Eldon-Online

Financial Centres

In the financial markets recriminations still fly, regeneration is the buzzword, and "remembering the past" means the past 24 hours let alone 24 months. Governments fret over exit policies (or lack of them), investment bankers are looking forward to the next round of bonus payments and "joe public" scratches its collective head wondering what just happened; for him no job, too much debt, minimal prospects but the newspapers tell him it's all good. 

Meanwhile, anywhere East of Istanbul, the cry has gone up "Let's be a Financial Centre!".

Putting aside for a minute the older established Asian centres of Tokyo, Hong Kong and Singapore, and the old debate about Shanghai's aspirations, and now that five year old successful "upstart" in the Middle East, the Dubai International Financial Centre (well, of course I'm biased!), I am beginning to wonder whether some of the new aspiring centres have any idea what they are talking about. 

Designating a city (or cities in the case of Korea) as a financial centre seems to be the easy part. Do they mean an International Financial Centre or a Regional Financial Centre? Do they look at London and say, "they are an International Financial Centre so we want to be like them"? If so, there is a little matter of 300 years of history to contend with in terms of infrastructure (it's okay, we can build that), safety and security (oh yes, we will have that), and reputation (reputation? can't we buy that too?).

A Deloitte study of Istanbul's potential to be a financial centre was circulated at the IMF meeting I attended earlier this month. A study that suggested there were "twelve dimensions of competition" for financial centres in order for them to be successful. Reputation was just about mentioned, as an adjunct to Image. Of course, you can have all the legal environment and regulatory framework (two of the twelve dimensions) you like, but if it is not demonstrated - over time (which is how you build your reputation) - that it is applied evenly and fairly across the industry, then what's the point?

I am not picking on Istanbul particularly, but it just happens to be a city with aspirations for which I have a recent study. (I must also say it was my first visit - and it certainly won't be my last!). The Deloitte report, on which the Turkish Prime Minister and the Association of Banks is pinning a lot of hope, says amongst other things:

- Significant improvements must be made regarding the legal environment.

- The fiscal environment needs greater certainty and efficiency and requires reduction in some taxes.

- The regulatory environment requires a more coordinated and responsive regulator based in Istanbul.

- The availability of skilled labour needs improvement

- Currently there is no brand or image that supports Istanbul as a venue for international finance.

The above is only a selection of their commentary, but it highlights the difficulties facing a city like Istanbul, and to be fair, just about any other city that has similar aspirations.

It is actually quite easy to sit and enumerate the qualities needed to create a financial centre. Deloittes have done it for Istanbul. Even I do it reasonably frequently, when asked, and one never wishes to dampen the enthusiasm of city, provincial or national authorities who want to consider ways of improving their respective economies. What I find harder to do, and am therefore asked less frequently, is to provide solid arguments about the differences between International and Regional Financial Centres. Can Seoul, for example be an International Financial Centre and Busan be a Regional one? How would they be differentiated?

And I also find it hard to answer my own question about how many "Financial Centres" do we actually need? Given the growing aspirations of countries in the Middle East, who are now beginning to publicly state their own aspirations, as well as Mumbai, various other cities in China and the rest of Asia it is becoming a little like "Well you've got one, I want one too!". This usually ends up in a no-one really wins situation, but where any success will be created by the creative, the non-bureaucratic and the quick - using external help in the early stages to ensure that the basic rules are simply written, clearly understood and consistently applied. Where the long term view is to build a reputation. Where corruption is not a feature of the country and where foreign workers are welcomed to help in the process.

"What Did You Learn In School Today?"

Maybe you don't know, or more likely have never heard of, the song by Pete Seeger with the above title. Actually, of course many of you have probably never heard of Seeger either but that's merely a function of age. An incredible folk singer, activist and great human being who at 90 is still going strong.

The song title jumped into my head today as I contemplated a question I was asked at a Forum in Singapore last week by an old and much respected friend, Tommy Koh, and a follow up question that was put to me in Beijing which had a bearing on what I said last week.

Tommy asked me if I could consider three lessons that I had learnt from the financial shenanigans of the last couple of years. A tall order I thought, to cover briefly - and only three of them at that - when there were so many thoughts running through my head.

In the end I did what I know other people do in a similar situation. I panicked. But I did think of three things. Three lessons that I learnt in "school" - perhaps not a formal school, and perhaps not today, but over a long period of time and that have come into focus recently. 

"Basics", when linked to financial services, may be boring but there do not seem to be many financial institutions who stuck to the basics that went far wrong during the recent crisis. Let's face it, banking is not all that difficult. You are entrusted with other peoples money because they believe you are going to keep it safe. You have custody of that money and lend it to others who can use it to improve their businesses and/or their lives - and who will pay it back to you of course, so that when the depositors turn up asking for their money back you can return it. You can provide other services, but you should not go too far off the beaten track - especially with other peoples money. Lesson number one, if I have learnt anything at all in 40 years of banking - basics will rarely let you down.

"Greed": It doesn't seem to matter what angle you look at it from, the recent crisis was fueled in a large part from a desire by many participants to take a short cut to wealth. Deals were created that were inherently unsafe. Credit standards were allowed to drop, because there was a chance to make more money than ever before - in a short space of time. Many participants in the market knew there were problems brewing, but they wanted to get their bonuses and move on before everything hit the fan. 

And as I have written before, bonuses are a part of life in the industry, but I think much more care would have been taken over the creation of some of these instruments of financial destruction if bonuses had been staggered, instead of being paid out quickly in lump sums. (And yes, this is a generalisation because some people were not paid out immediately, but I am talking about an industry on the whole). Lesson number two, reward well when deserved, reward fairly because it is the right thing to do, but don't hand it all out at once.

"Education": It seems to me that too many people were involved in financial dealings who had too little knowledge about what they were dealing in. You are rarely too young and never too old to learn new things. Boards of directors, for example, who approved products without asking some of the relevant questions because they felt they should already know the answers, and to ask would be a "loss of face". People who were selling products were insufficiently educated about what they were selling. Not their fault in many cases - it was management pushing sales targets, and telling their sales staff that "mini-bonds" were good. Regulators perhaps not moving quickly enough because they did not fully understand what was going on. Lesson number three; education at any time will never go wrong, and just because you happen to be a senior person and ask a question does not mean that you are losing the plot.

Those, then were the three answers I gave at the Forum last week, and then today it was suggested that every financial crisis is different, and that you cannot necessarily find answers from lessons of past crises. And while I agree that there are always some differences they are usually subtle as very often the basic problems are the same, and I return once more to the lessons from my recent favourite book, The Country Banker, where the author talks of the importance of learning "to distinguish those transactions in banking which are safe and legitimate from those which are unsafe". He cautions about the potential negative influences of the media, he warns of banks seeking to enhance profits imprudently at times when interest rates are low over a long period of time.

All characteristics of this crisis, all comments from a book written in 1885.

So what did you learn in school today, this month, this year, through your career? Whatever it was, it should provide a lesson for the next time, and be passed on - although it won't; no matter what new regulations we put in place, someone, somewhere is going to say "but it's different this time!".

Brother Can You Spare A Dime?

It seemed appropriate to use a song title that originated from the Great Depression to open a Blog in these strange and contradictory times.

Clearly investment bankers at a number of firms will be smiling all the way to their banks given either the bonuses they have received or -indeed - the "sign-on" fees that are once again prevalent in the market. And I said in a previous blog that I had a view on such payments - which I do. Honestly, I am generally in favour of rewarding good performance, and doing so via bonuses sits reasonably well with me, but I have three issues about which I am not so comfortable.

First I think we need to be clear that these payments should be performance related and not for some "anticipated future performance". That is hardly an incentive. Secondly they should be paid out over a period of time and not in one lump sum in the quarter, half year, or year in which the job was done. Sure, the largest percentage can be paid first, but let's hold some back to ensure that the deals engineered or the products created are actually genuine and not toxic. A bit like the contingency payments you might hold back on a house construction to ensure the building does not fall apart over a period of time. And thirdly I do have concerns about some of the amounts. I mean is the USD100m claimed by Andrew Hall a reasonable sum? You can feed a heck of a lot of people for a fraction of that amount so I hope any recipients will be at least conscious of their fellow human beings and spare more than a dime. But I wonder.

At the other end of the scale we have the ranks of the unemployed. Some habitually so, but now swollen by the newer unwilling entrants whose numbers continue to rise, despite all the talk of recovery. Job prospects look bleak in developed and developing economies for the foreseeable future. Homeless numbers too, continue to rise. In England the other day I heard a vendor selling the Big Issue, a magazine sold by the homeless to enable them to extract a living shout, "Buy your copy of the Big Issue and get nothing in return". He was poking fun at the "buy one get one free" offers and similar ploys to create interest in a product, and equally was having fun doing so - but underneath it all was a man who understood the realities of a life which held very little positive prospects for his future. Imagine how he feels about even well- paid people, ignoring the mega-rich in the previous paragraph, who would not be prepared to put their hand in their pockets for a serious magazine, which is actually worth reading, sold at the princely sum of GBP1.50 (HK$20), of which the seller receives half the proceeds. Every dime counts here.

Now what about those in the middle - who were the real reason I started this particular blog in the first place, or more precisely those involved in start-ups and SME businesses.

Certainly recessions, depressions, unemployment, and bills to pay focus the mind on alternative sources of income. For a few (relative term) people, venturing into their own small business is often the fulfillment of a long held dream. But start-ups are notoriously high-risk ventures, for a string of good reasons – reasons which are sufficiently good for many banks to ignore SME customers altogether. And in times like these, it is even more difficult to obtain funding. Skittish markets, lack of appropriate business skills, low entry costs that enable anyone to join in are all indicators as to why something like 90% of such ventures fail in the first year.

TV programmes that are now shown around the world, like The Dragon's Den have done something positive towards bringing the harsh realities of running a small business into focus. People are thus becoming better prepared to avoid the pitfalls, but they still can't get the money! So, where do they go? That is where "Brother Can You Spare a Dime" came into its own.

I came across a website the other day by accident (I do that a lot) called cmypitch. It led me to looking for other similar sites and yes, they were out there. Having been an "angel" - theatre investor, (one spectacular success one breakeven and one disaster) I have always been conscious that there were alternative sources of finance out there in small chunks, but I had not realised how far it had spread, and into what businesses. And what a good idea I think it is.

Here you go Hong Kong. You are still entrepreneurial, I hope. I think there is an interesting proposition here - raising small amounts of money from a large number of investors, and placing it wisely in start up businesses. I have a few ideas already!

Money Man

It will come as no surprise to most that Norman Chan has been named as the new head of the Hong Kong Monetary Authority, commencing his role on 1 October. Good choice!

I have known Norman for almost 30 years, and I cannot think of anyone else better qualified on an all round basis to assume the substantial mantle that will be left by Joseph Yam. What Hong Kong's premier regulator needs today is someone who understands Hong Kong and how it works. Someone who fully understands "central banking" and has a working knowledge of commercial banking. A person of integrity - who despite being appointed by Government, is capable of independent thought. An individual, then, who is known to and can work with the financial authorities and regulators in China. A character who understands that Hong Kong's position as a global financial centre is dependent on consultation and collaboration with the domestic financial industry.  

I believe that Norman will serve Hong Kong's best interests loyally and with skillful competence. I wish him well.

Of course, I don't for one minute believe that the announcement of the appointment will be the end of the debate!

Comments will be made on the transparency of the process, as legislators will undoubtedly say they should have been involved in the selection, and in today's open world it is hard to deny that where cases of public office are involved, greater transparency is becoming more usual. The trouble with such an open process is that it then becomes "selection by media", with commentary often provided by people without a sufficient understanding of the real issues - concentrating instead on personalities instead of competence.

There will also be comments on the new salary level, where some people will be inclined to say that even though the remuneration is 32% lower than Josephs' it is still a substantial sum. Maybe so, but if you want good people you have to pay for them. I am sure that if Norman were to venture into the private sector, he would attract a much higher remuneration than the one he is receiving from the Government. (Salary is a much different issue from bonuses - and I have a view on the most recent announcements from the investment banking community!).

And is the five year term an issue? I hope it's renewable - if appropriate.

In my personal opinion, this is a good move for Hong Kong. But you should take into account a description I read on someone's opinion of my Blog recently who wrote

 "... former lion of international high finance who is now in his winter. Mr. Eldon's views of the world, of China, and of HK are of his past spring. One may question how relevant his views are in today's political reality... "

Oh well!!!

WMD; Weapons Or Words?

The term WMD, in recent history, came to be known as an abbreviation for Weapons of Mass Destruction. Those things that the Americans said existed in Iraq, who dragged the British along with them into a war which rid the world of a dictator, but left a legacy of internal conflict in the country that shows no signs of abating. Oh, and just as an aside there didn't seem to be any WMDs - strange that!

On the other hand we have the North Koreans who most definitely do have WMDs, and a dictator, but nobody seems terribly interested in knocking him on the head and giving that country a chance of escaping from abject poverty and starvation. Where's the justice in that - or did everyone wake up to the idea that invading Iraq under some pretext or other was just wrong? Mind you, Iraq had oil - North Korea doesn't.

But it occurs to me that WMD could just as easily stand for Words of Mass Destruction - at least in Iran most recently where some bloodthirsty cleric is proclaiming that all rioters should be executed.

To re-cap, there can be few people in the world today, civilised or otherwise, who believe that the recent elections in Iran were fair and just. Of course, it is quite possible that both sides were trying to rig the ballot boxes, but there are just too many anomalies in the results to believe that the incumbent President won the election by anything like the claimed majority. He might have won, I cannot comment, but certainly not by the proclaimed majority.

The strength of negative feeling from the opposition within Iran, and from Iranians outside the country, is massive and powerful. They have been giving vent to their feelings, and show little appetite for remaining silent - almost at any cost. Which leads me to ponder on the words of the Islamic Cleric Ahmad Khatami, a known hardliner, who said "I want the judiciary to... punish leading rioters firmly and without showing any mercy to teach everyone a lesson," Khatami, a member of the Assembly of Experts, said the judiciary should charge the leading "rioters" as being "mohareb" or one who wages war against God. "They should be punished ruthlessly and savagely," he said. Under Iran’s Islamic law, punishment for people convicted as "mohareb" is execution.

One must assume that Khatami is equating rioting against a corrupt President Ahmadinejad as waging war against God; surely a dangerous and heretical supposition, but then perhaps he is becoming fearful of his own position and, like a cornered snake, is prepared to come out fighting.

The fact that inflammatory words can be as destructive as weapons is not in doubt. Comments such as these will lead Iran into a bloody domestic conflict that will end in tears. The fact that these words can can come from a man of religion is even more worrying. If religious leaders promote violence, from a religious base that is supposed to preach tolerance - and by religious base I mean all religions - what hope will there ever be for the people of this world to live a life where differences are respected, where freedoms become the right of everybody, and where the ambitions of dictators are not allowed to flourish. I hope that Iran does not descend into more bloodshed on account of the words of mass destruction uttered by its supposed men of peace. 

The Debate Continues: Hong Kong vs. Shanghai

The question that seems to bother Hong Kong journalists much more than their counterparts on the Mainland of China is the one that asks when Hong Kong will lose out to Shanghai as a financial centre. Why this difference in focus exists is something of a puzzle, but suggests to me that Hong Kong has developed a real (even though unnecessary) inferiority complex, especially where China is concerned. In the meantime China - or in this case Shanghai - is openly confident about achieving its goals, and sees little of concern that might hinder its progress.

Hong Kong has been successful as a financial centre. It is something that we in Hong Kong should be proud of, while at the same time making sure that we do not rest on our laurels. But, as I have said before, we do seem to take a perverse pleasure in denigrating ourselves - in allowing our media and even our legislators to "knock" (look at the slang definition) everything in sight; particularly if the Hong Kong Government is involved.

In a meeting of the Institute of International Finance I attended in Beijing last week a highly respected friend Dr Fang Xinghai, now Director General of the Shanghai Municipal Government Financial Services Office, laid out in his usual unambiguous matter of fact style the blueprint for Shanghai's aspirations. They could not be clearer. Shanghai will be the international financial centre for China, in time, and it is even decreed by the State Council that this should be the case. Period. So, what of Hong Kong, he was asked?

"Ah", said Dr. Fang, not at all put out by the question, "in terms of financial affairs Hong Kong is essentially a separate region under one country two systems, and it surely will have its own plans".

As an aside, it has surely been clear from way back that various cities in China have had aspirations to become a financial hub - international or otherwise. Beijing, Tianjin, Dalian amongst them - but the logical place for me anyway has always been Shanghai. It has historical claims, and it remains the hub of China's mercantile trade. It has been similarly evident that Shanghai actually really wants to undertake the role of international finance centre and not merely become the centre for finance in China, although heaven knows there is probably enough business there alone to keep a financial centre busy for ever. 

Okay; ball firmly back in Hong Kong's court. Do we have our own plans?

Well this, perhaps, is where the story starts to get a little blurred. Do we have a clearly articulated vision of Hong Kong as an international financial centre, in the same way that Shanghai is clearly focused? Yes we talk about it, but if you were to ask one of this City's leaders - public or private sector, about the definite plans to keep Hong Kong ahead of the competition what would they say? Would it be? 

"We have a well proven financial infrastructure encompassing the best practices from around the world. We have full support services for the industry with highly professional international and domestic firms in accounting and law. We have a strong, flexible, fair, industry-friendly collaborative regulatory regime. We are open to new ideas, and will always move quickly to implement the necessary changes required to keep us up with or ahead of the competition. We have a business friendly, knowledgeable legislature that understands financial affairs and acts to protect the prominence of Hong Kong. Our relationship with China is such that we can expect to be used as a "toe in the water" for changes that might be implemented more widely in China and internationally, such as Shanghai being allowed to use the RMB as a trading currency?"

If we can say yes to every one of these things then we are at least aware of our surroundings, and are proactively working towards ensuring that we remain as an important global financial centre. If we have gaps - we must close them.

The reputation of a financial centre is as important as its ability to perform, and reputations as we all know are lost in a nano-second, but take years, decades, centuries even, to establish. Look at London, and allow me to quote selectively excerpts from Stephen Inwood's excellent book "A History of London", writing on the period from 1965-2000.

"The City, nevertheless, was a huge and long-established centre of financial services, skills, contacts and institutions...this was London's greatest single advantage" ..."an enormous number of financial institutions offering profitable and tax-efficient investments of every conceivable description" ..."London's size and reputation, along with the skills and resourcefulness of its financial operators, enable it to beat or equal Tokyo, New York and its European rivals".

We have the fundamentals, the reputation, the skills and the abilities to continue to prosper as an international financial centre. It is up to us to keep those skills finely sharpened, to maintain our track record, to be creative (within the realms of decency given global financial scandals that have affected others much more than they have affected us), and make others chase us - instead of us doing the chasing.

We should welcome the competition that will be provided by Shanghai, but I would argue that this is not a heads we lose, tails they win scenario. Can Asia, and the global financial communities indeed, withstand the presence of two major international financial centres based in China - Hong Kong and Shanghai? I would say yes. Shanghai will make it, in time, but provided we do not falter in our own endeavours and ambitions, we will be right there too.

The Rules Of Principles... or How To Labour Under A Misapprehension.

I was brought up to believe that principles were everything. "Intent" was a defining noun. Doing the right thing, even if the "rules" allowed you to go further, was important. It has led to various debates throughout my life where my, at times perhaps, overly conservative/protectionist/reputational shield has come into play. For example, I did not think it "right" that my former employer should open a representative office in Myanmar, even if the rules allowed us, but they went ahead anyway. I closed it as soon as I was in a position senior enough to do so.

The discussion has struggled on. The "rules-based" provisions in the USA did not prevent the likes of Enron and WorldCom from going bust. The introduction of Sarbanes-Oxley "rules" has had some impact, but seemed to be more like using a sledgehammer to crack a nut - or so it became, even if the original intent was much less draconian. Rules, we said, encouraged the nimble-minded to see just how close they could get to the imaginary line created by the rules - or even assess the risk of having one foot on either side of those lines.

Principles, on the other hand were altogether more, shall we say, "lofty". More sort of, well, British. People instinctively knew what was right and what was wrong, and acted accordingly without having to resort to a "rule" book. Today, sadly, one might have to say that to trust in ones fellow human beings to act "properly" is blinkered and naive in the extreme.

Britain's ruling (for the time being anyway) Labour party has been found with an excess of moral turpitude and, to be fair, I suspect there are also a few members of the Conservative Party who have their heads very well below the parapet for fear of being branded the same way. It all started with expenses. There has been so much written in the world-wide media about how these politicians, representatives of the constituents who voted them into power, have blatantly abused the trust placed in them that I will not continue old news. "But", say these disgraced politicians, "it was allowed by the rules"! Forget the principles, people of Britain, it was in the "rule book", so it was okay.

Well, the people of Britain have had an opportunity to have their say. In the local elections held on Thursday and with results almost all in, the Labour Party has - in effect - been kicked out of Parliament, although that actual event is not going to take place until a General Election is called sometime with the next 12 months. The very people who voted for the last Government have already said "we don't want you any more. Leave."

The British Prime Minister, Gordon Brown, is I am sure an honourable man and must be bitterly disappointed at his inheritance from the rather clever Mr Blair, his predecessor, who maybe saw this coming before he left office mid-term. The Cabinet re-shuffle announced yesterday looks awful and surely the only way in which Mr Brown can salvage any dignity whatsoever is by resorting to his own strong  principles.

He is presiding over a Government that lacks credibility and which the people of Britain would like to see changed - now! The message is clear - move on, or run the risk of more indignity. This is nothing to do with the financial crisis, this is all about Governance and Leadership.

Do not stick to the "rules" and hold an election at the last possible day; Do stick to your principles and do the right thing. 

Market Madness.

I am beginning (?) to sound like a stuck CD! Here he goes again, they say, casting a wet blanket over the market euphoria; making Nouriel Roubini look like an optimist. Frankly, as I have said on numerous occasions previously, I have neither been a premature pessimist nor a blind optimist - but I hope, a realist.

In the last few weeks I have watched, with mouth open, as markets around the world have shrugged off the deathly spectre of recession and carried on rising as if it was a whole new dawn. I have read the optimistic commentaries from the analysts who, time after time, have got it wrong. I have been watching the antics of those commercial banking institutions that wrote off more bad loans in the first quarter of this year than they did for the whole of 2008. And listening aghast to the investment banking community crowing about their best quarterly results in recent memory - and heralding the return of bonuses to their "hard done by" executives! 

Knock! Knock! Is anyone at home?

Some years ago, I used to enjoy a writer in the SCMP called Teresa Norton who I think is still here in Hong Kong. She used to start her weekly columns with a phrase something like - "I don't know, maybe I'm nuts...". I wish I had thought of that phrase, because it's how I'm beginning to feel. Have I missed something here?

The stock market recovery has clearly taken its inspiration from the Book of Revelations and if, as I suggested you should, you took up your rights in HSBC at HK$28 per share, you will have done okay! And look, I really don't want to be the grouch, because the recovery will have helped many people - for the time being. But for every piece of front page news extolling the virtues of the market, announcing that the worst is probably over, that the green shoots are beginning to bud, there is "inside page" news about more job losses, more companies folding, more trouble for the airlines and car manufacturers. The job losses themselves adding fuel to the fire, by creating more people who can no longer pay their mortgages, auto loans and credit card debts.

The job losses in the USA last month have been greeted with relief that there were only about 325,000 of them. So, compared to the 700,000+ figures people have been used to it is better but, good grief, since when has the loss of another 300,000 jobs been something to rejoice about - with US unemployment still standing at a record high 9.4%. Not forgetting that in a few months time these latest figures could be subject to "adjustments" which are likely to go largely unnoticed.

In banking terminology when you write a cheque incorrectly, it often gets returned with the comment "words and figures differ". That's how I feel right now. Just like the multi-handed economists who say - on the one hand there is all this good news, and on the other hand there is all this bad news. Which is right?

So, I talk to people I know. People whose opinions I value and respect. I ask them to help me, as an interested observer, decipher my own thoughts and where my "gut feel" is flawed. They listen to my points of view and say they agree. In fact many have said "we've sold most of our shares and are now mostly holding cash, despite the zero interest rates". And if the market goes up any further we'll sell the rest too, they say.

More; I help out a couple of Pension Fund schemes operated for the benefit of some non-financial people. And even the Fund Managers agree with me. 

Well that makes me feel better, but my self-doubt remains highly corrosive. If my mentors are in agreement, why is it that the markets seem to defy the realities of the world around us? Or is this where we came in? Markets ignoring logic, creating speculators who are out for a good time.

In a Blog I wrote in August 2007, I reminded people of the old saying related to the Stock Market - "Sell in May and go away". It would have been a good idea to heed that advice in May 2007. It seems to me it would be a good thing to do in 2009 (even in early June) - but then, maybe I'm nuts!!

Britain - Pay As You Go (Out).

The Visit Britain website is a mine of useful information. Even though I left the country over 40 years ago I still enjoy visiting, not only because of the redoubtable Mother, but because it is stunningly beautiful and historic. And I always encourage others to do the same. Indeed, just this summer we will be hosting a small group of Americans who have never visited Britain before, and on doing the research I am seriously amazed and impressed at the deals available for foreigners. Welcome to Britain!

The sights in Britain are in fact so good that the "enlightened" but beleaguered Government are determined to encourage more Britons to stay at home and visit. Hence the bad news for the foreign tourists is that there appears to be a dark sting lurking in the tail of the British welcome.

So what is it that has caught my attention? 

A little underhanded Economic Nationalism perhaps - some protectionism, despite the fact that everyone is paying lip service to the "no protectionism" bandwagon? [And on that particular protectionism subject think ‘Buy America’ provisions. Or China’s Coke moment. Or Australia’s 

Rio Tinto dilemma. But I digress.]

In Britain's case it all revolves around the now "hidden" subject of Air Passenger Duty (APD) - in other words, Departure Tax. 

In the most recent British budget - and presumably to act as an incentive for Britons to stay at home rather than go and enrich some other economy during their holidays, there is about to be introduced a higher APD. Great for the British Government revenues and of course for Britain - or is it?

If you are a UK based businessman who travels overseas to acquire business which will ultimately benefit Britain, you are going to be paying more for the privilege - or at least your company is going to pay. If you are a British tourist who wants to go overseas on holiday, in the most economical class of travel, it will cost you more, (and heaven help you if you want to move up to World Traveller Plus). And if you are a foreign tourist, like our summer visitors who are a source of revenue to Britain, you can get in to the country, no problem - but then you have to pay to leave!!

An example as supplied by a friend who has looked into this carefully (it is complicated by distance, but I will use Hong Kong):

• 4001-6,000 Miles from London (eg Hong Kong, Thailand,Brazil, Kenya, China,Seychelles, Mauritius,S Africa)

       Current APD:   £40 Economy.                £80 Any other class

       In Nov 2009 will go to:      £50       £100

       And Nov 2010 will reach:     £75               £150

So today, the minimum airport tax to leave the UK on an economy class ticket is £40 - already the most expensive in the world. By November 2010 it will almost have doubled to £75. If you are a business traveller or tourist, who travels even just a little further up the plane, you will be paying £150 before the end of 2010!

And before anyone claims that this is all to do with the "greening of Britain", none of these taxes is earmarked for use for environmental purposes or research and development of cleaner engines or fuels or  technology improvements or anything to do with aviation or climate change.They simply go into general revenue. So, a "Brown-ing of Britain" in effect. (I wonder if Government Ministers or other Civil Servants are exempt from airport taxes?)

One quotable quote (I suspect the others were unprintable!) I have seen, was from the IATA Director General and CEO, Giovani Bisignani who said “It is time for the UK to realise that APD is penalising one of its most powerful economic  catalysts at the same time that is spending billions to bail out other failed industries.”

Hear hear, Giovani; on one hand the international business community that is a generator of revenue for Britain, and the tourism industry which does rather well from the arrival of foreign tourists, have been well and truly stuffed - to use a rather crude expression. But what a good move by the "Bayou Beauties", the ladies from Louisiana who chose the Summer of '09 to make their trip to the UK. They will still have to pay to leave - but it would have been a lot more next year.

Asia Rising - But Not So Fast!

The Financial Times of Monday March 23rd provided one of the most graphically legible league tables of current times, showing where the future financial power of the world may lie. Lending some strength perhaps to the already widely held views that this could be the Asia Century.

In 1999, of the top 20 banks by market capitalisation, 11 of them were American. The Europeans had 7 and the last two were from Japan. By 2009, a mere ten years later, 8 were from the Asia Pacific (China, Japan, Australia) - with the top 3 spaces taken by Mainland China, and another 2 Chinese banks in the top 20. In addition, and with tongue only slightly in cheek, it could actually be 9 from AsiaPac if you still believe that HSBC is fundamentally an Asian bank!

Citigroup at present has a market cap lower than that of my friends at Hang Seng Bank in Hong Kong, and lower than 5 Canadian Banks, none of whom even featured in the top 50 just 10 years ago. A shift in geographies where in 1999 Asian institutions comprised 16% of the total and today make up 32%.

I may be old, but I'm not that stupid! Of course these positions have been taken at a "snapshot" in time and use just one measure of comparison. Of course they can, and will, change over time - although how much time is anyone's guess.

The point is this. Asian banks have risen to the fore. I do believe that they have better structured balance sheets than before and that they are generally much better regulated than before - or have continued to be well regulated over time in the case of the Australian and Hong Kong banks.

But they must continue to pay attention to their businesses and their risks if they are going to seize advantage of the ratings they currently enjoy. The tables only tell a part of the story. The Asian banks have, in overall terms, come to the top quickly, but they will make more progress with less haste I suspect.

Given the financial resources available in the Middle East, it now needs some appropriate consolidations to put a couple of GCC banks into the league tables. And then the ancient silk road will, with the combined energy of both the Middle East and Asia, once again become a formidable trading empire. Some may think this fanciful given the current situation but it was already happening before the crisis, Ties were building and now continue. Singapore is still thinking 20 years ahead, while others think about the weekend.

And even Dubai (I am in the Gulf right now - watch this space), with a cooperative rest of the UAE, an awakening Saudi Arabia and other countries expanding, might yet spring some surprises.