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Future of the Banking Industry: Not without Blockchain

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If you are reading this article it means you are directly involved in the world of internet, this wonderful innovation has made it possible to connect everyone around the world directly. Through this innovation, the most promising new disrupt technologies have emerged for the future; Thus, the world of the blockchain. It is right to ask if the blockchain technology is a disruptive innovation?why is this novelle technology pacing slowly? This because the technology has only reached the required level of maturity wide mainstream use. What is a disrupting technology? It is the one that displays established technology and revolutionizes industry or ground shaking product that creates a completely new industry.

Today disruption, change and competition dictate the new paradigm for the banking industry, the financial institutions are no exception to the dynamics of industrial advancement which is driven by a fast-growing cost and great pressure. The implementation of the blockchain influences a lot of stakeholders in the financial services which include customers, employees, shareholders, investors, suppliers, industry associates, education institutions, government and non-governmental organizations. The banking world is involved in quick changes of digitalization, a potential cost and labor-savinginstrument, the prospects for the global finance market are so appealing that many major financial institutions are investing millions of dollars to research on what will be the best way to implement it.

The high-priced and opaque involvement of a third party in a transaction is the main problem that has been solved by the creation of the Blockchain due to one centralized shared database. In the past, it was impossible because every transaction requires communications between two single databases and thence another authorized controlling layer was needed. A simplified example of remittance can be used in espousing the concept lucidly, your relative who wants to Transfer money from another country to you, but before you receive the money it might take hours perhaps days for you to be able to receive the said money.

This is because transferring money involved some other parties who must authorize and control the transactions. That kind of frustrating and arduous processes get vaporized under Blockchain. The blockchain is a conceptually stored and synchronized distributed ledger that enables safe and transparent transaction across its networks. Every party involved has an identical copy of the shared ledger that is used to record and store information of the asset such as monies and properties.

Every change to the ledger will be synchronized and copied almost directly and transparently to the network where it will be seen as a block. The blocks are linked by cryptographically. An example to illustrate how this works is a situation where A wants to send money to B. The transaction is represented online in a block without a middleman. After the block is sent to every party on the network, approval is given by nodes to validate every transaction. If the transaction is approved the block will be added to the chain which revises the permanent and transparent records of the transactions Finally, the money will move from A to B and this is done in few minutes.

The blockchain network relies on the decentralized systems making it attainable for one person or group of persons to get in control of it. This safe and transparent transaction is facilitated through a decentralized system of the payment system which is allowed by the blockchain technology. Hereby staring in the era that extends beyond financial capital market, global payment, Corporate Governance social institutions and democratic participation Before Digitalization every action in the traditional banking industry had to be done manually. The industry has homogeneously surfaced centralized data stored and many intermediaries linked, this result to poor customer service through complex clearing processes, large amount manual inspections, leaking personal information and high costs.

The practice of keeping ledgers dates back in centuries, the blockchain story started in 2008 when an anonymous person or group of persons with pseudonym Satoshi Nakamoto published a white paper which proposes an Electronic peer to peer cash system called Bitcoin The blockchain was originally developed to support bitcoin but now it is used for more than thousand cryptocurrencies which resulted in a long trail effect.

The said technology can be used in so many sectors such as cybersecurity, supply chain, forecasting, networking, insurance, private transport, online storage, charity, voting, government, energy, online music, retails, health care, real estate, crowdfunding and identification As explained earlier the blockchain technology eliminates the involvement of a third party in transactions, or as prof. Anis H. Bajrektarevic coined: “Hegemony orhegemoney, a debtor empire/s’ fiat-papers.”

This chain is disrupting the banking industry as secured, cut cost, reduce delay and it is hugely efficient. Because it is decentralized and permissionless, it can lead to more disruptions in the financial sector, especially in payment clearing. Recently international organizations as well as developed countries and other countries have been paying close attention to the blockchain technology and are exploring their application in various fields.

For the financial sector, a number of the international financial institution have begun to formally plan for the blockchain technology since 2015, Goldman Sachs and other banking Giants have established their own blockchain laboratories working in close collaboration with the blockchain platforms.

Major Financial Institutions have a relatively positive attitude towards studying and improving the beck and processing efficiency of the blockchain technology and place a significant emphasis on its potential to reduce operational cost. In fact, IBM predicted that in four years sixty-six percent of the banking industry will have commercialized the blockchain at a scale. What are our indigenous Africa banks or Ghanaian own banks doing about this? Will they be part of the sixty-six percent as stated in the prediction above, it is high time we start giving opportunities to the IT department in the banking Industry to study this new technology so that we rise to be counted. Other opportunities with this new technology are a point to point payment, sharing credit data, smart contract all this using the blockchain technology.

This technology can drastically reduce the manual intervention of supply chain in finance and employ smart contract or digitized procedures that rely heavily on paperwork, numerous intermediaries, high risk of illegal transactions, high cost and low efficiency. As transaction occurs simultaneously each transaction will need to be verified by all the nodes in the entire network which is harmful to speed this impact will become especially needy when the nodes in the blockchain increase.

Despite the permission-less and self-govern nature of the blockchain the regulation and the actual implementation of a decentralized system are problems that remain to be resolved, however, it is important to note that any beneficiary technology is accompanied by risks, therefore, the blockchain regulation is necessary and should be considered earnestly. The Financial industry is highly sensitive to technological changes.

To keep up with these changes, banks must invest more into research on the blockchain not forgetting the development and empowerment of its staff in knowing more about this new technology. Although the blockchain technology is still unregulated and it could have its limitations, banks would have to improve their position in the industry.

The banks will try to improve their payment systems and overcome information communication resulting in a better customer experience hence the blockchain will become the core underline technology of the financial sector in the future.

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Economy

Modi’s India a flawed partner for post-Brexit Britain

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With just two weeks to go until Britain is scheduled to exit the European Union, Boris Johnson and his ministers are understandably focused on the last-minute dash to formulate a workable Brexit deal with the EU. Once this moment has passed, however, either Johnson or whoever replaces him as PM will come under intense pressure to deliver the trade deals Brexit side supporters have so talked up since 2016.

One such envisaged deal is with India. Seven decades after securing independence from Britain’s colonial empire, New Delhi has the world’s seventh-largest economy and one of its fastest growth rates. The prospect of deeper trade ties with Asia’s third-largest economy has been a major feature of the pitch for a “Global Britain” that extends the UK’s reach beyond the continent, and Johnson himself made a big thing of expanding economic ties with India while campaigning to become PM.

Unfortunately, any plans to kickstart trade agreements with India will run into problems, and not just over immigration and visa issues. India is on the verge of a serious economic downturn, hit by job losses and decreasing levels of foreign investment. With growth slowing down, Indian PM Narendra Modi has fallen back on his aggressive brand of Hindu nationalism to galvanise public support, a gambit that has most recently resulted in his government’s controversial move to strip automony from Kashmir.

Bad time for a UK-India trade deal

Whereas only a few years ago India was held up as one of the world’s fastest growing economies and an enticing prospect for global trade and investment, Moody’s new projection of a 5.8% growth rate represents a danger to Narendra Modi’s promise of a $5 trillion economy. Recently released figures show India’s GDP growth falling for the fifth successive quarter, to a six-year low of 5.2%.

India’s economic woes are reflected in patterns of foreign investment. Around $45 billion has been invested in India from abroad over the last 6 years. The downturn in the country’s economic fortunes has seen a record $4.5 billion of shares sold by foreign investors since June this year. These economic problems are linked to Modi’s failure to carry through on economic reforms promised when he came to power in 2014, when a number of structural problems were seen as inhibiting external trade relationships.

India currently has over 1,000 business regulations and more than 3,000 filing requirements, as well as differing standards for social, environmental and human rights. These have been sticking points in the moribund trade deal negotiations between India and the EU, and Brexit advocates have not explained how they plan to overcome these hurdles.

Hostility to foreign companies

Structural issues are only part of the problem. Another key concern is the Indian government’s adversarial attitude towards foreign investors. Despite Modi’s promises to make India an attractive place to do business, his government has continued protectionist policies that throttle the country’s ability to attract outside capital.

One issue is retrospective taxation. Under Modi’s predecessor, Manmohan Singh, several British and international firms were hit with sizeable, legally dubious tax bills by the Indian government. Modi came to power on a promise of ending retrospective tax bills being imposed on overseas companies, and yet British firms such as Vodafone and Cairn Energy still find themselves pursued through the courts for back-dated tax bills, despite the protections they should enjoy under the bilateral investment treaty between India and the UK.

Vodafone’s case involved its 2007 acquisition of a stake in cellular carrier Hutchinson Essar. While the deal did not take place in India, New Delhi determined Vodafone still owed $5 billion in taxes on the overseas transaction. After the Indian Supreme Court dismissed the claim in 2012, India’s previous government introduced a new law to tax transactions of this nature that retroactively applied to cases going back to 1962. Modi attacked this “tax terrorism” at the time, but his government has continued its dogged pursuit of Vodafone in the courts.

Cairn Energy has faced an equally arduous struggle with the Indian Ministry of Finance, which in 2014 blocked the British firm from selling its 10% stake in Cairn India and subsequently demanded $1.6 billion in taxes. Indian officials used the 2012 law to justify their actions, violating the bilateral investment treaty and breaking one of Modi’s own campaign promises in the process.

Immigration laws a further sticking point

This recent history should already give British businesses pause, but the most obvious obstacle in any trade negotiations between UK and India will be the issue of immigration. The Centre For European Reform has argued post-Brexit trade will be closely linked to opening up UK borders to workers from partner countries, but a UK Commons Foreign Affairs Select Committee report in June highlighted how Britain’s immigration restrictions on Indian workers, students and tourists has already impacted bilateral trade relations. The report noted how the UK has slipped from being India’s 2nd largest trade partner in 1999 to 17th in 2019, adding that skilled workers, students and tourists are deterred from coming to the UK by the complicated, expensive and unwelcoming British migration system.

It is unlikely the Modi government will agree to any UK-India trade deal that doesn’t guarantee a relaxing of immigration rules that will allow a free flow of people as well as goods and capital between the two countries. The question is whether the British government, which has veered ever more closely towards a Brexit-fuelled populism at odds with relaxed border controls, will be flexible enough to sign up to this.

Given these issues, are Britain’s hopes for a post-Brexit dividend in Indian trade dead on arrival? Unless Modi’s government starts living up to international standards and honouring his country’s investment agreements with British companies, “Global Britain” may not get much further with India than it has with the US.

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Economy

A more effective labour market approach to fighting poverty

Cynthia Samuel-Olonjuwon

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Gainful employment is still the most reliable way of escaping poverty. However, access to both jobs and decent working conditions remains a challenge. Sixty-six per cent of employed people in developing economies and 22 per cent in emerging economies are in either extreme or moderate working poverty, and the problem becomes even more striking when the dependents of these “working poor” are considered.

Thus, it is not just unemployment or inactivity that traps people in poverty, they are also held back by a lack of decent work opportunities, including underemployment or informal employment.

Appropriate labour market policies can play an important role in the fight to eradicate poverty, by increasing access to job opportunities and improving the quality of working conditions. In particular, labour market policies that combine income support for jobless people with active labour market policies (ALMPs).

The new ILO report What works: Promoting pathways to decent work  shows that combining income support with active labour market support allows countries to tackle multiple barriers to decent work. These barriers can be structural, (e.g. lack of education and skills, presence of inequalities) or temporary (e.g. climate-related shocks, economic crises). This policy combination is particularly relevant today, at a time when the world of work is being reshaped by global forces such as international trade, technological progress, demographic shifts and environmental transformations.

Policies that combine income support with ALMPs can help people to adjust to the changes these forces create in the labour market. Income support ensures that people do not fall into poverty during joblessness and that they are not forced to accept any work, irrespective of its quality. At the same time, ALMPs endow people with the skills they need to find quality employment, improving their employability over the medium- to long-term.

New evidence gathered for this report shows that this combination of income support and active support is indeed effective in improving labour market conditions: impact evaluations of selected policies indicate how people who have benefited from this type of integrated approach have higher employment chances and better working conditions.

One example of how this combined approach can produce results is the innovative unemployment benefit scheme unrolled in Mauritius, the “Workfare Programme”. This provides workers with access to income support and three different types of activation measures; training (discontinued in 2016), job placement and start-up support. The programme was also open to those unemployed people who were previously working in an informal job. By extending coverage to the most vulnerable workers, the scheme has helped reduce inequalities and unlock the informality trap.

Another success came through a public works scheme implemented in Uruguay as part of a larger conditional cash transfer programme, the National Social Emergency Plan (PANES). The programme was implemented during a deep economic recession and carefully targeted the poorest and most vulnerable.

Beneficiaries of PANES were given the opportunity to take part in public works. In exchange for full-time work for up to five months, they received a higher level of income support as well as additional job placement help. This approach reached a large share of the population at risk of extreme poverty and who lacked social protection. The report indicates that providing both measures together was critical to the project’s success.

The effects of these policies on poverty eradication cannot be overestimated. By tackling unemployment, underemployment and informality, policies combining income support with ALMPs can directly affect some of the roots of poverty, while enhancing the working conditions and labour market opportunities for millions of women and men in emerging and developing countries.

ILO

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Economy

CPEC vs IMF in Pakistan

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International Monetary Fund (IMF) was created just after World War II (WWII) in 1945. The IMF is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Pakistan has been knocking doors of IMF since 1958, and it has been 21 agreements with IMF. Generally, the IMF provides loans at very low-interest rates and provides programs of better governance and monitoring too. But for the last 6 decades, Pakistan has suffered a lot, in terms of good governance. Especially last 2 decades, corruption, nepotism, poor planning, bribery, weakening of institution, de-moralization of society, etc were witnessed. We may not blame the IMF for all such evils but must complain that the IMF failed to deliver, what was expected. Of course, it is our country, we are responsible for all evils, and wrongdoings happened to us. We have to act smartly and should have made the right decision and at right times.

IMF also dictates its terms and condition or programs like: devaluation of local currencies, which causes inflation and hike in prices, cut or draw-back of subsidies on basic utilities like fuel, gas, electricity, food, agriculture etc, which causes cost of life rather higher for local people, cut on development expenditures like education, health, infrastructure, and social development etc, which pushes the country even more backward. IMF focusses only on reducing expenditures and collection of taxes to make a country to meet the deadlines of payments. IMF does not care about the development of a country, but emphasizes tax collections and payment of installments on time, to rescue a country from being a default.

While CPEC is an initiative where projects are launched in Power Generation, Infrastructure development under the early harvest program. Pakistan was an energy trust country and facing a severe shortage of Electricity. But after completion of several power projects under CPEC, the shortfall of electricity has been reduced to a great extent. One can witness no load shedding today, while, just a few years back the load shedding was visible throughout the country for several hours a day. Several motorways and highways have been completed. Gwadar port has been operational partially. Infrastructure developments are basic of economic activities.

Projects under CPEC has generated jobs up to 80,000. CPEC was the catalyst to improve GDP by around two percent during 2015-2018. CPEC has lifted the standard and quality of life of the common man in Pakistan. CPEC was instrumental to move the economic activities and circulation of wealth in society. Under CPEC, early harvest projects, 22 projects have been completed at the cost of approximately 19 billion US dollars.

It is understood that early harvest projects were heavy investment and rather slow on returns. But, these projects have provided a strong foundation for the second phase, where Agriculture, Industrialization and Social Sector will be focused. Return on Agriculture and Industrial produce is quick and also generates more jobs. The second phase will contribute toward the social development of Pakistan as well as generate wealth for the nation.  Pakistan’s agriculture sector has huge potential as cultivatable land is huge, workforce is strong and climate is favorable.  Regarding Industrialization, Pakistan is blessed with an abundance of mines and minerals. The raw material is cheap and the labor cost is competitive. Pakistan has 70% of its population under the age of 40 years, which means an abundance of the work force. Pakistan’s domestic market is 220 million and the traditional export market is the whole of the middle-east and the Muslim world.

The major difference between the CPEC and IMF is that CPEC generates wealth, while IMF focuses on tax collection and reducing the developments and growth. China is the latest model of developments in the modern days, China is willing to replicate its experience with Pakistan for its rapid development.

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