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Risk and Capital Requirements for Infrastructure Investment in Emerging Market and Developing Economies

Joaquim Levy



Mobilizing private investment in infrastructure will be key to increase growth and resilience in developing countries. Well-planned infrastructure can raise potential output growth and help reduce the carbon footprint of progress. Directing excess savings from advanced economies towards emerging market and developing economies (EMDEs) helps address the low investment returns of institutional investors in developed economies while supporting achieving the Sustainable Development Goals (SDGs) by 2030.

Infrastructure is a natural match for insurers’ long-term liabilities. Long-term fixed income instruments fit well with the long-dated liabilities of insurance companies, especially for those offering life insurance and annuity products. Infrastructure projects tend to yield long-term, predictable cash flows, with low correlation to other assets and relatively high recovery value in case of repayment arrears. This match is so significant that some regulators provide special treatment for insurers that hold them to maturity. The recent update of Europe’s Solvency II Directive, for instance, provides for a “matching adjustment” that allows insurers to discount their liabilities by the rate of return of infrastructure-linked instruments, which tends to be higher than the market-implied discount rates, thus reducing the present value of these liabilities and the business cost for insurers.

However, insurance companies still allocate less than 2.5 percent of assets under management to infrastructure investment, in part because of insufficient understanding of the risk profile of this asset class. There are many reasons for the low participation of infrastructure, including the limited supply of fully operational infrastructure projects issuing debt. There is also an informational hurdle, with investors’ perception of infrastructure being risky, despite the long tradition of regulated utilities of yielding low-risk cash flows. This perception is also reflected in some regulatory frameworks, which require insurers to allocate sizeable amounts of capital to support investments in long-term debt, especially for unrated transactions, thus reducing the internal rate of return and the profitability of holding these instruments.

More recently, European regulators have acknowledged the particular risk properties of infrastructure, reducing the capital charge on this type of finance. Following the advice of the European Insurance and Occupational Pension Authority (EIOPA), which performed a comprehensive analysis of historical data of infrastructure risks in advanced economies, the European Commission in September 2016 revised down the standard formula for capital charges on qualifying infrastructure debt (and equity) investments under the Solvency II Directive. This calibration resulted in a significant relief of infrastructure debt relative to equivalent corporate bonds and loans. However, this more favorable regulatory treatment remains restricted to investments in countries that are members of either the European Economic Area (EEA) or the Organization for Economic Co-operation and Development (OECD). So, infrastructure projects in many EMDEs do not benefit from it.

New empirical analysis of infrastructure debt in EMDEs offers an opportunity to widen the perimeter of a more favorable regulatory treatment. Recently, Moody’s Investor Service published a detailed analysis of the historical credit performance of project finance bank loans, which account for 80 percent of the funding of project finance transactions originated globally since January 1, 1983. The study reviewed data of more than 6,000 projects from a consortium of leading sector lenders (Moody’s Project Loan Data Consortium), of which more than 1,000 are projects in EMDEs.

The study shows that credit performance of project loans in EMDE debt is not substantially different from that of comparable debt in advanced economies. As in advanced economies, the risk profile of project bank loans in EMDEs improves over time. Specifically, the marginal default rate–i.e., the likelihood that an infrastructure loan performing at the start of a specific year will default within that year–exceeds the level for non-investment grade corporate exposures by the time of the financial closing of the project, but it steadily declines as the loans mature, when projects reach “brownfield stage”. Cumulative default rates of infrastructure become flat like those of investment grade instruments, while rates for originally equivalent corporate debt continue to rise throughout their lives (Figure 1).  After five years, the marginal default rate of project loans is consistent with that of “AA/Aa”-rated corporates and, actually, on average lower in EMDEs than in advanced economies. For PPPs, the cumulative rate of return over the first 10 years of project loans in EMDEs is virtually the same as those in advanced economies, at less than 6 percent. Also, recovery rates for EMDE project loans average about 80 percent, and, thus, are like those for senior secured corporate bank loans.

Figure 1: Cumulative Default Probability of Unrated Project Loans in Advanced and Developing Economies

Sources: Moody’s Investors Service (2017) and Jobst (forthcoming). Note: based on the shortened study period between 1995 and 2015; the sub-samples “EEA or OECD,” “EMDE-A” and “EMDE-B” correspond to the samples selected in the Moody’s report and cover EEA and OECD member countries, all non-high income countries, and all non-high income countries without EEA or OECD members (i.e., Bulgaria, Croatia, Mexico, Romania, and Turkey).

Applying the relevant data from the recent Moody’s report to two important solvency regimes for insurers shows sufficient scope for reducing the capital charge for investments in infrastructure debt. World Bank staff in the finance area have recovered the credit risk parameters from the published  data on project loans and applied them to the relevant elements of the Solvency II Directive and the International Capital Standard (ICS) for internationally active insurers, which will be implemented by the International Association of Insurance Supervisors (IAIS). We apply these data to these solvency regimes, differentiating the properties of infrastructure loans from the standard corporate exposures without adjustments to current regulatory methodologies. Only the intrinsic risk profile of infrastructure debt vis-à-vis the standard risk assumptions on long-term debt was considered. When doing so, we find that the capital charges would decline significantly when these differences in risk are considered. Specifically, for a 10-year risk horizon, the annual expected loss of project finance loans (1.6 percent) is half of the expected losses implied by “Ba/BB”-rated non-financial corporates, and the implied capital charges would decline from 23.5 to 13.3 percent under Solvency II (Table 1). Under ICS, it would drop from 12.7 to 10.7 percent, consistent with the estimated economic capital within the range of 10.5 to 13.8 percent (based on the 99.5 percent conditional tail expectation).  Additional analysis of rated EMDE infrastructure debt securities, using data from another Moody’s Investors Service report published earlier in 2017, indicates some flexibility to lower capital charges on these instruments under Solvency II. For instance, the charge for “Baa/BBB”-rated securities, would come down from 20 percent to about 16 percent.

Table 1: Credit Risk and Estimated Capital Charges for Unrated Project Loans (using standard risk parameters and differentiated infrastructure risk profile) *

Sources: BCBS (2017), European Commission (2015 and 2017), IAIS (2017), Moody’s Investors Service (2017) and Jobst (forthcoming). Note: recovery rate refers to ultimate recovery rate; */calculated over 10-year horizon with recovery rate consistent with unsecured senior claims; **/ reduced capital charge if qualifying infrastructure exposure in EEA or OECD country; 1/ fixed risk factors of the Solvency II SCR Standard Formula — Spread Risk Sub-Module for fixed income investment, as amended by Regulation (EU) 2015/35 (October 10, 2014) and EU Regulation 2017/1542 (June 8, 2017); 2/ credit risk factor under the proposed International Capital Standard (ICS) is assumed to follow the advanced internal ratings-based (A-IRB) approach for specialized lending (project finance) using the cumulative PD with/without a floor for PD and LGD and full application of the maturity adjustment; 3/ based on credit risk (PD and LGD) of global non-financial corporate debt issuers; 4/ based on 99.5% conditional tail expectation (CTE).

Even a modest reduction in capital requirements for long-term infrastructure investments can significantly boost return-on-equity (RoE) under a prudent but differentiated regulatory treatment. For instance, considering a stylizing illustration for a European regulated insurer holding a 10-year infrastructure loan yielding 4.6 percent annually (less the insurer’s borrowing cost of 1.0 percent and an income tax rate of 35 percent), reducing the capital charge of 23.5 percent (under the current standard formula approach applied to corporate exposures) to about 14 percent (under a differentiated approach) would raise the RoE of investing in such an instrument from 10 percent to more than 17 percent. The latter figure is more than 50 percent above the average RoE of European life insurers in 2016.

Figure 2.  Return on Equity of Infrastructure Debt Investment as a Function of Regulatory Capital Charges

Sources: Bloomberg L.P., Moody’s Investors Service (2017) and Jobst (forthcoming). Note: The calculation is based on the annual yield (less the risk-free rate of 1.0 percent) after tax (35 percent); 10-year U.S. government debt yield at 2.31 percent as of end-Sept. 2017 and median RoE of European life insurers as of mid-2016 (EIOPA, 2017); 1/ average infrastructure loan rate in the U.K. (4.3 percent) according to Institute and Faculty of Actuaries (2015) at end-2014 and scaled to EMDE consistent with infrastructure bonds (4.6 percent); 2/ based on the Solvency II Spread Risk Sub-Module (European Commission, 2015, 2016 and 2017), assuming unrated exposure is treated like corporate exposure (loans/bonds) with credit quality step (CQS) of 5 (‘B’) and assumed maturity of 10 years (OECD, 2015).

Lower capital charges can help maximize finance for development, unlocking an important source of long-term capital for global growth. Although regulatory disincentives for infrastructure investment in EMDEs may be just one of the impediments to growing exposure to this asset class, the evolution of these regulations can be an important step forward.  By helping to increase the rate of return of holding infrastructure-linked instruments potentially by up to 50 percent, it may help insurers and other institutional investors to accelerate the rebalancing of their assets in ways that will help crowd-in resources in quality climate-smart infrastructure projects in EMDEs.  These projects are an important part of strategies to increase the resilience of these economies while helping eliminate extreme poverty and produce shared prosperity.

First published in World Bank

Note: The capital charges computed here were reached by using the implied transition probabilities for infrastructure loans and  (i) mapping the current reduction factors for qualifying (unrated) infrastructure investment for EEA/OECD countries under the Solvency II SCR Standard Formula — Spread Risk Sub-Module to the expected loss of project loans in EMDEs and (ii) calibrating expected loss to the credit risk stress factor for ICS (IAIS, 2017) following the advanced internal ratings-based approach according to the finalized Basel III framework. For details, refer to Jobst, Andreas A., forthcoming, “Credit Risk Dynamics of Infrastructure Investment—Considerations for Insurance Regulation,” Working Paper (Washington, D.C.: World Bank Group).

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The geopolitical and financial significance of Bitcoin

Giancarlo Elia Valori



Bitcoin and the other “cryptocurrencies”, namely Ethereum and Litcoin- although there are 33 additional currencies arriving on the Internet – are a brand new phenomenon on the currency market.

Currently we are all in the so-called “fiat money” regime, namely any money declared by a government to be legal tender, which is a currency not backed by gold reserves – a currency which is always and anyway accepted by everyone.

Hence it is also fiat money, like the first “lire” of the Kingdom of Italy.

This means it is a State-issued currency that is not convertible by law to any equivalent value in gold or other hard currencies.

Fiat money is stable as it is controlled, almost on a daily basis, with the money demand from the economic system.

When there is an excess of money supply, we talk about inflation.

This is, indeed, the true meaning of the alltoowell-known concept of “inflation”, not the mere “price increase” which, at most, can be an indicator of excessive growth in money supply, not one of its causes.

Accepting the Dollar, the French or Swiss Franc, the Euro, the Ruble or any other currency (albeit, in fact, the situation would be somehow different for the Russian currency) is always mandatory by law.

Hence also seigniorage is mandatory, namely the act of legal magic with which each issuing bank decides that a small piece of paper is worth 100 nominal euro – although costing  only 3 cents to the issuing bank for producing it.

The difference between the face value of money and the cost to produce it (plus fixed costs such as equipment, staff salaries and taxes) is, in fact, seigniorage.

The latter, however, should not be demonized, as done by some theorists who – by using a silly contemporary language dogma – are called “radicals”.

Reasonably, the possible alternative is the intrinsic value money, like the medieval coins – molten gold marked as shown on the coin front or back. Nevertheless the King often “reduced the value” of coins or melted gold and silver with non-monetary metals, such as copper (although the United States was to use it in the future) or even bronze.

Today we would say it was a form of “seigniorage” “with criminal relevance and implications”.

The primal scene – just to quote a concept by Sigmund Freud -stemmed from the 1971 “Smithsonian Agreement”.

It was the American agreement Nixon had wanted as from August 15, 1971, signed in the Smithsonian Museum of Washington. It was signed by what we would currently call the G7 and reestablished an international system of fixed exchange rates without the backing of gold. It certified the end of FED’s obligation to pay for gold up to the fixed rate of 35 US dollars per ounce.

It was the end of the gold-backed currency – the “fiat money” no longer pegged to intrinsic money – occurring after the Allies verifying that the American currency was severely overvalued.

The costs borne for the Vietnam War, the end of the Johnsonian cycle of Great Society and the crisis of US products on European markets, were all factors which led De Gaulle, at first, to ask – without further ado – the payment of the US debt in gold or in hard currencies. Later many other allies who were reluctant to put in place non-tariff barriers against US products followed suit.

To put it more brutally, Nixon shifted the burden of the US super-inflation onto his allies of the Bretton Woods Agreement, which Europeans were forced to pay since they had to buy highly overvalued dollars for their international trade.

As the US Treasury Secretary, John Connally, said at the time to his European colleagues: “The dollar is our currency but your problem”.

In other words, cryptocurrencies are the result of this long historical process.

The currency based on Nothing, the postmodern point of arrival point of the disembodied monetary instrument.

A currency that is believed to be good because everyone thinks so – a financial transposition of Andersen’s tale “The Emperor’s New Clothes”.

As you may remember, it is the tale about two weavers who promise an Emperor a new suit of clothes that they say is invisible to those who are unfit for their position, hopelessly stupid or incompetent – while in reality, they make no clothes at all, making everyone believe the clothes are invisible to them. When the Emperor parades before his subjects in his new “clothes”, no one, including his Ministers, dares to say they do not see any suit of clothes on him for fear that they will  be seen as stupid. Finally, a child in the crowd, too young to understand the desirability of keeping up the pretense, blurts out that the Emperor “is not wearing anything at all” and the cry is taken up by others.

The same will happen to the contemporary monetary equilibrium, but it will certainly not be a child who will get  bankers and the public at large to open their eyes.

Hence today banks create money, which is mandatory to consider valid, with a fiat -namely ex nihilo – from the Void of Value. Or from their debt or even from the State debt.

Just issue securities having another name.

Hence, what is currently money? It is what the Auctoritas decides to be so.

Or, to be precise, the money supply currently issued by the central banks or other banking institutions, which is not based on savers’ deposits or on debt repayment forecasts,  but it is only the sign of a debt, the “promise of a settlement”which, however, is spent immediately.

And hence it is confirmed in its Value. The Value lies in theshift from a currency to another or from a currency to real goods or assets.

Obviously banks still earn interest on the money supply, regardless of its source.

Bitcoin, however, is not a currency like any other, guaranteed by internal law and interbank agreements.

The cryptocurrency is based on a mechanism like the one of online sales, namely the peer-to-peer one, which is gradually accepted by all those who now operate with Bitcoins.

Hence, while the final Bitcoin supply is defined – as always happens – our Internet currency is completely volatile.

Therefore it cannot certainly be a unit of account.

Hence Bitcoin varies- programmatically – as demand changes. In fact, last year its value increased by 47 times.

The reason is simple: it is a monetary supply that adapts to demand, but is also able to stop so as to create sufficiently long Bitcoin income and returns to attract average investors.

In January 2018,the cryptocurrency is worth approximately 900 dollars – a value that will probably increase when, in all likelihood, the Internet currency will be accepted by large commercial and distribution chains.

If it is a currency that influences markets by adapting to buyers’ requests (or artificially reducing supply in an instant), the only ones that can reap benefits are the Great States, the International Crime Organizations or the new networks of global Banks.

Never let them tell you that the small investor of Grand Rapids or Varese can determine the first “peer-to-peer” that, by repetition, triggers the chain off.

It is another fairy tale like the one of the movie Mary Poppins pointing to the magical growth of the penny deposited in a London bank, growing out of all proportion and turning into huge amounts of money.

The fairy tale is the expected automatic growth of funds denominated in Bitcoins, from 10 euro up to millions of millions, like the stars.

In fact, nothing is closer to the world of Andersen or the Brothers Grimm than some bad finance.

We can wonder whether the cryptocurrency is nothing more than a “Ponzi e-Scheme”.

You may recall the Ponzi Scheme or pyramid scheme, in which the high interest rates granted to capital providers -attracted precisely by the rates that are promised – are paid with new investors’ fresh capital.

In fact, what is striking is that the production of Bitcoins is sometimes artificially low because there are many people  who want to buy them.

An issuing bank à la carte.

In fact, the many people who are waiting for buying Bitcoins hope that their value will increase, but only after they have managed to buy them.

A self-fulfilling prophecy.

A mechanism which is exactly the same as the Ponzi Scheme.

As the best US financial advisers say, do not follow the crowd.

Hence the Bitcoin is a “bubble”. A bubble probably bound to last, but still a bubble.

A bubble born in 2016. The primary year, while everybody makes reference to 2009, when the production of notes was no longer enough and the debt to be repaid was huge, while the West was entering its darkest crisis since the 1929one.

The trigger,i.e. the banking panic and the unaware laissez-faire approach of the US Presidency, were the same in both cases.

Two crises – the old and the new -broken out precisely in the United States, the burden of which was later shifted onto  the rest of the West.

With a view to overcoming the first crisis, the huge costs borne for the Second World War were needed.The Rooseveltian stimulus had been to little avail.

The second crisis, much closer to us, which was triggered by the subprime crisis, has needed liquidity injections even greater than those needed during the 1929Great Depression – injections which have not ceased yet.

In the latter case, the exit from the crisis is ensured by the creation from nothing of the largest mass of money in human history, also through the Internet.

In fact, the Internet currencies have allowed to create exchange value, purely financial values ​​that have strongly contributed to multiplying global liquidity in collaboration with standard currencies, which have been distributed indiscriminately to just any market – with helicopter money – by the US Governors and then by the ECB Governor, although certainly in much smaller proportions than his US counterparts.

On the other hand, when there is a liquidity crisis- a crisis caused by an excess of debt – every issuing bank prints money or rather creates money from debt securities. There is no other solution.

Contemporary Value arises from the mastery of a Name and from the artificial dissociation between this Name and a New Name.

Furthermore,in any case, the presence of cryptocurrencies only on the Internet and with a system along the lines of the peer-to-peer mechanism of normal online sales has allowed hackers’ systematic theft of 14% of all cryptocurrencies existing on the worldmarket.

A theft worth 1.2 billion US dollars, with revenues equal to at least 200 million US dollars.

In less than ten years, however, the technology generatingBitcoins will be vulnerable to cyber-attacks launched by quantum computers, which will become more widespread  than they are today.

The attacks on virtual currencies have already cost governments and private companies owning them asmany as 113 billion dollars of turnover.

Nevertheless, who is currently inflating the Bitcoin value, which has more than doubled compared to January 2017 –  a value that is now around 125%?

The main reason for this is China. Beijing is now the first market  for the exchange of cryptocurrencies in the world.

As early as 2015 China alone traded 80% of Bitcoins.

Today, the top 4 among the 32 major exchange platforms of these new currencies mainly trade yuan.

One of these platforms has opened a mining station for  “creating” Bitcoins – an operation which is highly energy-intensive and consuming – on the slopes of Tibet, where there is abundant low-cost energy.

Every time the yuan depreciates, the Bitcoin appreciates, because there are so many Chinese who pocket their capital to avoid government’s control and hence buy Bitcoins.

The yuan is depreciating and the capital flight from China is ongoing. The tool is often the conversion of the yuan masses into Bitcoins.

We may wonder whether the e-currency is used as a tool of  “indirect war” against China.

Moreover, the current growth on the US and on some other European Stock Exchanges has occurred with credit money, borrowed at zero interest rate, which has been provided to  major investors by central banks.

Another possible reason justifying the Bitcoin growth.

Virtual money may havealso been created to avoid the investors’ traditional rush to gold – the “tribal residue”, as Keynes called it – and hence not to increase the dollar value, currently maneuvered downward?

On January 15, one of the most active US-listed banks on the Bitcoin market ceased to convert cryptocurrencies into “traditional” currencies, but especially into dollars.

The beginning of the fall in the Bitcoin value, but the preservation of market liquidity, so as to prevent it from converging towards gold, in particular, or European hard currencies or, even worse, towards the Chinese or Russian financial markets.

Hence the Bitcoin is a pseudo-currency that serves to control the volatility and trends of global financial markets, as well as to keep it artificially high and avoid some currencies becoming “full” or sovereign like the Swiss Franc.

In fact, in 2018 a referendum will be held throughout the   Helvetic Confederation on the so-called “full” or sovereign currency, i.e. on a Swiss Franc created by the national central bank and not by international banks.

“True Francs on our accounts”. Only the Swiss National Bank can create e-money, where necessary.

These are the goals of those who have proposed the referendum.

Let us hope for the best. Those who almost invented modern finance – the Swiss merchants of the Middle Ages, the link between Italian ports and large Central European markets -now realize the dangers of creating value from nothing, the Faustian (and darkly malicious) mechanism currently governing the magical and alchemical transformation of banks’ and States’ debt into credit for individuals.

Let us hope that the financial world will come to its senses, just in time.

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Reskilling Revolution: A Future of Jobs for All



The global economy faces a reskilling crisis with 1.4 million jobs in the US alone vulnerable to disruption from technology and other factors by 2026, according to a new report, Towards a Reskilling Revolution: A Future of Jobs for All, published today by the World Economic Forum.

The report is an analysis of nearly 1,000 job types across the US economy, encompassing 96% of employment in the country. Its aim is to assess the scale of the reskilling task required to protect workforces from an expected wave of automation brought on by the Fourth Industrial Revolution.

Drawing on this data for the US economy, the report finds that 57% of jobs expected to be disrupted belong to women. If called on today to move to another job with skills that match their own, 16% of workers would have no opportunities to transition and another 25% would have only between one and three matches.

At the other end of the spectrum, 2% of workers have more than 50 options. This group makes up a very small, fortunate minority: on average, all workers would have 10 transition options today.

The positive finding of the report is the huge opportunity identified for reskilling to lift wages and increase social mobility. With reskilling, for example, the average worker in the US economy would have 48 viable job transitions – nearly as much as the 2% with the most options today. Among those transitions, 24 jobs would lead to higher wages.

The case for a reskilling revolution

The research, which is published in collaboration with The Boston Consulting Group, finds that coordinated reskilling that aims to maintain or grow wages has very high returns for workers at risk of displacement – and for businesses and the economy. At-risk workers who retrain for an average of two years could receive an average annual salary increase of $15,000 – and business would be able to find talent for jobs that may otherwise remain unfilled. With this approach, up to 95% of at-risk workers would find new work in new, higher-income jobs. Without such coordinated upskilling efforts, the report finds, one in four of at-risk workers would lose on average $8,600 of their annual income even if they are successful in moving to a new job.

However, this reskilling revolution requires that 70% of affected workers retrain in a new job “family” or career, highlighting the need for retraining initiatives that combine reskilling programmes with income support and job-matching schemes to fully support those undergoing this transition.

“The only limiting factor on a world of opportunities for people is the willingness of leaders to make investments in re-skilling that will bridge workers onto new jobs. This report shows that this investment has very high returns for businesses as well as economies – and ensures that workers find a purpose in their lives,” Klaus Schwab, Founder and Executive Chairman, World Economic Forum.

A future of jobs for all

The report also describes what reskilling would need to look like. The people who will do best in the transitions underway are those who have “hybrid” skills – transferable skills like collaboration and critical thinking, as well as deeper expertise in specific areas. Both highly specialized and highly generalist roles will need significant reskilling.

The report lays out 15 job pathways to demonstrate the precise range of options that reskilling can present for professions as diverse as assembly-line workers, secretaries, cashiers, customer service representatives, truck drivers, radio and TV announcers, fast-food chefs, mining machine operators and computer programmers.

However, for these viable and desirable job transitions to come to fruition requires concerted efforts by businesses, policy-makers and various stakeholders to think differently about workforce planning and to invest in reskilling that will bridge workers to new jobs.

“Work provides people with meaning, identity and opportunity. We need to break out of the current paralysis and recognize that skills are the ‘great redistributor’. Equipping people with the skills they need to make job transitions is the fuel needed for growth – and to secure stable livelihoods for people in the midst of technological change,” said Saadia Zahidi, Head of Education, Gender and Work System Initiative and Member of the Executive Committee, World Economic Forum.

A gendered impact

Of the 1.4 million jobs expected by the US Bureau of Labor Statistics to be disrupted between now and 2026, the majority – 57% – belong to women. This is a worrying development at a time when the workplace gender gap is already widening and when women are under-represented in the areas of the labour market expected to grow most robustly in the coming years. The data show that the current narrative about the most at-risk category is misleading from a gender perspective. For example, there are nearly 164,000 at-risk female secretaries and administrative assistants, while there are just over 90,000 at-risk male assembly-line workers.

Without reskilling, on average, at-risk women have only 12 job transition options, while at-risk men have 22 options. With reskilling, women have 49 options, while men have 80 options. With reskilling, the options gap between women and men narrows. However, these transitions also present an opportunity to close the persistent gender wage gap. Combined reskilling and job transitions would lead to increased wages for 74% of all currently at-risk women, while the equivalent figure for men is 53%.

The many futures of work

Towards a Reskilling Revolution: A Future of Jobs for All is complemented by a second World Economic Forum report launched today: Eight Futures of Work: Scenarios and Their Implications, also produced in collaboration with The Boston Consulting Group. It presents eight visions of the future of work in the year 2030.

“The future of work is not predetermined. All of the scenarios we present are possible, but none is certain. It is in our hands to proactively manage the changes underway and build the kind of future that maximizes opportunities for people to fulfil their potential across their entire lifetimes,” says Rich Lesser, Global Chief Executive Officer and President, The Boston Consulting Group.

The scenarios make the case that, while stakeholders cannot definitively choose to bring about any scenario that they might prefer on their own, they can manage the changes underway and influence the future through collaboration. Eight Futures of Work identifies reskilling the current workforce as one of the most critical actions that can be taken to proactively shape a new, positive future of work. Together, both studies aim to provide actionable tools that will help individuals, employers and policy-makers take action to influence a more inclusive and positive future of work.

The World Economic Forum project on Closing the Skills Gap provides a platform for public- and private-sector leaders to work together on reskilling and education reform, and will use both studies to tailor solutions for workers. At the Annual Meeting 2018 in Davos, the project will announce a new target for collaboration to reach workers with appropriate reskilling and retraining.


The Towards A Reskilling Revolution: A Future of Jobs for All report introduces a new methodology built on innovative new data from 50 million online job postings, encompassing 15,000 unique skills, collected over a two-year period by Burning Glass Technologies, the data partner for the report. Combined with labour market statistics from the US Bureau of Labor Statistics, the data used in the study covers 958 unique types of jobs.

The methodology combines the various aspects of a job, including work activities, skills, knowledge, abilities, years of experience and education, into an index of job-fit to measure the similarity between jobs in the set. While the methodology uses the United States labour market as an example, it can be applied to a variety of job requirements and sources of data to map out job-transition opportunities in diverse labour markets, and will be expanded in the future.

The Eight Futures of Work: Scenarios and Their Implications report creates eight potential worlds based on how different combinations of three key variables may come together – the rate of technological change and its impact on business models; the evolution of learning among the current and future workforce; and the magnitude of talent mobility across geographies.

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Radiation Processing Enables Small Businesses to Enter Global Value Chains in Malaysia



Photo: M. Gaspar/IAEA

In today’s globalized world, becoming part of an international supply chain is key to the prospering of small businesses and their ability to create jobs. Meeting the quality requirements set by the multinationals that head these value chains is often tough for small and medium sized businesses (SMEs) operating on shoestring budgets. The country’s nuclear agency, Nuklear Malaysia, is doing its bit to help.

Thanks to the support of the Nuklear Malaysia, Wonderful Ebeam Cable has become the first SME in the country to supply cables to Malaysia’s booming automotive sector. “By using radiation technology, we have been able to improve our product line and meet the requirements of the car manufacturers,” said Managing Director Ir Chan Chang Choy. “This has allowed me to grow my business and increase the workforce.”

Due to the high temperature in engines, cables used in the engine compartment of vehicles need to be heat and flame resistant to make sure they, and the car, do not catch on fire. To improve the heat resistance and flame retardance of the insulation of copper wires, their polymers need to be crosslinked, forming an extremely tightly packed network of interconnected polymer chains. Crosslinked insulation material increases the service temperature of cable for instance from 75⁰C in the case of normal PVC to 100⁰C for crosslinked PVC.

Crosslinking can be achieved using chemicals, but the process requires higher temperatures. The alternative, the irradiation of polymers, leads to the formation of permanent bonds between the polymer chains at room temperature – which requires lower operating costs.

No SME in Malaysia has the technology in place to carry out such irradiation, and banks are reluctant to provide loans for the purchase of irradiation equipment, Chang Choy said. “These machines are expensive, and the banks do not accept the equipment itself as collateral, because there is no second hand market for irradiation equipment, so the banks cannot sell it if my company were to go bankrupt.” Also, their safe use requires extensive shielding, which can make up half the installation cost. And shielding cannot be removed and sold.

Enter Nuklear Malaysia, which irradiates the products of small businesses like Chang Choy’s for a small fee.

“The automotive industry has long been recognised as one of the key contributing factors towards the realisation of Malaysia’s aspiration to become an industrialised nation by 2020,” said Zulkafli Ghazali, Director of Radiation Processing Technology at Nuklear Malaysia. “This requires domestic capacity in cable manufacturing.” Through this support, the agency is doing its part to support the Government’s SME Masterplan to accelerate the growth of SMEs and increase their contribution to the economy from 32% of GDP to 41% by 2020.

Wonderful Ebeam Cable ships its products to Nuklear Malaysia’s irradiation facility in the centre of the country, some 300 kilometres to the north, three times a week. After a few days, the cables are returned, ready for the car companies.

Nuklear Malaysia is working with several SMEs in different areas of radiation processing – using ionizing radiation such as gamma radiation and  electron beam to change the physical, chemical or biological characteristics of materials to increase their usefulness and value or to reduce their impact on the environment. It is most widely used in the modification of plastic and rubber materials, the sterilization of medical devices and consumer items, the preservation of food and the reduction of environmental pollution. Nuklear Malaysia’s scientists have benefitted from a number of IAEA Technical Cooperation and Collaborative Research Projects, through which they were able to perfect the technologies used in radiation processing by working with experts from around the world. “The IAEA helps turn global expertise into local expertise,” Ghazali said.

The IAEA helps Member States strengthen capacities in adopting radiation-based techniques that support cleaner and safer industrial processes. Nuklear Malaysia has participated in several such projects and has been recognized, since 2006, as an IAEA Collaborating Centre for radiation processing of natural polymers and nano-materials.

This could come particularly handy in a few years’ time, he added. “If the country decides to build a nuclear power plant, we would need a lot more of cross-linked cables and other products manufactured using radiation processing technology.”

First published in International Atomic Energy Agency

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