Intel, and there are few signs the It also left a gaping security hole.
pressure will let up on Krzanich anytime soon. In a research The feature’s vulnerabilities were discussed at confer-
note, an analyst for Sanford C. Bernstein & Co. called the ences and in academic papers but were considered merely
stock sale “indefensible.” theoretical until last spring, when Jann Horn, a 22-year-old
Intel, which declined to make Krzanich available for com- researcher in Google’s elite cybersecurity division, suc-
ment, has treated Meltdown and Spectre as something close ceeded in reading private data from the secure area. Horn
to a nonstory. In its initial statement, issued on Jan. 3, the informed Intel in June, beating out three other research
company disputed that Spectre and Meltdown represented teams that discovered the flaw later in 2017. Together, they
Where Intel Chips Are Vulnerable

Programs run securely and To speed things up, the The processor stores this Hackers can use Meltdown With those keys in hand, the
separately from one another processor tries to anticipate data briefly in a less-secure to raid the cache and hackers may then be able
on Intel processors what the user is going to do area, called the cache, reverse-engineer the to access all the data in the
and access data before it’s before verifying that the user permissions and keys for machine, though that may
actually required has permission to access it the secure data require physical access
Program 1 P2 Hacker P2
program
Program 2 P2 Cache Cache
Stolen
Program 3 data
Hacker
program
Bloomberg Businessweek Middle East Krzanich 1 February, 2018
speeds, or skip the patches and remain at risk. (Intel has

already said patches are causing some machines to reboot
more often than usual.) Future designs will include hard-
wired fixes that speed things up, but the first versions of those
won’t appear until later this year, the company says.
All of this puts Intel in a tough spot. The company is a
nonfactor in the smartphone-chips business dominated by
Samsung, Qualcomm, and ARM, and rival Nvidia has taken
a commanding lead in the fast-growing market for graph-
ics chips used in artificial intelligence applications. Now,
Meltdown and Spectre threaten the core of Intel’s busi-
began working with Intel to patch the flaws; until the Register ness. The company has no competitor in server chips at the
report, they’d planned to disclose their findings on Jan. 9. As moment, but this episode could change that. Microsoft and
Google pointed out in a blog post about the discovery, the Google have publicly praised Qualcomm Inc.’s first server
security flaws could allow a cloud user to covertly snoop on chip, which went on sale in November, and Apple, Google,
another customer’s machine. Anyone with an Amazon Web Microsoft, Amazon, and Facebook all have internal divisions
Services account could, in theory, steal another AWS user’s working on chip designs.
login data and access their files, though that would often Intel’s more immediate threat is political. It’ll almost cer-
require physical access to the target machine. tainly have to withstand criticism from lawmakers at a time
In interviews, Intel executives dispute suggestions that the when governments around the world are increasingly scep-
company’s focus on chip speeds led it to overlook obvious tical of tech companies with de facto monopolies. “This
vulnerabilities. Intel says it’s already provided software fixes hyper-dependence on one chipmaker, indeed one technol-
for 90 percent of its chips and that this is nothing out of the ogy, although billed as a way to lower prices, has had the
ordinary. “We have an ongoing process to make our products effect also of greatly increasing society’s exposure not only
better,” says Stephen Smith, general manager of the compa- to hackers but also to ‘shock events’ that disrupt entire sys-
ny’s data centre group. “We just happen to be doing it under tems,” the Open Markets Institute, a Washington think tank
a spotlight now.” At CES, Krzanich told the crowd that “as that advocates for controls on market concentration, wrote in 53
of now” Intel had “not received any information that these its weekly newsletter on Jan. 11. For now, Intel’s big problem
exploits have been used to obtain customer data.” is Krzanich’s stock sales, but if it becomes clear that custom-
This sounds more comforting than it probably should. ers have been harmed by hacking or higher costs, regulators
Security analysts say that if four groups of researchers inde- will likely seek recourse through consumer protection suits,
pendently figured out the exploits, then some number of antitrust investigations, or both.
governments with sophisticated cyberweapons programs Intel has faced this kind of public pressure before. In 1994
(China, Russia, the U.S.) likely did, too. An intelligence agency the company was heavily criticised for trying to ignore evi-
armed with Spectre or Meltdown would likely aim big, dence that its Pentium chips were generating errors for cer-
according to Mandiant’s Carmakal. “A government wouldn’t tain obscure calculations. The crisis caused IBM to announce
use this to break into Target,” he says. “They’d use it to get that it would no longer ship machines that used the flawed
into the Department of Defense.” chips. Intel’s meticulously constructed brand, Intel Inside,
which had served as a sort of Good Housekeeping Seal for
So far, Meltdown and Spectre probably pose less risk to computer buyers, suddenly looked questionable. As part of
the average person than, say, a simple phishing attack in Intel’s extensive mea culpa, then-CEO Andy Grove offered to
which a hacker tries to send you to a malicious website. They replace all the buggy chips and took an inventory writedown
won’t lead to the kind of widespread panic that resulted from of $475 million, about half its annual R&D budget at the time.
the 2017 hack of Equifax’s customer database. Grove’s lesson, as he recounted in his business-advice book
But that could change. Hackers who hadn’t tried to break Only the Paranoid Survive, was that Intel had been caught out.
into Intel’s hardware, believing there was no way it would Even a quarter-century into its existence, the massive com-
leave a side door open, are now seeking ways in. “You’re pany still saw itself as a scrappy tech startup. With its size and
going to be looking for other things like this,” says Jeff Pollard, influence, he acknowledged, came new responsibilities. “The
an analyst with the research firm Forrester. “This is a new trouble was,” Grove wrote, “not only didn’t we realise that the
kind of attack. This is going to linger.” rules had changed, but what was worse, we didn’t know what
And long-term fixes won’t be easy. While coders can pull a rules we now had to abide by.”
few all-nighters to close holes in software, a chip takes years Intel has been the top chipmaker for the past 25 years,
RICK WILKING/REUTERS
to design, test, and mass-produce. Each model can cost tens but Meltdown and Spectre could turn out to be much worse
of millions of dollars to develop. For now, computer own- than the Pentium bug. If the company wants to maintain
ers and data centre operators will have to make an unsa- its position, it’ll need real humility, not cheap theatrics. <BW>
vory choice: Use Intel’s software patches and accept slower �With Dina Bass, Mark Bergen, Alex Webb, and Dune Lawrence
RESTAURANT . LOUNGE . DIFC
For the past decade, the casual Brooklyn
P
58 62
A high-tech swing Fatonomics
aesthetic has dominated American doctor to get your
game out of the rough 63
restaurants. Now chefs are returning to Pretziada Ceremony
U
59 fireplace set
pricey elegance—but not at the expense Gloves are chic again
64
of a good time. By Kate Krader 60
Bespoke motorcycles
The Welshman who’s
saving Japan’s forests
Photographs by Adrian Gaut
R
S
THE U
NEW
FORMAL
I
T
S
1 February, 2018
Caviar, served on egg custard at the Office, is a hallmark of the fine dining revival Businessweekme.com
DINING Bloomberg Pursuits 1 February, 2018
I n December 2008, then-New York Times restaurant critic with dishes such as warm oysters with seaweed butter and
Frank Bruni dropped a culinary bombshell. He bestowed crispy skinned duck with foie gras and figs. The prices were
three stars on Momofuku Ssäm Bar, an East Village dining likewise elevated: Dover sole with grapes cost $48; a veal
room with no tablecloths, no elegant glassware, and no tongue starter with sturgeon caviar went for $38. The place
coffee service. There, inside a shoebox-size space stocked was an immediate success, hosting everyone from Kanye
with benches and paper napkins, diners used tongs to yank West to Henry Kissinger.
at a communal roasted pork ham and, with their hands, Just as resoundingly as Ssäm Bar led a swing toward the
wrapped the drippy tendrils in lettuce cups. No restaurant so hypercasual, Le Coucou heralded a return to finer dining—
casual had received such a distinction, and the news spread. but an evolved model. Rather than a library-still environ-
“Chefs from around the world would show up at Ssäm,” ment replete with beige, like New York’s remaining formal
Momofuku chef-owner David Chang later said, citing the icons Per Se and Jean-Georges, Le Coucou offered a colour-
likes of René Redzepi from Copenhagen’s Noma and Ferran ful sense of theatre, with arresting lighting and friendly
Adrià from Spain. “That review took everything to a differ- service. It turned out the public was hungry for a restau-
ent stratosphere.” rant experience that felt not
Bruni’s take on Ssäm quirkily humble, but like an
came just after the 2008 event. One with real chairs
stock market crash. In New instead of stools, where you
York City, Wall Street plays could make reservations that
no small role in the restau- would be honoured, and
rant economy, and the effect where the playlist wasn’t
was on display. “If there was crushingly loud—but every-
a single, most pronounced one was having fun.
narrative toward the end A number of similarly
of my time as restaurant minded restaurants, such
critic, it was the migration of as Bellota in San Francisco,
extremely ambitious cooking La Table in Houston, and
56 into humble and casual set- Del Mar in Washington, have
tings,” says Bruni, whose sprouted up since the begin-
tenure as a critic at the Times ning of 2016. Common to
ran from 2004 to 2009. “Ssäm each dining experience—call it
Bar was the harbinger.” Luxe Redux—are these items:
Will Guidara, co-owner of 1. Reimagined classic dishes,
Eleven Madison Park (which often evoking France, the
topped the World’s 50 Best country that invented fine
Restaurants list in 2017), dining. French cuisine was
puts a finer point on it: “Fine set aside for its fussiness in
dining was under attack.” the Brooklyn era.
A casual-dining revolution 2. An a la carte menu,
followed, armed with flea with familiar plate sizes.
market décor, foraged ingre- (Remember appetizers,
dients, and a phalanx of food Oysters at the Office in Manhattan turn up in a whimsical nautilus shell entrees, and desserts?) This
trucks. Fancy, ambitious class of chefs views the tasting
restaurants with jackets and elaborate silverware began to menu format as too formal and restrictive and the jumble of
shutter, including Charlie Trotter’s in Chicago (2012), Alain shared plates as confusing.
Ducasse’s Adour in New York (2012), and Fleur de Lys in 3. No burgers. You might see a stray one on a lunch menu
PHOTOGRAPHS BY ADRIAN GAUT FOR BLOOMBERG BUSINESSWEEK
San Francisco (2014). Chefs who didn’t already have a fast- but generally not for dinner. Gone are the days when a
casual concept in their portfolio raced to find one. The ones restaurant wasn’t allowed to open without a headline-
who stayed high-end locked patrons into tasting menus. making, Instagram-ready patty smothered in cheese and
And then in June 2016, at the start of a record-breaking bacon jam.
18-month run for the Dow Jones industrial average, a restau- 4. Table seating, with chairs. Many Luxe Redux restaurants
rant called Le Coucou made its debut in New York. Its open also have counters, but you’ll fret no more about having
kitchen showed off gleaming copper pots and chefs sport- your awkward first-date conversations overheard along the
ing tall, white toques. In the front of the house, a battery benches at a communal table.
of captains in fitted uniforms attended to customers at 5. Waiters in pressed shirts and, yes, suits. A rock band
candlelit, cloth-topped tables. The menu from French- T-shirt is no longer work- appropriate attire. Tattoos,
trained chef Daniel Rose smartly tweaked the classics, however, are allowed.
DINING Bloomberg Pursuits 1 February, 2018
6. A new class of stylish sommeliers, as comfortable with topped with osetra caviar, and presented with a glass
inexpensive, unorthodox bottles as the big-ticket ones. of Champagne, all for $65. “I thought we’d sell three of
“Traditional sommeliers wanted to sell you a $175 bottle of those oyster pies a night. We sell 15,” says Boehm, Boka’s
wine. Anything less, and you were dead to them,” says Kevin co-founder. “There’s a demand for this kind of dining. People
Boehm, of Chicago’s Bellemore. “This new group came up are sick of sitting in uncomfortable spaces and sharing their
after the markets crashed, when restaurants couldn’t afford food.” Boehm also points to the plateware as a key element
$80,000-a-year sommeliers” and wine captains became cre- of this style of dining. “The china is not the mishmash that
ative by taking on other roles. you see in hipster restaurants,” he says. “But it’s also not the
7. Expensive options. If this style of dining has a signature bright-white Bernardaud. That got so boring.”
dish, it’s duck, comforting but more ambitious than roast And at the light-filled Del Mar in Washington, chef-owner
chicken. Oh, and caviar. Lots of caviar. Fabio Trabocchi makes Spanish cuisine an event. He has
Look at the Office, the classically minded bar and restau- his servers, clad in seersucker suits in coordinated colours,
rant at New York’s Mandarin Oriental from Nick Kokonas individually plate paella rather than serve it in the tradi-
and chef Grant Achatz, the tional family style.
duo behind the avant-garde In Bethesda, Md., Peter
Alinea in Chicago. Retro Chang, who has a reputation
cocktails have been reimag- for spicy Sichuan food in low-
ined (the Old-Fashioned price settings, has opened a
is made with bananas and flagship called Q by Peter
miso), and dishes such as Chang, where he’s serving
prime rib-eye tartare ($45) scallops with XO sauce ($30)
are decorated with tiny herbs and braised pork belly with
and flowers. Kokonas char- Chinese biscuit ($26).
acterises the Office, which At DaDong, the 400-
serves oysters in a giant silver seat Beijing transplant in
conch shell, as an “inten- Manhattan, elegantly clad
tional throwback to that sort sommeliers offer a range of 57
of dark mahogany-walled glasses, from Champagne to
place from long ago.” orange wine from California,
Or take Midtown all underneath ceilings
Manhattan’s tired Four playing black-and-white
Seasons, which vacated its video art. The signature
space in the Seagram Building Peking duck is $96; director
in July 2016. In its place came of operations Celso Moriera
two fancy-but-lively dining says almost half of guests
rooms in 2017: the Grill and ordering a la carte also get
the Pool. At the former, chef the $42 caviar supplement.
Mario Carbone uses a sal- DaDong’s showstopper is
vaged duck press to make steamed king crab in egg-
a roasted vegetable sauce, white flan: A whole one goes
tableside, for his pastas. The Office also dresses up its mussels, in a colourful vintage terrine for $560; on average, the
Co-owner Jeff Zalaznick notes restaurant sells five a night.
that the most popular dishes tend to be the most expensive, “There’s absolutely an appetite on diners’ parts to be
including the $67 prime rib and a $92 Dover sole served with dazzled, and restaurants like Le Coucou and the Grill are
crab and shrimp. Both are prepared in front of diners by answering the call,” says Caroline Potter, chief dining officer
captains clad in Tom Ford tuxedos. Power lunch still reigns at OpenTable Inc. “However, they’re dialing back the fussi-
in this room, which hums at midday with patrons poking ness when it comes to service and ambiance.”
at $36 chopped salads. Adjoining the restaurant is the Pool, Those two restaurants are among the hardest tables to
where chef Rich Torrisi transforms foie gras terrine into find in New York, and in early December, when DaDong
ribbons presented in an ice bowl, with crispy orange chips opened its reservation line, its bookings filled through
arrayed on the linen alongside. February. Hedonism has returned, and these restaurants
It’s not just a New York thing. Chicago’s steakhouse-heavy are politely holding the door. Even Ssäm Bar has evolved—
Boka Restaurant Group recently opened Bellemore, where gone are the benches and chopstick dispensers, replaced by
chef Jimmy Papadopoulos serves an anachronistic-seeming banquettes and real napkins. “Our goal isn’t to be the young
oyster pie in a room with spacious tables and an art deco kid anymore,” David Chang says. “We decided it was OK to
décor. The savory pastry is filled with rich oyster custard, grow up a little bit.” <BW>
SPORTS Bloomberg Pursuits 1 February, 2018
Data Driven
New golf technology helps you tweak your game this
winter, so you can come out swinging in summer
By James Gaddy
Albert Einstein was once asked if he you 20 degrees on your turn, or that performance-training boutique in
played golf. “No, no,” said the man your right leg is overcompensating for Scotch Plains, N.J. “It just keeps getting
who devised the theory of relativ- a weak left one. better, cheaper, faster, cooler.” He’s
ity. “Too complicated.” The story has Swing-analysing technology isn’t been using MySwing since it was intro-
served as a humbling reminder that new, says golf instructor Ben Shear, duced and is now one of hundreds of
even geniuses can find golf to be, as who advises top pros such as Luke instructors who teach with it around
Bobby Jones, a co-founder of the Donald and hosts the Golfers Edge the world, from Australia to Sweden.
Masters Tournament, described it, “a show on SiriusXM’s PGA Tour Radio The system is primarily meant
mystifying game.” channel. But the old systems took for instructors, but Peter Gauthier,
But in the past year, golf instruc- an hour to set up, whereas MySwing MySwing Golf Inc.’s chief executive
tors have begun using an unassuming takes about 20 minutes from start officer, says a few motivated ama-
piece of technology that aims to take to finish. The sensors attach wire- teurs have bought the system for
the guesswork out of your stroke. lessly, another first, and can be used themselves. Golfers as a group are gen-
58 MySwing, introduced in late 2016, is indoors or outside. Most important, erally educated professionals who are
a small box with 17 motion-capture it’s only $6,000, a relatively affordable equipped to understand the volume of
sensors that attach to various parts piece of equipment for a country club data if they’re so inclined.
of the body—the shin, the top of the that wants a competitive advantage. Pros typically use it in conjunction
feet, around the arms and chest and (TrackMan Golf, the shot-monitoring with a coach, finding it most helpful at
forehead. A separate one attaches to technology familiar from television locating that extra tweak in their game
the club. tournament broadcasts, runs closer that will get them over the hump for
Once the sensors are calibrated on to $25,000.) their Tour card. But Shear thinks it’s
a Windows-based device, a skeletal “It’s like any technology,” Shear even better for amateurs, especially
avatar appears on screen and begins says at the offices of his eponymous when combined with a physical eval-
to move with you in real time. Take a uation that might quash the tendency
few swings, and the feeling is similar to make unrealistic comparisons to
to a science-fiction fantasy. (Everyone the players they see on TV. “A lot of
from Game of Thrones to NASA creates golfers are guys who sit behind a desk
characters using mapping tech from working 60 hours a week, they’ve got
MySwing’s Beijing-based parent three kids who are all in sports, and
company, Noitom Ltd.—“motion” they’re driving them everywhere,”
spelled backward.) The system Shear says. “They’re not going to get
re-creates the angles, tilt, and rota- to the gym four times a week. But they
tions of your swing and plays it back still want to know what their physical
from overhead, behind, and the side. capabilities are. And then I can build
The key, though, is the software, a golf swing around what they can
which produces line graphs and bar actually do.”
charts that tell you whether you need Some limitations may not be phys-
ILLUSTRATION BY GAURAB THAKALI
to be more patient with your arms ical. “If you can’t chip and putt, then
and get your lower body to do a better this isn’t going to help you all that
job of initiating the downswing. It can much,” Shear says with a laugh. “If
observe, with sometimes excruciating you’ve got a 4-footer and you just
detail, that the bum shoulder you got rolled it by 10 feet, then that’s why
from playing college football is costing you’re not good at golf.” <BW>
STYLE 1 February, 2018
59
A Touch of Class
Luxurious gloves regain their grip on fashion. By Troy Patterson
“We’re on a mission to bring back glove culture,” says Niklas second from right), because when Hestra gets the skin, it’s
Magnusson, bespoke glove cutter at Hestra, a family com- typically been scratched by big-cat predators and pocked
pany in Sweden founded in 1936. He’s in New York on a with shotgun pellets.
four-city North American tour to measure clients for cus- Magnusson says he wishes he had more competitors.
tom orders and, while he’s at it, resize their ideas about how Many old glovers have died out or spread themselves thin
PHOTOGRAPH BY JANELLE JONES FOR BLOOMBERG BUSINESSWEEK. PROP STYLIST: GÖZDE EKER
gloves can look and feel. in diversifying their offerings. One exception is France’s
Just as the hat, buffeted by the winds of social change in Lavabre Cadet, whose line for Camille Fournet Paris includes
the mid-20th century, stopped being a full-brimmed sar- yellow lambskin driving gloves with silk-lined fingers and an
torial statement, so the glove ceased to be anything more alligator closure (€480, or about $576, above middle).
than a grudging, ugly defense against frostbite. “People tend Dents, a U.K. company founded in 1777 that’s much
to buy gloves that are designed for the coldest day they’re favoured by the royal family, makes the fleecy York (£107,
going to wear them,” Magnusson says. But in recent years, or about $145, far left). The outer suede and interior fur are
dapper men in temperate climes have revived the stylish made from one piece of lamb shearling. In France, Causse
glove. You can even see it in pop culture: The paws of Ryan Gantier carries the torch; the brand, founded in 1892, was
Gosling in Drive and Ansel Elgort in Baby Driver are hand- acquired by Chanel in 2012. It’s skilled with nubuck, a calfskin
somely wrapped in supple leather as they grip the steering it buffs into a suave velveteen, which is paired above with a
wheels of their getaway cars. cashmere lining (€312, far right).
Magnusson is currently evangelising about the pec- If you prefer your lambskin glossed, you can do worse
cary, a piglike mammal native to the Amazon, whose hide than Hermès’s buttery Nervure gloves ($840, second from
makes an excellent glove leather. “You have great dexter- left), which boast black leather so painstakingly worked
ity, but it’s also quite warm,” he says. Gloves made of it are that a delicate nub on each index finger renders the pair
also exclusively priced ($400 for the peccary pair above, touchscreen-friendly. <BW>
BIKES Bloomberg Pursuits 1 February, 2018
Building a Better Bike

Revival Cycle’s entry-level bike, the 140,
starts as another hand-built cycle, the 2012 The original Hellcat
Confederate X132 Hellcat. The team keeps bike costs $54,450.
the original engine, suspension, and frame Revival’s work more than
but hand-forms the new alloy tank, belly doubles the price.
pan, and tail section.
A 2.1-litre V-twin engine

produces 132 horsepower
and 140 pound-feet of
torque (hence the name).
60
The 140 runs on Pirelli

Diablo Rosso II tires. Its
Brembo and Beringer
stainless-steel disc
brakes are set in carbon-
fibre wheels.
Every day, in a nondescript, sun-beaten warehouse building a shipping container, and Stefan Hertel, a mechan-
15 minutes outside of Austin, you’ll find a handful of foot- ical engineer who once lived a quiet life making medical
long beards and tattoos so bad they’re excellent. The guys devices in Michigan. “They are literally engineering new
at Revival Cycles weld metal and pound leather with the [parts], and then they just bury them in the bike, and it’s
kind of grit you could stick in your jaw and chew. not even the selling point,” says Mark Buche, an executive
The crew creates composite motorcycles and rebuilds at BMW Group’s motorcycle wing, Motorrad. “It’s not just
vintage bikes: cafe racers, dirt bikes, and track rockets as them bolting together some parts.” Under Hertel, who’s 37,
potent to ride as they are arresting to look at. The variety the engineering team has applied for 10 patents.
of forms is jolting, from a flat-seated scrambler-type with It all started a decade ago, when Stulberg lost his job
insectile blue-and-white tanks to a reimagined Ducati (“I was unaware of how much I didn’t fit in,” he says),
painted up like Christmas. Most cost six figures and broke up with his girlfriend, and rode for a year through
take many months to make. The entry-level 140 motor- Europe on a KTM LC4 Enduro dirt bike. Appreciating
cycle (above), a beast of brushed alloy that takes about the size and breadth of the biking community there, he
650 hours to build, starts at $115,000. realized that other people would like seeing motorcycles
Revival is the brainchild of Alan Stulberg, 42, a former built from the ground up as much as he did. So Stulberg
software salesman who taught himself how to weld by opened Revival Cycles in 2008. Hertel joined soon after.
BIKES Bloomberg Pursuits 1 February, 2018
For six figures, Revival Cycles will pair vintage parts with cutting-edge
engineering to make you a one-of-a-kind masterpiece. By Hannah Elliott
The line of the alloy bodywork

flows from the front wheel,
over the engine and gas tank,
and up off the short seat.
The team created a new front,

with a xenon projector headlight,
plus a handlebar clamp integrated
with push-button controls on
either side.
A Revival 140 can

take up to 650 hours
to build.
61
The flanking panels,

the stainless steel
exhaust, and the
underframe are all
freshly designed
by Revival.
Today, Revival occupies multiple fabrication shops, Revival. Hertel and Stulberg started it by eliminating all
employs a full-time staff of 19, and sells branded goods the stock plastics from the 900SS-SP Ducati that served
online and from a retail store in downtown Austin. It also as the base, then rebuilt it from the chassis out, creating
turns out six built-from-the-ground-up motorcycles a year. their own lightweight steel frame, adding new bearings
Clients can give as much input as they want into the design and lights, polishing the heads on the 90-degree V-twin
process, though most defer to Hertel’s genius. Last year, engine, and upgrading the clutch, electronics, and brakes,
Revival’s revenue was in the mid-seven figures, up from among many other things. They polished the flat alumi-
$12,000 its first year, Stulberg says. num body until it shone like a mirror and added custom
“Alan is an artist and designer and imaginer, and Stefan drop handlebars wrapped in oxblood leather. The process
is this engineer savant,” says Rob Stalford, a crude oil took 1 ½ years.
options trader in Houston who bought a Revival in 2013. Even if you don’t want to buy a bike, you can attend one
COURTESY REVIVAL CYCLES
“These guys have incredible vision.” of several annual Revival motorcycle shows, where even
The team’s decision to not limit itself to one style of suits are welcome. The next is in April. “I wanted to create
bike makes the work inefficient and costly—but it’s con- something new,” says Stulberg, who knows how intimidat-
stantly building a knowledge base and, thus, a creative ing his world of motorcycles can be. “I want to make every-
edge. Stalford saw the benefits when he ordered his one feel at home.” <BW>
CRITIC Bloomberg Pursuits 1 February, 2018
It’s the Obesity, Stupid

Economics is often the base reason why a nation gets fat.
Can it also be the key to losing weight? By Joe Weisenthal
a lot to teach us in this area. For them, it meant losing a com-

bined total of 120 pounds over 18 months.
A primary argument of the book is that to lose weight,
we essentially need austerity. The authors liken obesity to
a government going deep into debt. Eventually you have a
choice to make: a catastrophic default (a bad health event)
or an uncomfortable reduction in government spending
(eating less). We need to set our own conditions of scarcity
amid this abundance. How do we do this? One approach,
drawn from the work of behavioural economist Dan Ariely,
is to set meta-rules. For example, rather than trying to
decide what to eat every day for lunch, just come up with
a simple rule that you’ll only have salad. Remove the temp-
tation to even consider a bad decision. (You are going to
be unhappy and hungry at times.)
62 The book is filled with various behavioural approaches
to good decision-making that won’t really surprise you (but
that, also unsurprisingly, work): Buy groceries online to
reduce temptation, make a habit of saying no to bread
and chips, always order the smallest size, cook at home,
and don’t eat if you’re not hungry. One thing that makes
Payne and Barnett’s work distinct from most diet books
is the relative lack of discussion about nutrition. They’re
I’ve always been drawn to unconventional diets. I was raised economists, not medical professionals, and it’s refresh-
as a vegetarian, and at different points in my life I’ve char- ing to read a book and not have to wonder whether the
acterised my diet as vegan, macrobiotic, Atkins, low-carb, science is bunk.
paleo, or keto. (Yes, I’m really popular at dinner parties.) It The Economists’ Diet diverges with some popular thinking
hasn’t been torture. In fact, I enjoy the tinkering. about weight loss. Earlier this year, I read Dr. Jason Fung’s
Of course, around the world, not everyone has this fantastic The Obesity Code, based on his experience treating
luxury. The economy is a huge determiner of what we people with Type 2 diabetes, which argues that, ultimately,
eat. The premise of the book The Economists’ Diet is to cutting calories is a failed idea. Fung posits that your body
take insights from broad global issues and apply them to will just adjust to a new equilibrium, and you’ll never be
personal dietary behaviour. Authors Christopher Payne able to sustain feeling hungry. He advocates instead for a
and Rob Barnett observe that many of us live in a world of low-carb, high-fat diet that leaves you with reduced insulin
abundance: In wealthy, developed markets, cheap food levels but satiated. Like Fung, Payne and Barnett argue for
is everywhere, and so obesity has skyrocketed. Payne, a skipping meals, but for different reasons. Fung believes
financial stability expert, and Barnett, an analyst of the fasts are important, leading to long periods of low insulin
politics of fossil fuels, met while working at Bloomberg levels; Payne and Barnett mostly see skipping as a chance
LP (Barnett still does) and soon found themselves obese, to reduce calories. It’s a basic economy.
after endless rich dinners with clients and fast lunches The Economists’ Diet is not a panacea. Rather, it’s an
ILLUSTRATION BY YANN KEBBI
from McDonald’s. enjoyable account of the thought process of two non-diet

They write about their efforts to lose weight by applying professionals who hacked their way into a system that
the lessons they learned studying economics. By now, there’s worked for them. Economics is ultimately about building
been enough behavioural work inspired by Freakonomics a toolbox to analyse different problems; the beauty comes
(and its various ripoffs) to recognise that the field may have when we put those tools to work in a new space. <BW>
THE ONE Bloomberg Pursuits 1 February, 2018
Pretziada Ceremony
Fireplace Set
A hearth without the proper tools is like a kitchen
without knives. Photograph by Yasu+Janko
63
THE CHARACTERISTICS THE COMPETITION THE CASE

Italian design company Pretziada was At €695 ($834), the nine-piece Ceremony All fireplace tool sets work pretty much the
founded in 2015 by Ivano Atzori and his fireplace set is on the high end compared same, but it’s not often that such a large
partner, Kyre Chenven, a set designer from with others that are also designed with the set—which includes a poker, blower, broom,
California. They’re based in Atzori’s native more contemporary home in mind, but you shovel, ash bucket, tool stand, and tongs—is
Sardinia, where they’ve worked with local get a lot for the money. In contrast, Swedish also compact. The designers wanted to make
artisans to reinvent the region’s classic designer Emma Olbers’s fireplace set will something that honored the essentialist
wares, such as shepherd’s boots and nuptial run you $460 for five pieces. Available lines of traditional country tools but was
vases. For the Ceremony fireplace set, at Sag Harbor, N.Y., home-goods mecca contemporary and decorative as well; even
they collaborated with French designer Monc XIII, it’s made from beechwood and the andirons have a sculptural element.
Ambroise Maggiar and metalworkers Fratelli comes with brass details, a horsehair brush, Pretziada also left it with a clear finish, so all
Argiolas. The collection pays tribute to and all-natural leather handles. The $900 of the hand welding is visible. It’s home décor
the importance of the hearth in Sardinian Henry, a set of four hand-forged iron pieces that’s supremely functional when everyone
homes, but refashioned in a minimalist from home furnishings wholesaler Arteriors, is gathered around on a cold winter day but
design. Each tool is made from laser-cut, in Carrollton, Texas, employs heavy-duty beautiful enough to keep out after warmer
hand-welded iron. materials for a more rustic feel. weather arrives. €695; pretziada.com
GAME CHANGER Bloomberg Pursuits 1 February, 2018
C.W. Nicol
The multitalented philanthropist is restoring
Japan’s forests. By Adam Popescu
64 WITH HIS BUSHY BEARD AND His 1975 book, Moving Zen,
deep-set blue eyes and has been credited for bring-
clutching an axe in his mas- ing karate to the West.
sive hands, C.W. Nicol might While 67 percent of Japan
just be the most intimidating is already protected, that des-
tree-hugger you’ve ever seen. ignation means more on paper
A Santa dressed in a down coat than it does in the field. Effective
and a blue beanie, the 77-year-old forestry takes effort: Cutting back
Welshman may also be Japan’s best underbrush allows tree saplings to
hope for protecting its forests. grow; moving rocks in streams opti-
In the mid-1980s he bought up mises irrigation. Rural farmers once cared
47,000 square kilometres (18,147 square miles) for the wilderness as well as they did for their
of decrepit parkland in Nagano prefecture, a three-hour crops. But as they retired and younger folks decamped
train ride from Tokyo, and founded the Afan Woodland Trust, for the cities, the wilderness suffered. “The forest has
named after a forest in Wales. Today the preserve is home to become completely wild—humans hardly ever go in there,”
148 types of trees and 137 varieties of wild mushrooms, as well says John Harris, a Canadian speechwriter who’s spent the
as almost 60 species of wildlife, including owls, red foxes, past 32 years in Japan. “Japanese life is so urban-centred now,
and black bears, many of which are threatened or endan- these vast areas are neglected.”
gered. “We brought a dead forest back to life,” Nicol says. Harris calls Nicol the “guru of forest preservation in
The role of conservationist is but another line in his colourful Japan.” Nicol spent a decade digging ponds, bolstering
dossier, one that includes best-selling author, whisky mogul, riverbeds, planting and clearing space for trees—hard labour
actor, and singer. He’s also been an explorer who worked he did himself using traditional tools and horses, which
as a game ranger in Ethiopia and lived with the aren’t as destructive to new growth as heavy
Inuit in the Canadian Arctic, where legend says he machinery. He’s using his low-impact approach
b. 1940, Neath, Wales
introduced Kikkoman soy sauce to the local diet. - to forestry to create a sister preserve in his native
ILLUSTRATION BY SAM KERR
Nicol has always been fascinated with Japan, While on a research trip Wales. In Japan, Nicol thinks he can persuade the
to Devon Island, killed
especially after childhood bullies led him to take two polar bears in self- government to designate more areas as protected.
up martial arts. He started studying the language defence and ate them “If I can change Japan and make people care about
-
in the ’60s, between his Arctic and East African Still acts in the the forests here, I’ll be happy,” he says. “That’ll be
stints, and by the mid-’70s he was a full citizen. occasional commercial something worth protecting.” <BW>

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1-15 February, 2018

BUSINESS TECHNOLOGY FINANCE

“There are a number of projects on the way. We continue

40 Debrief: Alain Bejjani, CEO, +971 4 4 329 467

UMS International FZ LLC, a

Luxe redux: Fine

dining is back Printed by:

58 Sport: Perfect your

actually look good 731 Lexington Ave, New York,

Those Intel chip flaws?

The company’s blasé

who’s saving Japan’s

removing the red

tape and laying out

the red carpet.”

● French President Emmanuel Macron wooed about 140 Davos-bound tech

● Vietnam ● The terrorists ● Formula One

like 2006, by as much as charges of graft and money

were all 12 years and significantly

talking former president’s quest

whether The maker of Kleenex tissues and

of economic last day as HP CEO is

crises.” superproducer Jeffrey

venture, tentatively known 7

Barclays CEO Jes Staley warned 1000

● European Union antitrust

national income. The country’s leaders promises on the need to do business

S makes plans for nuclear reactor

Emirates Orders A380s

T Out From Under the

L tiring of what they call a “bamboo ceiling,” a rela-

next few months it will announce five additional

PHOTOGRAPHS BY ANA CUBA FOR BLOOMBERG BUSINESSWEEK

Inc. and Cboe Global Markets Inc., from going

futures market as a stamp of approval for a volatile

1960s ’tronics craze, stocks with even the slight-

Careers Global Guru

in which people raise money for projects or compa-

‘this time is different.’ ” He wrote that currencies advantage,”

JPMorgan Chase & Co. Chief Executive Officer

of papers to explain bitcoin trading and its deci-

not invest in products or strategies you do not

O Rising oil prices have

O Libya’s powerful black market traders are encoun-

I year. Meanwhile, the central bank has eased restric-

C ers already struggling since the 2011 NATO-backed

dollars until the price stabilises.

follow. Kuwait, Saudi Arabia and Abu Dhabi are

IMF Raises Saudi Arabia’s 2018 Growth

needed is projected to weigh on growth pros-

ment,” he said �Vivian Nereim by India’s Parliament. Much of it winds up in open

S The latest turn in

SPECIAL REPORT: FINTECH

blockchain remain the key

areas of finvestment along Standard Chartered Bank has ex-

with Biometric security, efits of distributed ledger tech-

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stance, provided faster transactions

SPECIAL REPORT: FINTECH