China has now become the biggest and fastest-growing online payment market in the world. In the past decades, with the development of communication technology, the e-commerce with the online payment methods present in the 21st century. Mainly, there are two types of payment methods: through the first one, customers use their credit card or online bank to transfer money, which is essentially linked to banking services; different from the first method, independent third-party online payment platforms provide additional cashless payment options. In such arrangements, customers open dedicated accounts in their online payment providers’ systems, which they can generally top up by means of credit transfers or card payments, and use subsequently for their transactions in the providers’ self-contained proprietary systems, which are independent of banking infrastructures. In most developed countries, because of the early development of credit system, the first payment method is widely used. Despite the steady growth in the number of people using mobile payment solutions in Western states, even the most developed payments systems have so far failed to convince a wide range of consumers to use the latest technologies. By contrast, in China, a significant group of consumers has skipped over arguably traditional payment methods such as credit transfers or card payments and switched from cash usage directly to mobile third party payment solutions. This has also caused the role of banks to become less central, and that of other payment service providers more prominent, which may also significantly influence the situation of the banking sector going forward. In the online payment market, China’s two most prominent service providers are Alipay and Wechat Wallet. Alipay was established in December 2004, which is one of China’s mainstream third-party payment platforms. Initially, AliPay primarily supported the execution of e-commerce solutions on Alibaba and Taobao platforms by acting as a third party between merchants and buyers, providing an escrow service to remove the obstacles resulting from the lack of trust between the parties. According to the data which is published by Alibaba, the transaction value of Alipay in 2016 is about 5.6 trillion. More than 4.5 hundreds of millions of people consume products through Alipay. Transactions made by mobile App increases from 65% to 71%. Unlike Alipay, the rise of WeChat is originally intended to meets people’s needs of interaction and communication in an increasingly fragmented society and constitutes an indispensable part of people’s daily lives. In 2014, Tencent Company has been successfully leveraging users to Wechat Wallet. In 2016, the transaction value of Wechat Wallet reaches 3.6 trillion. Having those Apps, you can shop in supermarkets, take metros, call a taxi, call for food delivery and so on. From 2011, both companies opening the ‘pubic service’ sector, where you can pay for utility and penalty. Nowadays, in most big Chinese cities, the only thing you need to bring with yourself when you going out is your mobile phone with the App of Wechat or Alipay. These two payment methods are becoming a necessity of Chinese people’s daily life. Given the popularity of the use of online mobile phone payment, it is not difficult to imagine how big the amount of money these two payment platforms can generate and if the power can be properly used in financial and banking sector, how big the influence will be. Unfortunately, as online purchases essentially concerned low-value transactions and involved a relatively high level of risk, commercial banks avoided this segment. By the time the banking sectors was finally recognized its importance, commercial banks had lost the vast majority of the market. Although payment services account for only a relatively small part of their revenues, banks may not only lose customers but also key data, such as those suitable for scoring based on actual customer behavior. Furthermore, bank liquidity may dry up to a large extent in the long run. Although online payment has been operating in China for more than 10 years, most people regard the June 2013 launch of Yu’E Bao, an online sales platform for money market funds established by Alibaba’s Ant Financial Services, as the point from which the recent explosive development of Internet finance in China began. From 2013, internet technologies and internet ways of thinking profoundly changed the pattern of traditional financial business. Internet companies raced to get involved in the financial sector, financial innovation protagonists are no longer limited to banks, insurance companies, securities companies and fund companies. The convenience and high-return products offered by internet finance brought forward an unprecedented challenge to the banking industry. And it is really hard for the bank to fight against the online third party because of their stereotype of service and business. So far, the online third-party platforms just make up almost 90 % of the market, and the expected market share is increasing each year. Let’s still take Yu’E Bao as an example. Yu’E Bao is the largest MMF in China and one of the largest in the world with around US$120 billion in total assets at end September 2016. It has more than 250 million retail investors; more investors than China’s equity markets. Investors include individuals and corporations, most of which are reportedly looking for investments of less than three months. Investors buy units in Yu’E Bao by transferring funds from a linked deposit account to their Alipay account through the Alipay app; investors can draw on multiple bank cards or receive payments from other individuals’ Alipay accounts to purchase units in Yu’E Bao. But, banks limit the amount their customers can transfer to Yu’E Bao per day per card and can vary this amount. Yu’E Bao operates 24 hours a day and allows online shopping purchases from MMF dividends, offering clients an efficient cash management facility. Little information on the underlying investments is available to investors. And the fund’s broad asset allocation is available on the website and is updated on a quarterly basis. Investors can withdraw funds from Yu’E Bao at any time and there are no limits on the amount that can be withdrawn; however, since October 2016 Yu’E Bao has imposed transfer fees on users transferring more than CNY20 000 to a third party. There are also potential delays for larger withdrawals: for example, there is a two-hour delay for withdrawals of up to CNY50 000 and up to a 48-hour delay for larger withdrawals. According to the Peking University Internet Finance Development Index (IFDI), since January 2014, Internet financial activities have been growing at around 100 percent a year. Taking the peer-to-peer platforms as an example, the total number of platforms increased from 200 in 2012 to 4,029 in April 2016. How could the banking industry face the challenges in the Internet finance era, and how to make good use of these opportunities to transform and develop the banks has become an important issue. So what is the reaction of commercial banks when they had lost the vast majority of the online payment market? They tried to block the growth of third party platforms using their monopoly power. They united as one to resist permeating of Alipay and Wechat payment. At the same time, they tried to draw more investors back by launching a similar new product. The growth prospect of Alipay and Wechat wallet indeed slowed down. Another reason causing the decreased growth rate is the defect of the online payment platform itself. The number of problem P2P platforms also skyrocketed, from 16 in 2012 to 1,598 in 2016. In other words, 40 percent of the P2P platforms ever established turned out to be problem platforms. It is therefore not surprising to observe that public sentiment toward Internet finance has moved from a fever pitch to fear in the past three years. The online platform company also realized that it is never ever possible to beat the banking sector. To search for continuous innovation and development, AliPay teamed up with one of China’s four largest banks CCB to set up an innovative payment system in March 2017. This is an ice-breaking action of both markets. As mentioned above, enjoying its previous monopoly, the CCB aided by the state was relatively late to realize the degree of threat third-party providers posed to the banking sector, and by the time it launched its new products such as real-time payments or card transfers, it had suffered a major market loss in retail payments. Meanwhile, Alipay suffered from low growth rate. A corporation between these two parties seems to lead to a win-win situation. It releases a signal that commercial banking sectors are now willing to compromise with third-party payment companies. Three months later, ICBC announced its corporation with Jin Dong, which is another online platform. A few days later, ABC declared its alliance with Baidu. From now on, an era has started and we are looking forwards how far it can go.

«Hurray! It works!» lit up my phone screen as I received a message from my friend. She was referring to the no-visa regime for Ukraine. «They asked for nothing but my passport at the border! And I didn’t have a single visa in there». The amazement of being able to travel to 30 Schengen zone countries for the purpose of tourism and business without a visa, has spread across the whole of Ukraine since the signing of the Association Agreement between the EU and Ukraine in June 2014. Ukrainians waited for long three years, and just when most of us were about to give up their hopes on promises from our president – Petr Poroshenko – the European Union approved a visa-free travel on 11th May 2017. Ukraine is gradually starting to bloom and stand on its feet and the Association with Europe along with the allowance for visa-free entrance is just another proof of that. Whilst some people might see the Association with the EU as window dressing against Russia, in fact, Ukraine declared European integration as their strategic objective way before the conflict with Russia actually started, back in 2011. What is the actual current situation in Ukraine? The setting in eastern Ukraine still remains intense despite Minsk Agreements that called for cease-fire by all sides, and, yes, our economy has been heavily affected by this armed conflict. Nevertheless, despite recent economic downturns, the Ukrainian economy experienced a 2.3% real GDP growth. Ukraine has been noticed on the world map. European businesses have greater interest in Ukraine and it has been recognized as a closer territory and as a cheaper one as well. We are still a young and developing country that is trying to find its place in the global arena. The country is changing, and I can see that this change is for the better. It was claimed to be the first outsourcing market in Eastern Europe in 2016 by the International Association of Outsourcing Professionals. Moreover, it is home to the largest number of IT professionals in Europe. Ukrainian software engineers are skilled and knowledgeable and this is what attracts an increasing number of investors, in particular from Western Europe. The country offers more competitive outsourcing rates along with a much larger tech talent pool. The Ukrainian market provides an opportunity for growth for European investors who can experience a higher risk premium due to possible political and economic risks. Visa liberalization, specifically, sent a strong signal of trust towards Ukraine. Living between two countries – the Netherlands and Ukraine – I get to see the overall feeling of ongoing activities from both sides. Just the results of the Referendum in the Netherlands in 2016, under which Dutch voters rejected closer ties with Ukraine, and the actual vote of Dutch representatives in the European Commission in 2017, clearly draws a line between the moods of the population and the government. Europeans are doubting the adequacy of adopting a closer relationship with Ukraine, especially in terms of the increasing number of Ukrainian immigrants coming to the EU. The common belief among most of the EU citizens is that Europe is not receiving anything in return for the partnership with Ukraine. However, even though positive aspects for Europe might seem less significant on a bigger picture compared to those for Ukraine, I believe that soon Europe will experience benefits both in the short and long run. But, let me first touch upon the benefits and possible threats for Ukraine. The gains for Ukraine are obvious. First of all, a visa-free regime provides closer economic integration with one of the largest markets in the world. This includes economic benefits such as the removal of tariffs, leading to reduced costs and increased trade activity. Further, it opens up an opportunity for free trade which should induce greater competition with the potential for improving the efficiency of Ukrainian industries. All of the above leads to one of the main benefits of the agreement between Europe and Ukraine – an improved business environment. Secondly, collaboration with Europe will most certainly contribute to the corruption fighting programs adopted by the current Ukrainian government. In turn, this will attract investors from Western Europe, the US and China, providing them with a greater level of confidence. Lastly, a visa free regime provides Ukrainians with an opportunity to plan for the future. The visa application process was rather dragged out and irritating. A collection of documents for the embassy, long waiting in queues and over 15 working days until the final decision is made on your visa status required a lot of nerves and patience. Now, not only can people easily plan for their vacations, but entrepreneurs also get a chance to plan their business trips and attend international trade fairs, which will expand their knowledge and networking for further business development. Why is Ukraine important for Europe? Well, primarily, Ukraine is part of Europe. Without reaching out to Ukraine, Europe will not fully understand its own history. Europe needs Ukraine in order to reconcile with its own past, but also understand its own destiny and values better. Speaking in economic terms, the increased amount of tourists from Ukraine is likely to increase the GDP of European countries in the short run. Furthermore, the trust given to Ukraine by the visa-free regime will increase investors’ confidence and will enlarge the business area and markets opportunities for European corporations. But, most importantly, Europe will have open access to a pool of young and talented professionals, especially in the field of engineering, IT and manufacturing. Ukraine’s potential gives it the possibility to be an important contributor to international efforts in fighting against current problems in the world. After all, it is rather early to make conclusions regarding the outcomes of collaboration between the EU and Ukraine since there is still a long way to go. But I can reassure you that with every new visit back to my homeland, I see change in people. The mind-set and goals of the young population are getting closer to those in Western Europe. People of my age are trying to find various opportunities for self-development in order to make a change in the country. They are quickly adopting to a dynamically changing environment and are not afraid to speak up about matters that dissatisfy them. As Nelson Mandela said: “Sometimes it falls upon a generation to be great, you can be that generation”. I have a feeling that my generation is THE ONE.

How Close Can You Go #4 – Jelle Ritzerveld, Chief Risk Officer Delta Lloyd Asset Management “Find out who you are and do not be afraid to show and express yourself even though you are not perfect!” Long time no see, but we are back with a new article of the ‘How Close Can You Go’ series. This time I had the chance to have a chat with the highly talented Jelle Ritzerveld, currently Chief Risk Officer of Delta Lloyd Asset Management. As of August 1st, Mr. Ritzerveld will move to Aegon where he will be appointed Chief Risk Officer Holdings. This management talent is just thirty-six years old and already got himself in one of the C-level (Chief) positions. Mr. Ritzerveld comes across like a really nice guy, but most of all, as an extremely intelligent man. This should not be very surprising when realizing Mr. Ritzerveld graduated with a GPA 8.5/10 from both secondary school and university, and holds a PhD degree in one of the most challenging academic fields: astrophysics. Delta Lloyd Asset Management is an asset management firm which offers specialized products within different asset classes, such as fixed income, equity and real estate as well as balanced solutions. They also offer discretionary mandates for institutional customers and a range of investment funds for institutional and retail customers. They are an asset manager that manages the assets of Delta Lloyd’s various business lines and specializes in investments, both for third parties Delta Lloyd’s and for insurance business. The services provided to third parties focus on asset management for institutional clients, and management of Delta Lloyd’s multiple investment funds. They have over EUR 56 billion assets under management. Delta Lloyd Asset Management’s board consists of three board members, including Mr. Ritzerveld. His responsibilities include financial risk, operational risk, compliance and legal. Mr. Ritzerveld started studying physics and astrophysics at Leiden University when he was seventeen years old. He found this very interesting and in his opinion astrophysics tackles the biggest problems that exists in the world – the universe itself. Besides that, astrophysics is full of mathematics, physics and a lot of computer science which are major elements in the corporate world and could be very useful when you decide not to continue in astrophysics after graduating. Furthermore, he has always been a beta-talent and enjoyed this field to the fullest. During his time at university, he worked at multiple IT businesses (consultants) during the pre-dot-com-bubble. He wanted to learn the corporate world and how to work in a team. He really enjoyed working in the corporate world, which therefore motivated him to join the corporate world after graduating. However, this idea changed when Mr. Ritzerveld successfully did the research for his thesis. In this way, he learned new things because he discovered them by himself and that is what he enjoys the most; learning new things. His thesis was so successful that he got an offer to do a PhD in astrophysics at Leiden University. Because Mr. Ritzerveld always had, and still has, the desire to learn new things, he accepted the offer and completed his successful research after four years. Major lessons were defending his opinion and research in front of very critical audiences. According to Mr. Ritzerveld, in the academic world, where each and every detail is heavily scrutinized, you learn that the path of most resistance leads to the best results, and this is an insight he still benefits from in the corporate world. After receiving his PhD degree, Mr. Ritzerveld visited various sectors to determine where to start his corporate career. Among them were Shell, McKinsey and some financial services businesses. He decided to work within the financial services business because this was the field where, in his opinion, he could learn the most. After starting his corporate career as a quantitative risk analyst at ABN AMRO, he moved to LeasePlan, the biggest leasing firm in the world (and also a bank and insurer), where he was given the chance to set up their financial risk team, and was eventually given the responsibility over the total risk department of LeasePlan in the Netherlands. After five years and rolling out other risk teams in multiple countries, he was given the chance to become director risk management at Kempen Capital Management for four years after which he moved to Delta Lloyd Asset Management where he is currently Chief Risk Officer. As of the 1st of August, he will move to Aegon where he will be appointed Chief Risk Officer Holdings. What does your week look like? That is very hard to say because it differs all the time. Most of the times I am working like fifty hours a week at the office, but most evenings, I am reading some articles or minutes so it is probably more, but not extremely so. At most C-levels, you have to stay reachable all the time. It is important that you can deal with this constant sense of responsibility, but if you can work efficiently, you certainly have enough time for your family and friends, even at a C-level position. What advantage do you get from a PhD in the financial world? You obtain a spectacular skillset to analyze complex problems and, as I said before, you learn how to defend your opinions and research in front of a tough crowd. Also, you travel a lot between universities, which shapes you to deal with various cultures in an international context. Astrophysics is one of the most difficult academic fields. How did you stay motivated in this period? I really liked the beta aspect of astrophysics and I think astrophysics tackles the biggest problem in the world. That is what makes it so interesting. Thereby, my job in IT was also one of the elements in my study which kept me motivated. The combination between the beta side of astrophysics and the corporate world made it exciting. Why are you in this position and not anyone else who is working at Delta Lloyd Asset Management? Firstly, you need the right kind of experience and expertise in the field you are working in. Secondly, you should be able to explain complex problems to a four-year-old child. Communication skills are so important. You have to understand your employees, clients and other stakeholders, and they have to understand you. This is a crucial one. Thirdly, be curious and challenge yourself in the choices you make. Do not make yourself comfortable in life, always look for a challenge. I think I have mastered those skills quite well. I have heard that the amount of freshmen almost doubled for the coming year in studies like economics or finance. How can students, in your opinion, ensure themselves to stand out of the crowd in such a large number? Of course, internships, board years, high grades, and so on, are crucial in standing out of the crowd, otherwise you will not even pass the first round of your job application. However, in the end, it is all about you as a person. How have you developed yourself as a person in the past couple of years? You should be a trustable partner, who knows (or wants to know) what he or she is talking about. How do you communicate? Do you have self-confidence? All of this is also noticeable in a curriculum vitae and motivation letter. Also, personally, I like to have someone who wants to constantly challenge himself. What is the most important tip for current students? Find out who you are and what makes your clock tick. If you sort this out, you automatically have an intrinsic motivation to perform at a high pace in the environment of your choice. What are the biggest risks in the current Dutch financial market? The Dutch economy is strongly linked to the global economy, so we have to deal with the global macroeconomic risks. Today, we have to deal with very low interest rates and volatility. These are signs that there is something going on, but nobody knows how it will actually play out. Also, geo-politically, we, as a country, but also the EU as a whole, are forced to rethink what our position is in this world. Unfortunately, I do not hear any statements from politics about this topic that are clear and firm enough to pave the way for the coming decades. Finally, we have to rediscover what our expertise is as a country. Do you really want to become a knowledge-based economy? Then you have to accelerate investing in education. Do not get me wrong, because our education system is not bad, but if you want to position yourself as a top tier knowledge-based economy, you really have to be top notch. What will financial markets look like in ten years? That is really hard to say. I think there will always be platforms where supply meets demand. Technology will probably facilitate this in an improved way. I also think there will still be demand for human knowledge in this industry. Maybe there will be no need for it anymore in fifty years due to artificial intelligence, but I am not sure. In ten years, the focus will be switched to aspects where we really can add value. To summarize, financial markets will probably be more accessible and balanced in ten years. What is your position with respect to algorithm trading as an asset manager? I think you have to see asset management as a product, and when there are opportunities (like algorithm trading), which are legal, to compete with our services, this is a chance the market gives you. It is what it is. You are in the “Goudhaantjes top 100”, a ranking for management talent below forty-five years old. What do you think about this? Well, I think it is mainly a marketing-driven initiative. I can imagine there is much more (better) management talent around which the people involved perhaps did not spot on LinkedIn. So yeah, I therefore do not feel very honored or impressed. Last question, what is your most important lesson of life? All successful people work hard and are very smart. This is just the basis to qualify yourself for being successful. In the end, it is all about who you are as a person. You have to inspire your people and have to take the leadership role in an authentic way. If you find yourself in an early stage, this will help you a lot. Reflect on yourself every day! What can you improve? What was going well? And last but not least, be successful in the things you do and be a reliable partner to work with. Find out who you are and do not be afraid to show and express yourself even though you are not perfect!

We – humans – are at the point of our history where the pace of innovation and scientific discovery is truly defining our lives. The amount of improvements in our lives is growing exponentially and, although we have not colonised Mars yet, the reality that we see in science fiction films seems to be within our reach. Still, progress can be a very expensive and difficult process that can take years, if not decades, to bear fruits. This is particularly true for areas of science in which research is prohibitively expensive, potentially unethical or otherwise simply unfeasible and imprecise. Among them are economics and business. Conducting economic experiments would a require a considerable amount of people to participate in a controlled environment for a long period of time and, if they are to be fully representative of real life, monetary rewards would have to also be similar to real life. In majority of the cases this would probably require isolating the test subjects from the society for a while, lying to them about the purpose of the study to ensure their choices are not affected by such knowledge and would mean that the experiments would be as expensive as the actual policies. Not ethical, not practical and not feasible. As a result, economists are forced to rely on historical data or very simple experiments that do not always provide reliable answers to questions we ask. One day we might be able to find those answers with the rapid progress of computer technology that will allow us to use all the available data to model the whole human economy. However, that day is still far ahead and, for the time being, we might have to look for different solutions to the problem at hand. One of them may be massively multiplayer online role-playing games (MMORPGs). MMORPGs are online games in which thousands or even millions of players create a character – their virtual avatar – and interact with each other and the game environment. There are many different games and equally many goals set for players (other than having fun, of course), but the general aim is to develop your character, improve its strength and abilities, obtain better in-game items and unlock new features. These in turn allow for further development of the character. What could be interesting from the point of view economics is that most of MMORPGs have some sort of a monetary system: players obtain the in-game currency through different activities and spend it on improving their avatar. In a very simple form this is not very useful for any economic research, but in recent years the games’ economic systems have become more and more complex, giving players a chance to use currency not only to interact with the in-game environment, but also to interact with each other. For example, if you happen to obtain an item you don’t need, you can sell it to another player who does and with the currency you receive you can now buy the items you want from a player who has them. Just like in real-life economy. Nowadays, players can trade directly with each other or with the use of auction houses, where they can list their offers or orders. You set the desired amount and price of a good you want to buy or sell and wait until another player accepts your terms. If the price you want to pay or receive is too high or too low, you will either not be able to find someone willing to accept your listing or you will lose on the transaction. With this growing complexity and new options for interaction, the in-game economies have started to resemble the real-life one. And this is where the fun begins because real-life phenomena begun appearing in the virtual environment. For example, the classical supply-and-demand model explains how the in-game equilibrium prices are reached – if an item is rare (low supply), the price demanded for it will be high. On the other hand, if an item is not necessary for many players (low demand), price demanded will be low. With high volume of transactions, equilibrium is quickly reached. Furthermore, if there is a supply or demand shock (e.g. a new expansion pack renders a previously rare item easily obtainable), prices immediately react. On top of that, if an item is very difficult to obtain and, as a result, very expensive, the sellers have very high power and can dictate price, resulting in the economy diverting from equilibrium. Another phenomenon that also appears is collusion – in the absence of regulations, players can cooperate to buy all the items available on the market – drastically reducing the supply – and then sell those in much smaller numbers with a much higher price tag. Depending on the game, many such phenomena and behaviours can be noticed. Supply and demand, collusion, transaction costs and many more exhibit behaviour very similar or exactly the same as the models we learned predict. Many players use these to obtain profit in in-game markets by carefully studying patterns and trying to predict the future. For example, if you want, in case of the game Guild Wars 2 you can find websites that show all the historical data on prices in the in-game auction house (a great way to practice your finance skills if you want to work on Wall Street in the future). Careful study of all of the above could help us with a better understanding of the real-life economy, evaluation of the existing models and creation of new ones. Of course, there are many issues that arise with using online games for the study of economics. Although in-game economies have become similar to the actual one, there might still be crucial differences that could distort research results. For example, people do behave differently when interacting with an in-game currency that has little to no value in real life. Furthermore, games still are not a fully controlled environment – as a player, I would be angry if the game designers suddenly changed game mechanics just for the purpose of research. Still, a closer study of online games could be very beneficial. Also, I think it would be much more interesting – and fun – than many other approaches. It is also worth mentioning that studying human interaction in the virtual environment can be very useful in other areas of science as well. A great example is the so-called “Corrupted Blood incident” that took place in 2005 in an MMORPG game World of Warcraft. The developers introduced a game mechanic that was supposed to make an in-game encounter with a monster more challenging by applying a condition that would spread between characters and eventually kill them. The condition was supposed to disappear after the encounter but, due to a bug, it stayed with players afterwards. The result was a full-blown in-game pandemic that ravaged the servers for a week. The players’ behaviour and the pace at which the “disease” spread have provided very valuable insights for epidemiologists. Studying online games is not a golden solution to the problems of many sciences. However, this unorthodox approach could certainly add to our understanding of the world around us and of ourselves. Lower costs, conducting experiments that would be unethical in real-life but are not so in the virtual world or the ease at which you can access data are just a few of the possible benefits. If chess could be analysed for centuries to successfully study strategy and human behaviour, then why can’t modern games do the same?

Scrolling down my Facebook feed, along with photos of other people’s vacations and posts by my mom, I often stumble upon videos such as “Italians Try American Snacks” or “Americans Try German Food For The First Time.” We all know these videos: usually produced by media companies like Buzzfeed, they attract millions of viewers using a simple yet classic formula: have a certain kind of people eat a “different” kind of food associated with other people, and watch their reactions of shock. People trying Hungarian, Armenian, Korean or Indian food; all of these videos are quite the same, yet they seem to be highly popular on social media platforms nevertheless. Watching a few of those, it becomes evident that it is one’s own identity that determines the reaction to a “different” kind of food. Or in other words, the emphasis is on difference, rather than on similarity. An Italian might severely criticize an American version of what he calls pizza, because Italian food is an important component of his own cultural identity. Most of us take pride in our national food, and we measure all other foods accordingly. But these, sometimes hidden, cultural boundaries that stem from our own national or cultural pride can have some real consequences for the world economy. It is thought today that national identity is a continuous process that is embedded in culture, history, language and memory. In this process, our national foods play an important role: food is seen as a medium for expressing feelings of belonging and distinction from others. The term gastronationalism was developed by sociologist Michaela DeSoucey in order to describe a counter-sentiment to the so-called homogenizing forces of globalization. In a world of merging and integrating identities, the need of some to preserve their identities through common symbols has seemed to intensify. Gastronationalism describes how sentiments of national identity are embodied in the production, processing, distribution and consumption of food. If you need an example, check your local supermarket: try to count the number of products that show a national flag on the package, or some other symbol of nationalized production. Not only different types of food become national symbols, but their production as well. In this hyper-politicized discourse, a slice of cheese or an alcoholic beverage can represent the protection of national identity through the actual protection of food industries. This is a classic tale of national symbols translating into economic facts. Take the EU’s program for labelling foods according to their national origins: free trade is one of the most basic conventions of the European Union, but it has long been argued that some cultural goods deserve protection for their national or cultural significance. This is often claimed when it comes to art or music – global competitiveness might not do well with such cultural industries, while their preservation is considered important. As for food production and marketing, the EU poses strict regulations and standards that apply to all producers alike, aimed at inducing competition and constraining protectionism. These regulations have stirred discontent in some European countries and resentment towards these one-size-fits-all standards and the resulting intensified price competition. It was for these reasons that the EU issued a program in 1992 to register certain foods as cultural exceptions, outside the Common Agricultural and Competition Policies. Small-scale and local producers could now have their products labeled to boost domestic sales and to protect from imitation and misuse of product names. A famous example is the usage of the term “Champagne” to describe sparkling wine; EU regulations prevent producers outside the Champagne region from naming their own sparkling wines in the French fashion. Labeling was authorized also as a measure of food safety as it indicates the origin of production. Thus began a new discussion, extending far beyond the 1992 scheme and revolving around what kinds of food deserve protection, and what makes a certain food a cultural exception. Adherents of product labeling claim that such practices provide transparency and allow consumers to support local producers. Some of you may remember the “Horsegate” scandal of 2013, when multiple DNA tests in several European countries found horse meat in products labeled as beef. This was considered by consumers to be a major breach in trust, soon demanding the labeling and tracing of the “origins” of products, even those that are not included under the definition of cultural exceptions. Opponents of labeling are worried that this is a camouflaged form of nationalism creeping through the continent, disguised as economic policies. For these opponents, it seems that recently there are more reasons to be worried. In July 2016, France confirmed that it will trial mandatory labeling for some meat and dairy products. The trial commenced in January 2017 and will reportedly continue until the end of 2018; results of the trial could be then generalized to other member states. Food labeling is an extremely sensitive subject in France, where some groups of farmers are linked to far-right parties and engage in activities such as destroying cargoes of unlabeled French goods. French actions were later followed by similar actions in Greece and Finland, who announced the labeling of locally-produced dairy products. Earlier in 2016, Romania tried to pass a law requiring supermarkets to sell a minimum 51% of local food, while Italian producers have declared a “wheat war” on imports from other European countries. But what is so wrong about supporting your local producers? Indeed, we should all have the right to spend an extra euro in order to support whomever we like. However, we must also remember that buying from local producers does not guarantee that they receive higher prices for their produce. Other efficient alternatives for providing information for consumers do exist, and labeling in itself does not guarantee food quality. It is, however, a powerful tool for marking goods as national and consequently applying some sort of economic protection on selected industries. Whether this is a welcome outcome for EU countries is debatable. European economists opposing gastronationalism take it very seriously – for many, this could signify the beginning of the end of the single market. They view this phenomenon as a part of a larger revival in national sentiments that has already shaken some of the political and economic institutions in Europe. Calls for buying local produce were heard both in the UK after Brexit and in the US after the election of Donald Trump. On the other hand, in a highly globalized world, ownership of cultural attributes can suddenly seem more important. In a sense, gastronationalism is a symbol of an ongoing debate across the European continent and the rest of the world, between integration and protection. Perhaps we can end on more positive, tasty note. If gastronationalism is now a part of our lives, why not embrace some gastrodiplomacy? The idea of food as an instrument of peacemaking is rooted in the history of diplomacy, from ancient Greece to the courts of the French kings. Government culinary programs are aimed at spreading local foods both nationally and internationally as a form of diplomatic cooperation, not economic separation (Thailand is an example of a country successfully spreading its national cuisine worldwide). For its many attractive attributes, food can be a powerful tool for understanding and mutual recognition of shared origins. Think of joint cooking competitions, festivals and communal meals – wouldn’t it be great to bring world peace with a big bowl of hummus?

As a committee, we’ve had some rather passionate conversations on how individuals, especially politicians, make decisions based on their available information. In our dire effort to understand the mechanism of strategic decision-making, many of such ideas have been articulated into articles that represent some of the most interesting reads of the past academic year of our magazine. The contract theory, Trump’s strategic reaction, and even the game of chess were added to our list of game-theory related articles. However, this article would attempt to show a distinct perspective of game theory: the focus will be rather on its chronological development. So, let us travel back in time to see how game theory has established itself as being one of the most discussed (and somewhat controversial) topics of modern-day sciences. Before we kick off our journey, I put forward a slight cautionary note to the part of our audience who is not fully aware of the comprehensive interpretation of economic concepts. Game theory, as many would understand correctly, is the strategic decision-making process of a “game”, a systematic description of a strategic situation. However, to be qualified as a game, that situation needs to have multi-party interaction, and their respective decisions directly affect the consequences of each individual in the game. This is very different to our casual (independent) decision-making process that we make every day, which rather seems to have a negligible influence on others. Historical recordings before the Industrial Revolution practically do not serve as a reliable indicator to determine how long game theory has been around, nor do they reveal any explicit evidence whether humans had recognized and formally termed it in a way that is similar to “game theory” now. Fragments of game-theoretic analytical ways of thinking can be found in readings such as the Bible, scholar works during Greek or Roman history, in addition to myriads of its applications during war times throughout history. But one might suggest that the earliest findings on game theory, at least applied to decision-making in maximizing one self’s returns, traces back to the Babylonian civilization. The problem is as follows: Suppose that there is a wealthy merchant who earns a fortune from his expertise in trading. Suddenly, he passes away and leaves behind his three wives, who are the direct inheritors of his assets. Assuming that every asset is worth 100 during this period, how shall these assets be divided to the creditors? The scholars at the time provided a rather strange and contentious answer to the problem: for example, if the accumulated value of his assets is 100 (meaning 1 unit), then the asset is borne equally by the wives (each has to pay 33.3); if their value is determined at 200, the first wife would only be liable for one-fourth of the asset, and the rest is divided equally to the other two (meaning that the first wife is liable for 50, the latter two have an equal obligations of 75); if the value is at 300, the division is even more skewed: the first wife is still liable for 50, but the second wife now owns  for 100, so that leaves exactly half of the asset attributing to the third wife (150). Why is this the case and what is the rationale behind it? It might sound a bit confusing at first, but the answer to this problem is quite simple. If we leave out other factors such as cultural attitudes or any social custom at the time, we could arrive at a very logical answer. Here, we will look at the case of three assets. In this case, we further assume that the man marries the first wife after he purchases his first asset, the second asset comes after his second wife, and so on. So, the first wife would claim the first 100 of the asset, the second wife would contest her rights to two assets at 200, and the final wife claimed all of the available assets at 300. Here’s how the mystery unfolds. We divide the situation into three two-player pairs, so (100,300), (100,200) and (200,300) respectively. Depending on the claims that are made by the wives, the officials would decide on how much of the asset each wife would be designated to have. Firstly, they took the average of the two values of the claims. Take the pair (100,300) for example, so the average of the two values is 200. Since the first 100 are contested by both parties, they would be equally shared, so each would receive 50. For the remaining 100, only the third wife has the claim on the asset, so all 100 would be awarded to the third wife. Ultimately, the first wife would get 50 and the third wife would get 150. In a similar manner, you could do it for the remaining two pairs and you would be able to find that the amount that the second wife could claim is 100. Surprisingly, not only the results are actually fair (each wife would be granted half of their claims), but they are also consistent between pairs! There are also various extensions to the game, such that in each case, there is always a desirable outcome (albeit much more complicated to mention here). This solution to this problem is uncovered by Robert Aumann (1982) as he formally named the method “equal division of contested sum”. The game with a two-player interaction was not conceptualized until the 18th century, when Francis Waldegrave provided a framework, which is now referred to as “minimax strategy”,  to decompose the problem of a card game called le Her. The problem is described as a situation where two separate players are given a card by the dealer from a 52-card deck; each player is allowed to exchange one card with the dealer. The winner of the game will be determined by the level of the card, and whoever keeps the card with the higher level (King is determined as high and Ace is deemed as low) is the ultimate winner of the game. With further discussions with other scholars at the time, Waldegrave concluded in his work the game has a mixed-strategy equilibrium (where players randomize their strategies by assigning a probability in each case). The strategic decision-making between humans is also deeply enclosed in one of the most popular economic belief at that time. Adam Smith, with his analogy of the “invisible hand”, strongly advocated that if people act in their self-interest so as to increase his own benefits as much as possible, then society would benefit as a whole. We can actually interpret his idea in game theory terms: maximizing individual payoffs would eventually lead to the socially optimal outcome for every player involved. Although so far this idea has not been true empirically, this ideology was successful in the way that it sparked debates among academics at the time. It was not until 1928 when von Neumann, who had numerous academic contributions in mathematics, physics, computer science, and of course, economics, published a highly technical paper on deciphering the minimax strategy game. However, he lost his interest in game theory for a while and rather chose to devote himself to mathematics. Fortunately, Morgenstern, an economic professor originally taught at the University of Vienna, and then was appointed to lecture for three years at the Princeton University, had an encounter with von Neumann and was able to renew his interest in game theory. Morgenstern and von Neumann later worked extensively for their new research, “Theory of Games and Economic Behavior” (1944), which attempted to form a compelling connection between these subjects. The publication focused on the most primitive aspect of economics: the analysis of interaction between buyers and sellers. The welcoming success of the work in the next decades could be seen as a revolutionary step towards making economics as a true matter of concern for academic disciplines, which is comparable to that of Newton’s Laws of Motion for physics. However, there was one major problem with their work. While taking into account that an individual would maximize their strategy regardless of what others do in a non-cooperative game, both authors did not give any indication to how cooperative behavior would alternate the outcome of a game. John Nash, who was also a graduate from Princeton, decided to publish his work on the bargaining position and asserted that there exists a possible scenario where every player participating in the game benefits not at the expense of others. At the same time, he also continued researching into non-cooperative games. He later developed the most famous concept of game theory, “Nash equilibrium”, the state in which a player chooses the best possible outcome given that others are committed to one certain action, and that goes for every possible action for the remaining players in a non-cooperative game. Soon after the game theory publications by John Nash, many academics (especially economic researchers and mathematicians) were deeply interested in developing advanced methods in understanding and interpreting economic behaviors. Alternative models of game theory such as the extensive game and games with repeated interaction were also developed during the period. For games with repeated interaction, the degree of patience of two players with respect to future periods of the game would potentially make the pursuit of self-interest of both players yielding optimal outcomes for the games. From these proposed models, related academic publications are put forward solutions to these games; some of which include the introduction of the concept of “subgame perfect equilibrium”, a refinement of the Nash equilibrium, and Bayesian games. It comes to no surprise that game theory has an important position in everyday’s lives. Every strategic decision being conducted on a managerial level is based on game-theoretic analytical reasoning. The cases of the public good problem, auctions, or Cournot duopoly are typical economic examples of game theory that are familiar to most of our readers. 18 out of the last 25 Economic Nobel Prize award-winning publications are related to the principles of game theory. Game theory has also escaped far beyond the world of business and economics. Psychology, biology, or even computer science are only a few examples of how game theory disseminates to other academic disciplines. That is just to infer that game theory is far from fully discovered. As we attempt to acquire a seamless understanding of the human nature, game theory might just be the answer to all problems.

As the British government is dealing with Brexit and the issues that come with it, the least thing it needs is uncertainty and instability. However, the results of the UK general election, which took place on the 8th of June, has left the current British government with a shock and has made the direction of Brexit more unpredictable. Earlier this April, Theresa May, the prime minister of the UK, decided to bring the next general election forward — that is, she called a snap election. It was originally scheduled for 2020, and May was hoping that the general election would increase her Commons majority before the start of the formal Brexit talks which will begin on the 19th of June this year. The reason that made May so confident regarding bringing forward the election is that she believed the high approval rate of the Conservative Party over the Labour Party would “strengthen her hand” in Brexit negotiations. May surely presumed that she could win the election, furthermore, it is not difficult to tell that the snap election is not just about Brexit —there are much more incentives involved. However, her gamble had failed catastrophically; the Conservative Party did not even retain its majority in the parliament. More specifically, a party is required to win at least 326 seats (absolute majority) in the House of Commons of the United Kingdom in order to form a majority parliament. In this election, the Conservatives remain the biggest party but won only 318 seats, followed by the Labour with 262 seats. Thus, the election resulted in a hung parliament, which means that there is no single political party that has got an absolute majority of seats in the parliament. How did the UK conservatives lose? It is worth investigating some primary factors that destroyed Theresa May’s plan to reinforce her power, as she was so certain regarding the public opinions on her and her party that she called a snap election. There are two most crucial factors that play important roles here — May’s pro hard Brexit stance as well as some controversial policies she promoted. If you are not familiar with the concepts of hard vs. soft Brexit: there is no explicit definition of them; both stand for the UK leaving the European Union, but a hard Brexit referred to leaving the EU without a deal in place, while a soft Brexit involves deals such as free movement of citizens and staying in the EU single market. First of all, Theresa May stated pretty clear that she pursues Brexit at any cost. However, for groups such as business people and the younger generation, any form of Brexit represents a loss of opportunities, and the sacrifices of Brexit for them are way larger than the benefits. The UK, specifically London, has been the hub for many multinational financial institutions as well as many international organisations’ portal for the EU markets, and Brexit almost certainly indicates a certain level of restrictions on free movement of goods, capital and people. On the other hand, the leader of the Labour party, Jeremy Corbyn, has successfully captured the insecurity and the needs of voters who are dissatisfied with the current status of the society as well as the Conservatives Party. The difference between them is pretty obvious by just looking at their campaign slogans — Theresa May’s repeating “strong and stable leadership” versus Jeremy Corbyn’s “For the many, not the few”. The Labour’s manifestos such as free university tuition fees, higher income tax as well as enhance the social welfare and health care systems are very tempting to voters. Furthermore, it supports a softer Brexit comparing to Theresa May’s, which is the main concern of many younger voters. As shown in the election results and polls, the surge of youth vote rate, the “youthquake”, was the major component for Labour’s success. The NME exit poll suggests that the turnout rate of voters under 35 surged to 56%, which is an increase of 12% comparing to the election is 2015; and almost two-third of them voted for the Labour. Other factors that might have resulted in Theresa May’s failure including she is been criticised for being ‘arrogant’ (e.g. she was absent from the general election debate) as well as being unsympathetic toward the minorities such as the disabled and the poor. The latter intensified even more drastically after the tragic Grenfell Tower fire occurred a week after the election, her responds and actions taken were blamed for being very cold-blooded. After the shocking election result, May now has two options — step down, or form a government withthe  DUP — the Democratic Unionist Party, a centre-right to right-wing unionist political party in Northern Ireland. Either way, the snap election certainly generates more uncertainty, which is ironic and contradicting to Theresa May’s original plan —‘strong and stable leadership’. What does it mean for Brexit? Despite the fact that there are other (above-mentioned) factors involved in the Conservatives’s lost, for the situation of Brexit, the election result can be interpreted as increased numbers of voters demanding for a softer Brexit. What’s more, the speculation over the UK might have a second EU referendum has raised after the election, although the request was turned down by both parties before. It is far from clear of how Brexit will actually rule out and what specific impacts are directly induced by this general election, therefore, I will illustrate a more general overall picture here. The formal Brexit negotiation talk starts on the 19th of June, 2017; and the UK is due to leave the EU by the end of March, 2019. As the UK is about to leave the EU, which means that it will be disqualified from the freedom that an EU member has if it left without successfully negotiating any terms. The four freedoms of the EU that all 28 full members of the single market share including the free movement of labour, capital, service and goods. Among them, the issues over immigration and customs union are the main concerns for the UK when negotiating the agreement. The ideal situation for the UK is that it can have control over immigration and the free movement of EU citizens, while still enjoy the benefits of a single market by negotiating ‘a good trade deal’. It is very unlikely to happen that the EU let the UK ‘cherry picking’ the deal it desires, or it will trigger more EU members to leave the Union. Theresa May has expressed her stance on both issues clearly: she is against staying at the single market as well as free movement of people, and that “no deal for Britain is better than a bad deal”. With the defeat of the Conservatives in the election, even if May managed to save herself from resigning, her power for demanding a harder Brexit is not as strong. With all the uncertainties involved, a temporary transitional agreement is demanded by some MPs to prevent a shock to the economy as the Brexit negotiation goes on. What does it mean for the financial markets? Hung parliament induced a great deal of uncertainty over numerous prime issues, both domestic and international ones. And as we all know, the financial markets are very sensitive toward political changes and swings. This election is not an exception, it has evoked several uproars in the economy. Firstly, a snap poll conducting by the UK Institute of Directors (IoD) shown that after the general election, business confidence has plummeted as political uncertainty heightened. Brexit could change the way the business trade, hire, operate as well as the regulations they followed. Since the British voted to leave the EU, one of the most significant issues is the possible migration kerb and the huge costs that come with it. According to an in-depth research regarding the possible impacts of Brexit on the UK’s small business revealed that most of those business leaders favoured softer or no Brexit. Secondly, credit rating agencies S&P and Moody’s have warned that a hung government implies a higher possibility of downgrading as political risks increased even more after the election. And the instability of the political situation hurts economic growth, and it seems like the turbulence is going to loom the market not only in the short terms. The UK economic surprise index from Citi, an indicator which demonstrates how the data is turning out versus expectations (with above zero means a positive surprise), is now negative and at its lowest since the EU referendum in 2016. On the other hand, for the equity market, the benchmark index FTSE 100 fluctuates hugely with the UK political situation. The FTSE 100 is buoyant as the Brexit talk begins on the 19th of June, nevertheless, there is still many obstacles ahead — as aforementioned, stability and minimised uncertainty is what the UK economy desperately needs.

The recent Fed rate hike and the expectation of further hikes and commencement of balance sheet unwinding has refocused African economic and financial minds on sovereign debt. Though, the consensus view suggests a debt crisis sequel is probably unlikely, a significant number of observers believes the path of sovereign debt on the continent is somewhat worrying. Debt to GDP ratios in most countries that saw debts written off as part of the Multilateral Debt Relief Initiative (MDRI), approved in 2005, are still lower than during the debt buildup which begun in the 1970s and nearly all these economies are now structurally stronger. It is widely accepted that with current external debt mainly privately held, if conditions deteriorate, the sequel is unlikely to see as much forgiveness and understanding as the original. With more countries issuing Eurobonds (foreign currency, usually dollar, denominated debt) of increasing value, (2017 already holds the record for African Eurobond issuances) the cases of Ghana and Mozambique are offered as cautionary tales by those who believe that the continent could drift into a debt crisis iceberg. In 2007, Ghana became the first African MDRI recipient to access international capital markets for a bond issue. It was heralded on the continent as a sign of necessary progress. This week the IMF stated that, “Ghana remains at a high risk of debt distress”. The country’s 2014 $1 billion IMF Extended Credit Facility (ECF) arrangement to help restore “debt sustainability and macroeconomic stability” is scheduled to end in April 2018 and is likely, according to various sources, to be extended until at least December 2018. At the end of 2016, debt to GDP was estimated to be more than 70% whilst the public wage bill accounted for more than 50% of the government budget. How did it come to this for West Africa’s second biggest economy and still one of the most developed countries on the continent? A wage bill that reached nearly 70% of the budget in 2012 and a currency that depreciated dramatically making it Africa’s worst performing currency in 2014 partly due to reduced revenues from cocoa, gold and oil exports. A power crisis also contributed to lower economic growth in 2014 and 2015, a story replicated across the continent; 2016 the lowest growth year in the last two decades. Since 2007, the country has issued multiple financing and refinancing Eurobonds. Though slowly recovering, the outlook is not as rosy as it once was and though debt is by no means the sole cause of subsequent economic problems, it shows how misplaced debt financed spending and uncontrollable global factors can lead to a cycle where more and more debt is needed. The case of Mozambique is somewhat starker. Somewhat paradoxically, the country’s currency, the metical, is the world’s ‘best’ this year, despite the fact that Mozambique is technically in default after missing multiple scheduled debt repayments. Africa’s first Eurobond default since Ivory Coast in 2011 has been caused by the government’s stated inability to make repayments on secret loans worth more than $1 billion and an $850 million ‘tuna bond’, arranged in 2013. The 2016 revelation of this previously undisclosed debt saw the IMF and other donors subsequently suspend aid, significantly detrimental to a recipient of IMF credit and a country where donors fund at least 25% of the state budget. Liquidity problems and inflation were unsurprisingly exacerbated by the funding withdrawal of funding. The story of the ‘tuna bond’ is particularly notable. Ematum, the state owned fishing company, borrowed money from Credit Suisse and VTB, a Russian bank, ostensibly to ‘fishing infrastructure’ for a new tuna fishing fleet. The two banks along with France’s BNP Paribas securitized the loan which crucially was backed by the government. A Reuters reports cites Ematum records showing that in 2015 there was a more than $17 million gap between the value of projected and actual tuna catch. The project income needed to service the debt was thus nowhere to be found. Worse still, it came to light that a significant amount of the borrowed money was used on naval hardware. A debt to GDP ratio that has ballooned from around 40% in 2013 to 120% now, a fact described as frightening by the central bank governor, and the delay of talks on a much needed IMF program are casting a cloud over what was one of Africa’s fastest growing economies. However, as the currency situation hints at, there is a silver lining that both officials and investors believe can revive the economy. An $8 billion deal to develop the Coral South gas field off the Mozambican coast signed on June 1st and led by Italian energy company Eni can “bring the economy back to the performance of the last decade” according to Mozambican president Filipe Nyusi.  Production is expected to start in 2022 and the project, described as the world’s first ultra-deep-water floating LNG project, is expected to generate more than $1 billion per year over 25 years. With an independent forensic audit into the debt by Kroll Associates completed and received by the Attorney-General but yet to be made public and the internal and external political dimensions surrounding ramifications of any findings, the country’s short term economic future is far from certain. Some fear that these two case studies may be replicated in differing orders of magnitude and form across the continent. Currency depreciation causing inflation, questionable public expenditure and increasing external debt stocks are the templates on which future crises may be laid. Optimists however point to the fact that local debt stock still far outstrips external debt stock while only 10 of 39 African countries in the IMF’s latest Debt Sustainability Analysis are described as in debt distress or at high risk of debt distress, little change from the nine countries in the November 2015 figure. With 2017 already a record year for the value of African Eurobond issuances, partially due to African bond yields still on average 1% greater than the emerging market average, both parties agree on the importance of finding ways of mitigating potential external debt problems. Particularly as most solutions may lead to continental economic development independent of the probability of future debt problems.  Below is a brief summary of some the potential solutions. Improved tax administration (nationally and internationally) Tax revenues in many African countries are at about a fifth of GDP, significantly below the OECD average of a third of GDP. Increased tax revenues will allow governments to diversify their revenue sources, reduce dependency on export revenues and increase the funding pool for public services. Tax arrangements by foreign based companies, particularly resource extractive companies, see millions of dollars to flow out of Africa countries either untaxed or minimally taxed. That this happens from Addis Ababa to Auckland illustrate the importance of a global solution to tax avoidance. Strengthening debt legal frameworks (internationally and nationally) The failed establishment of an IMF led Sovereign Debt Restructuring Mechanism in the wake of Argentina’s 2002 debt crisis was an aborted attempt to bring sovereign debt resolution into an organized internationally administrated framework. Revisiting this proposal, by tackling its strengths and weaknesses, may be useful especially in an era where most emerging market debt is now privately held. On a national level, national debt management on the continent needs to be significantly improved according to most experts, especially with more African countries issuing more debt. Debt management offices (DMOs) or their equivalents are needed to ensure adequate attention is given to debt funded project bankability and mutli-situational debt repayment plans. The example of Nigeria’s DMO which has contributed to a relatively healthy domestic debt market, through increasing market efficiency, access and size and international recognition of its local bonds in the JP Morgan and Barclays emerging market indices are an example that most countries can learn from. Enshrining debt issuances in law may also help to minimize odious debt situations. Technology utilization The example of Kenya’s world first mobile phone government bonds is an example of how technology can be used to fund government expenditures. The bond, which can be bought without a bank account and offers a 10% interest rate, allows small investors to participate in helping fund the country’s economic development as its minimum investment amount of about $30 compared to the near $500 minimum for conventional government bonds which have a commercial bank account prerequisite. Tradable on the secondary market, it may improve liquidity in Kenya’s financial market whilst boosting the country’s domestic savings rate which is relatively low by regional standards. Taking advantage of diaspora wealth The wealth and income of Africa’s vast diaspora population must be utilized to support economic development on the continent. Diaspora bonds and remittance backed loans, if organized and promoted effectively, as done in India, Israel and Guatemala could see foreign exchange receipts and an investment boost that helps revenue diversification for the government while providing businesses and individuals with an alternative source of funds. All in all, it must be accepted that international debt will continue to be taken on. The continent’s massive infrastructure deficit alone is unlikely to be plugged without taking on more external debt. Indeed, as some point out, overextended domestic activity by the government could have a crowding out effect on the private sector. However, it is key that the cited methods in conjunction with stronger institutional capacity and transparency ensure that debt taken on is used wisely and efficiently for the benefit of both current and future Africans.

The twenty-first century is such an incredible time to be alive: only thirty years ago, the only way to reach somebody as soon as possible to communicate important news was either with your landline phone or, if you were not at home, by barging into a shop or bar to use their own or finding a phone booth in the streets. Watching films and listening to music was, needless to say, confined to cinemas or the intimacy of your own bedroom. In the last decades we have made giant leaps in the technology of mobile telephony, which allows us to carry what is in fact a powerful mini-computer in the comfort of our pockets, always keeping us up to date with the rest of the world. We can comfortably keep in contact with people from all over the world, download music and video content like never before and even write nonsense on social media for the world to see, even while moving across the European Union. All of that, of course, comes at a price. It is a truth universally acknowledged that roaming fees are among the most obnoxious things in life, after the questions of your relatives at the Christmas table and the knots in your earphones when you pull them out of your pockets. But what exactly is a roaming fee? A roaming fee is a payment offered to a foreign mobile operator in order to use their infrastructure to connect to your home mobile company. Technically, roaming may occur even within your home country, for example if you went somewhere where your company’s signal is not available but somebody else’s is, and you used that to navigate, text or call. However, the vast majority of roaming fees are incurred by travelers in a foreign country. Especially in these cases, the costs associated with roaming are usually to the company’s discretion and can be astronomical for the unsuspecting visitor. Whether or not European citizens should be charged roaming fees when switching operators during travels across the EU has been on top of the agenda of the European Commission for a while now. The works started as early as 2005: at the time, you could be charged as much as 12 euros for a 4 minute call! As of 2013, the European Commission started drafting a proposal to make roaming a single market within the European Union and ultimately abolish roaming fees. The proposal was approved by the European Parliament in April 2014, but only authorized by the Council of the European Union in January 2017 because of internal disagreements on the price caps. As of June 15, the legislation has finally come into effect, and any European citizen with a domestic provider may now “roam like at home”, or in other words use foreign mobile networks at the same price of the domestic provider. As a result, you can now surf, call and text regardless of where you are in the EU for the same costs as you would at home. But do keep in mind that this only works as long as you remain within the cap set by your provider’s package. For example, if you have a package that allows you x minutes of calls, y texts and z MB per month, this will usually mean that calls and texts should be directed towards users in your own country. If you are abroad, you can freely text and call home, your friends and your significant other for no additional costs; however, if you contact a foreign phone, you may still be charged international fees, unless your mobile plan allows international services. In addition, the price for data has not reached its minimum yet, but is expected to decrease yearly until 2022. The European Commission has set the following caps, for calls, text and data traffic: €0.032 per min of voice call, as of 15 June 2017 €0.01 per SMS, as of 15 June 2017 A step by step reduction over 5 years for data caps decreasing from €7.7/GB (on 15 June 2017) to €6/GB (01/01/2018), €4.5/GB (01/01/2019), €3.5/GB (01/01/2020), €3/GB (01/01/2021) and €2.5/GB (01/01/2022) Something that attracted quite a bit of attention about this legislation is a so-called “fair use” policy, which was thought as a means of preventing users from fleeing en masse towards extremely cheap providers in countries where costs are kept artificially low (such as the Eastern block for example) and then roam all over the rest of the EU for those prices. This means that the roaming traffic of each user will be constantly monitored by the competent authorities in order to verify whether the user significantly uses roaming more than domestic traffic and whether the user significantly lives in other countries longer than in the domestic provider’s. Should those circumstances occur, then the provider may interrupt the service freely. This ignited quite a lot of complaints from the community of consumers who are concerned with privacy issues. Is it ethical to monitor one’s data consumption? Wherever the truth may lie, the end of roaming fees ushers a new age of interconnectedness and unity within the EU. The first thing this year that brought us closer, and not further apart.

I believe that almost everyone I had a conversation with over the past two months now knows that I went to Cape Town in April this year. Together with 29 other students from the faculty, I explored the city in the two weeks we had. Apart from the nice (touristic) activities we did — we of course visited the Table Mountain, Lion’s head and Robben Island, did some wine tastings, and went to see penguins — we also visited a lot of companies to learn about the South African business culture, as well as the current economic situation of the country. The companies we visited range from an established insurance company to a technological start-up, and therefore provided us with a broad insight in South African business. Also, April has been a very moving month for the political and economic situation in the country, and that is one of the reasons why I keep talking about the country after the two weeks I spent there. Today, I will try to explain to you what is so interesting about South Africa and Cape Town in particular. A brief history of the country South Africa is known for the apartheid, Nelson Mandela, its wine industry, the fact that the country has got three capital cities and eleven national languages, the 2010 FIFA World Cup, and unfortunately, for its ever remaining inequality. In short: the country is very diverse and full of contradictions. The country that used to be a Dutch and British colony respectively became independent in 1931, after which segregation started to take severe forms. The years that followed were characterized by growing discontent, and Nelson Mandela became the arch image of the fight against racism. In 1994 Mandela became president of the Republic of South Africa and his political party, the African National Congress (ANC), has remained in charge ever since. Although the election of Mandela 23 years ago seemed to herald a completely new political, social, and economic era, the country has still not fully recovered from its moving history. Politically, the country is often considered unstable and corrupt. Looking at the country from the social perspective: half of the people in South Africa live in poverty, and the poorest 10% accounts for only 1.3% of the Gross Domestic Product (GDP). Especially in the townships of the big cities, poverty and criminality are huge problems. Furthermore, the country has the biggest HIV epidemic in the world. Approximately 7 million people (out of roughly 54 million) are infected with the virus. Some state that this huge number should have been prevented by the government, but due to the political unrest, it never came to that. As to the economy: the South African market used to be a promising one. Being the second largest economy of the African continent, international trade is becoming more and more important to the country. Due to the variety of natural resources in the country, South Africa is an interesting country to trade with and invest in. However, 26.8% of the labour force is unemployed. High unemployment has been a problem in the country for decades now, and the government appears to be unable to tackle the problem. In fact, the current government is not doing so well for the economy. Recession Ten days ago, the government announced that the economy is facing a recession. The expectations for GDP growth are negative, and one of the explaining variables for this is the decreased investment. This decrease in investment brings us back to the moving month of April this year. After president Jacob Zuma fired nine of his ministers — of which one was Pravin Gordhan, the minister of Finance — the credit-rating agency’s Standard & Poor’s, and Moody’s and Fitch lowered the credit rating for the country to junk status. Their main argument was that Gordhan secured stability for the South African economy, whereas his discharge was a signal of political instability. Due to the downgrade to junk status, a lot of pension funds and other investment funds are no longer allowed to invest in the country of South Africa. As a result of the downgrade, the South African Rand (ZAR) started to depreciate against the U.S. Dollar (USD). This depreciation could in turn lead to higher exports, but until now it has not resulted in an increase. The ZAR now remains constant at a higher level, which causes an upward pressure on the government debt, since that is mostly denominated in the USD, which has become relatively more expensive due to the depreciation. Whether the government debt is sustainable is therefore not easy to say. Company visits During our company visits, we talked about the current economic situation a lot. What all executives of the visited companies agreed upon, was the fact that corruption is a serious problem within the country. As long as the president of the country puts his own interests above the people’s, crises will not be avoided. However, what I found really remarkable was the focus on the entire economy. Many companies emphasized how much potential the South African economy has and that it is such a shame that it does not show off. In their opinion the actions and unstable policy that President Zuma is pursuing dominate the opportunities that lie within reach of the country. I think that this is what I found most interesting about the country: South Africa has got everything it takes to become a successful player on the world market, but they are still not succeeding in eventually becoming it. There are many natural resources; the location of the country is perfect for international trade, and the community in really diverse. In business studies you learn about organizations and how diversity is going to lead to more successes, but in South Africa it is apparently not paying off. Economic growth could be the key to more welfare throughout the whole country, since unemployment could be partly solved by more economic activity, but of course there is more to it. The political situation reflects the contradictions within the society: There is a lot of welfare, but there is also a lot of poverty. There is a lot of potential, but also very little success. There is a lot of faith in that potential, but there is no trust in the government. If you cross the streets of Cape Town, you can experience these contradictions yourself. Many people are living on the streets and the townships that lie next to the heart of the city show that there are still a lot of problems to solve. At some point, it felt as if I was in a well-developed European city. But in for example Amsterdam, I can cross the streets on my own at night. In Cape Town I could not. This shows that Cape Town appears to be well-developed, and I think that a lot of people think about South-Africa as a relatively well-developed country, but that it in fact is not. There is so many inequality, but so many potential. The biggest contradiction of the country might not be the differences among people, cultures, poverty and welfare, but mostly between the expectation of the country and reality.

Between the 5 and 6th of June, 9 countries including Saudi Arabia, Yemen, the United Arab Emirates, Egypt, Bahrain, Mauritius, Mauritania, the Maldives and Libya’s eastern-based government fully froze all diplomatic relations with Qatar. This is an unprecedented in its scope and structure case even though it is not the first crisis in that region in the modern history. By this move, Qatar literally fell into isolation, since this blockade means the full closure of all possible borders of the Gulf states around Qatar including aircraft and ships. In addition, several Middle East’s airlines no longer provide flights in both directions for Doha (Qatar’s capital). Such a blockade will be a serious test for Qatar, despite the fact that it is recognized as one of the richest countries in the world because of the huge reserves of oil and gas in the bowels of the Qatar land. Also, in 2016 it was estimated to have the fourth highest GDP per capita in the world. Qatar does not produce its own food and nearly the entire supply of groceries before the blockade came from Saudi Arabia, meaning that after the closure of the borders food reserves will start to deplete and no one can say for sure how long it could take to solve that crisis in the Middle East. Authorities of Qatar express the opinion that this ban is violating the sovereignty of the country. What was the reason for such a rapid escalation? The first reason is that according to Saudi Arabia, Qatar provides funding to terrorist organizations such as the Muslim Brotherhood that severely destabilizes the region. In response, Qatar denies that it supports terrorists and states that Qatar is, on the contrary, actively helping to fight ISIS. Besides, critique on Al Jazeera – one of the largest news organizations that is owned by the government of Qatar and which was blocked in Saudi Arabia and UAE in the end of May – appeared to be another reason for the blockade. The third reason is usually considered to be the relations between Qatar and Iran. For example, Al Jazeera has described Iran as an “Islamic power”, and criticized President Trump’s policy towards Tehran. However, Qatar stated that the channel was hacked and that the report was simply a fake one. Nevertheless, Qatar and Iran indeed have close economic relations mainly grouped around gas and oil segment. Whereas, Saudi Arabia stopped its diplomatic relation with Tehran in 2016 as a consequence of an attack on the Saudi diplomatic missions in Iran. Saudi Arabia has issued certain demands that Qatar has to meet in order for the blockade to be stopped. Among them was a demand of cutting all links to Iran and closure of Al Jazeera. UAE are less willing to cooperate and stated that there is nothing to talk about. Moreover, users on social media who express any sympathy to Qatar may have to go to prison from 3 to 15 years. It may seem that the whole world is against Qatar and is nearly freezing the country out of all relations. However, there are several countries that took a stand near Qatar and are willing to support it during the crisis. For example, Russia has invited Qatar’s foreign minister to Moscow for talks, which are believed to maximize Russian support to Qatar. Another country positioning as a friend is Turkey, which passed a law that allows accelerated deployment of Turkish troops to the country. What impact can this crisis have? First of all, Qatar is a host for the 2022 World Cup, the closure of borders delays the construction of the stadiums and other infrastructure. Moreover, as mentioned above, the closure of borders means a shortage of food supply. People already started to stock up, which caused an increase in prices. This all is leading to a higher inflation. Saudi Arabia, the United Arab Emirates, and Bahrain declared that Qatar citizens that are currently located in their countries should leave within 2 weeks, while diplomats were given only 2 days. The main problem coming from this will be for international companies operating in the region. For example, more than 180,000 Egyptians live and work in Qatar in fields as medicine and engineering. So, if Egypt issues a similar ban, there will be a large loss of workforce in Qatar, which affects local companies and the overall economy state of the country. International firms having affiliates and shops in Qatar are likely to be closed, at least temporarily. This puts pressure on any business deal or international trad currently going on. Another huge problem occurred with the flights, as besides stopping the flight connection between Qatar and the other Gulf States, Qatar Airways was also banned from using the airspace above those countries. This means making huge changes in flight paths, which leads to certain losses for the company as well as a further increase in ticket prices. Two of the most powerful countries in the region – Saudi Arabia and UAE – have already proved that they are concerned about the security of the region, so they would not want to step back from this blockade of Qatar. The only point of influence Qatar has is an important US military base, situated in Al-Udeid. However, other countries in the Middle East might be willing to replace this base in order to leave no incentives to the US to help Qatar. The whole situation may lead to a foreign intervention into the region and Qatar in particular, such that the leadership of the country will be changed. Although there are several ways on where this crisis can go, one thing is certain – the political situation in the Middle East will get more heated up and the economy of the whole region will experience changes, with Qatar suffering in particular.

[Major Major’s father’s] specialty was alfalfa, and he made a good thing out of not growing any. The government paid him well for every bushel of alfalfa he did not grow. The more alfalfa he did not grow, the more money the government gave him, and he spent every penny he didn’t earn on new land to increase the amount of alfalfa he did not produce. Major Major’s father worked without rest at not growing alfalfa. On long winter evenings he remained indoors and did not mend harness, and he sprang out of bed at the crack of noon every day just to make certain that the chores would not be done. He invested in land wisely and soon was not growing more alfalfa than any other man in the county. Neighbors sought him out for advice on all subjects, for he had made much money and was therefore wise. “As ye sow, so shall ye reap,” he counseled one and all, and everyone said, “Amen.” — Joseph Heller, from Catch-22 One of my oldest memories of my stays in Belgium was seeing a cucumber when I was about six years old. At one of my relatives’ place, I wanted to have cucumbers in the salad for dinner, so I asked my uncle who was going shopping to get a few cucumbers. He chuckled, “few you say!” When he was back with the shopping bags, he took out just one cucumber. I mean, we have cucumbers in Turkey too, but they are about 10-12 centimeters at most. The one he brought was basically as long as my whole arm. I was just baffled, how do you have cucumbers this big!? I asked him how much it cost—it had to be a special cucumber after all, it ought to be expensive—and he said it was about fifty cents. It just blew my mind! After two years in the Netherlands, it’s a lot more normal to me to have these gigantic cucumbers, and they are still about fifty cents each. It still feels oddly cheap though, and that’s not because the cucumber is large. A kilogram of tomatoes or carrots are right around three euros each, but considering all the investment that goes into the farming equipment, land, labour, depreciation, time period from sowing until reaping… it seems very accessible. Almost a bit too accessible. For us living in the European Union, the system that makes foods accessible is the Common Agricultural Policy (CAP). It consists of three main groups of expenses: Income support for farmers and assistance for complying with sustainable agricultural practices Rural development measures Market-support measures The first one is more or less a fancy phrase for direct agricultural subsidies. Fortunately, these subsidies are a bit tougher to get, as opposed to the ones Major Major’s father gets for not growing alfalfa. In order to be eligible for them farmers must follow a very strict list of guidelines with regards to food safety, environmental protection and animal health and welfare.  Expenses in this group account for the large majority of CAP’s budget, at approximately 70% of the total. Rural development measures taken to help farmers modernise their farms and increase their competitiveness. These can also be considered subsidies, but most often they are more indirect in the sense that the contributions are made by individual member countries over long periods of time—they work more like investments rathers than direct benefits. Market-support measures are for exceptional cases where the supply is disturbed to the extent that intervention is necessary, for cases such as the Courgette Crisis. It is a small chunk of the expenses, at the final 10%. The European Commission notes that “the average EU household spends 15% of its budget on food – half as much as in 1960,” which goes to show the significance of the CAP for Europeans. It sounds all well and good at first sight, but although agricultural subsidies make our food cheaper, it is not a necessarily good solution to our problems with regards to agricultural supply and demand. One of the primary criticisms of the CAP is that it encourages farmers to supply well over the market demand—this supply is bought by the EU and stored for later use, in forms of exports or crisis intervention. In 2007, it was revealed that the EU had a significant excess supply of staple grains, dairy, and wine. That storage has been mostly exhausted through exports, which help people living in urbanised regions of developing countries by bringing them cheap food. Another criticism is regarding its effects on international trade and comparative advantages against developing countries. Although consumers in developing countries can benefit from the cheaper produce imports from the EU, farmers from developing countries cannot compete with the price or quality of the produce coming from developed countries. As these farmers generally lack any form of subsidy from their own governments, the gap of competitiveness between developing and developed countries’ farmers is widened even further. Seeing that it’s not viable for developed countries to willingly forego their advantage, the alternative option seems to be subsidising developing countries. Unfortunately, that’s not a viable option either. A study by the Danish International Development Agency shows that such programmes are very expensive and not particularly effective in prioritising the poorest and most vulnerable households due to the fact that subsidies are not able to cure the underlying problems of high input procurement costs and market failures. Finally, we already know from our Economics of Markets and Organisations class that such subsidies may lead turn into perverse incentives, where a lack of regulatory oversight may lead to farmers overloading croplands and increase pollution from synthetic fertilizers. CAP has received a great deal of criticism for incentivising production growth while allowing farmers to disregard the environmental consequences of bad farming practices. Excessive use of fertilisers and pesticides can lead not only to soil that’s weaker both in terms of the necessary minerals and structural strength, but also be extremely dangerous to the ecosystems surrounding conventional farms. The overall situation is even worse in the United States, where extensive lobbying directs a heavy share of subsidies into crops such as corn and soy, while vegetables and fruits get a significantly smaller share. In Texas, which receives the largest share of commodity subsidies, only around 15% of all farms received a subsidy. This uneven distribution creates market discriminations in favour of certain types of over-subsidised crops. The situation is better in Europe due a stronger set of eligibility rules for these subsidies, yet 37% of the annual EU budget for 2017 was allocated on the CAP. It seems that the EU is on a good path with the way it approaches the matter of direct subsidies and crop insurance, but shifting the focus more towards the development of sustainable-yet-efficient farming methods may be a better long-term goal. The next time you reach for that delicious box of Dutch strawberries, consider the amount of taxpayer money that went into subsidising it. Setting aside the subsidies, incorporating the costs of depleting soil fertility and environmental damages alone would simply make many currently profitable conventional farming methods unsustainable and unprofitable. No matter how sweet those strawberries are, knowing that it should cost almost twice as much as it does now leaves a sour taste in my mouth.