Monthly Archives: March 2013

Residential market stands alone

Denmark’s residential construction market CAGR expected to grow 1.44%, while the industry outlook remains bleak.

LONDON –The Danish residential construction market is expected to record positive growth in 2014 with a CAGR of 1.44% over the forecast period, after recording a decline of 0.3% in 2013.  Residential construction constituted the largest market within the construction industry, accounting for a 46.8% share of industry output in 2012. Overall, the Danish construction industry recorded a negative growth CAGR of -3.31% during 2008 -2012, residential construction emerged as sole market with any expected growth.

Residential construction markets expected to grow despite relatively strong property prices

Accounting for a 46.8% share of industry output in 2012, residential construction constituted the largest market within the construction industry. Despite a decline in property prices during the past few years, they remain considerably higher compared with neighboring countries, leaving the residential market in a fragile situation

Industrial construction market expected to register CAGR 0.33% by 2017

Industrial construction recorded a CAGR of -3.99% over 2008 -2012, the largest decline of all the construction markets. Owing to uncertainty in the global economy, exports declined, resulting in the decline of local demand which affected the manufacturing industry in particular. With the Eurozone crisis continuing to fester and many Danish trade partners suffering as a result, Timetric forecasts the Danish industrial construction market to register a CAGR of 0.33% over the forecast period.

Due to a highly-developed transport network the infrastructure market only recorded a mild decline

Owing to strong transport networks of roads, railways, airports and ports, the infrastructure market was only slightly impacted by the economic crisis. Supported by 130 commercial ports and 30 airports including five international airports, with Copenhagen’s airport acting as Europe’s main gateway to Scandinavian countries,  the infrastructure construction market to emerged reasonably unaffected recording a CAGR of ‑1.74% over 2008 -2012.

Weak economic growth is affecting urban development

In 2012, the Danish commercial construction output valued DKK26.3 billion (US$4.9 billion), recording a CAGR of -3.68% during 2008 – 2012. With the Danish economy remaining in turmoil and caught in a period of sluggish growth, the demand for commercial properties such as retail, office and leisure and hospitality remained low. As a result of the continuing gloomy conditions across most of Western Europe, the main trading partner for Denmark, Timetric expects the commercial construction output to register a CAGR of 0.88% by 2017.

Infrastructure The Only Light In Ireland’s Bleak Construction Market

Tough economic times have seen a decline across Ireland’s construction industry, but the infrastructure sector is set to record positive growth between 2013 and 2017.

Despite a significant decline in the Irish construction industry – a CAGR of -28.25% between 2008 and 2012 – infrastructure construction is projected to record a CAGR of 1.03% between 2013 and 2017. This growth can primarily be attributed to various transport plans and government initiatives that are seeking to stimulate the economy.

Residential Construction

Depressed economic conditions as a result of austerity measures are making it difficult for Irish households to repay housing debt. Furthermore, prospective buyers – especially those taking their first steps onto the property ladder – are finding it difficult to secure mortgages without being asked to pay often prohibitively large deposits. Consequently, despite residential construction’s being the largest construction market in Ireland – accounting for 34.7% of total construction output in 2012 – it was also one of the worst performing between 2008 and 2012, recording a CAGR of -29.37%.

Commercial Construction

High unemployment, low wage growth, and a depressed economic outlook have rendered customer spending in Ireland cautious, which combined with the fear of government spending cuts and tax hikes

Customer spending in Ireland has been rendered cautious by high unemployment, low wage growth, and a depressed economic outlook. Combined with business’ fear of making large investments as a result of government spending cuts and tax hikes, this has had a significantly detrimental effect on Ireland’s commercial construction market, which recorded the most significant decline of all sectors: a CAGR of -32.93% between 2008 and 2012.

Industrial Construction

Uncertainty in the global economy had a negative effect on exports, affecting the manufacturing industry in particular. This, coupled with the more general economic malaise, saw the Irish industrial construction sector record a CAGR of -31.36% between 2008 and 2012 – the second largest decline of all Irish construction markets.

Infrastructure Construction – The Light In Ireland’s Construction Market

Although all sectors of Irish construction registered negative growth between 2008 and 2012, a low benchmark interest rate, various transport plans, and government initiatives to stimulate the economy are expected to encourage growth in the infrastructure sector between 2013 and 2017.

Tunisia tourism springs back after uprisings

Tunisia’s total revenue increased at an annual rate of 12.7% in 2012 due to an increase in domestic and inbound tourist volumes. 

LONDON – Despite the decline in tourism Tunisia experienced following the Arab Spring Uprisings of 2011, total revenue has rebounded at a rate of 12.75% during 2012. This recovery was primarily due to an influx of domestic and inbound tourist volumes. Additionally, airline revenues have seen a 39% growth rate during 2012.

While tourism is still affected by political instability and terrorist concerns within the region, the government’s measure to improve tourism infrastructure and the creation of pro-tourism regulations has helped restore the country’s economic lifeblood.

Improved social and political climate

The ejection of Ben Ali’s repressive reign has lead to a newly elected constituent assembly that is likely to maintain a priority focus on tourism and continue initiatives to encourage foreign investment. Foreign direct investment (FDI) in Tunisia has already seen increase of 24.1% between 2011 and 2012 creating a total of 7,501 new jobs, mitigating social unrest.

Airline industry growth aided by regulatory reforms

Airlines saw a strong recovery with the end of the revolution, with a 39.7% growth rate over 2012, following a 29.5% decline in 2011. However, despite the recovery, airlines relied heavily on tour operators to generate flight bookings due to the high fares charged by international airlines. With minor social and political restoration and modified airline regulations, airline industry prospects are promising. Proposed open-skies agreement with the EU to bilateral air agreements with various nations in Europe, Africa and the Arab region, will act as important growth drivers for the Tunisian airlines industry.

Pressure from competitors prompts growth in Medical and Wellness Tourism

Egypt and Morocco, Tunisia’s neighboring tourism giants, are also in the midst of enticing tourists, pressuring Tunisia to explore new markets in order to refuel its inbound tourist deficit. The financial crisis had major impact on the tourism industry, affecting the primary European market. As a result, a new field of Medical Tourism has emerged and it’s expected to grow strongly by 2017, aiding the recovery of the stifled sector.

Driving Medical Tourism is a solid medical infrastructure, ensuring access to inexpensive yet high-quality medical services. Factored into costs, are luxury lodgings for family members with a broad range of treatments available to meet growing demands for health and wellness tourism. Treatments included spas, resorts and thalassic therapy centers, supplementing the appeal for cash-strapped Europeans. Adding to this growth, Tunisia aims to develop and promote its thalassotherapy centers, such as those in Hammamet.

Government Initiatives Grow Puerto Rico’s Insurance Sector

Despite its contracting economy, measures taken by the government have spurred growth of Puerto Rico’s insurance industry. 

Government initiatives in Puerto Rico have seen its insurance industry grow by a CAGR of 5.8% between 2007 and 2011, despite its contracting economy.

A high rate of insurance penetration however – standing at 11.3% in 2012, compared to the global average of 6.8% – means opportunities for further foreign investment, and therefore the sustained growth of the insurance market in Puerto Rico, are limited.

Insurance unaffected by negative economic growth thanks to government initiatives

The Puerto Rican economy contracted between 2007 and 2011, with GDP at constant prices falling at annual rates of -1.9%, -2.3%, -2.1% and -2.2%. This has been primarily attributed to a decline in exports, the global financial crisis, falling investment in construction, and a significant decline in government spending. However, its insurance industry weathered this storm admirably, posting a CAGR of 5.8% during the same period. This is in part a consequence of the government’s healthcare reforms, the implementation of a Medicare program, and compulsory third-party motor insurance.

New legislation attracts global investors

A key factor in the Puerto Rican insurance industry’s continued growth is legislation enacted in 2011 as part of a collaboration between the government and the office of the Commissioner of Insurance. This placed a 4% flat tax rate on all overseas insurers starting business in Puerto Rico in the 2012 tax year, and will be given for 15 years, with an additional option to renew the contract for two more 15-year terms. This initiative boosted investors’ confidence, and sparked significant interest in the Puerto Rican insurance market from overseas insurers in 2012.

A gateway to the Latin American and US insurance industries

A further contributing factor to Puerto Rico’s recently expanded insurance sector is its proximity to both Latin America and the US, rendering it an attractive proposition for global insurers to underwrite policies directly from these areas.

High levels of insurance penetration discourage new entrants

Despite its significant recent growth, the high levels of insurance penetration in Puerto Rico damage its investment potential for new market entrants. In 2012, Puerto Rico’s insurance penetration was the highest in Latin America, standing at 11.3%: significantly higher than Costa Rica’s 1.9%, Guatemala’s 1.3%, the Dominican Republic’s 1.2%, and even the world average of 6.8%. Consequently, opportunities are comparatively few, and insurers considering ventures into Puerto Rico are instead likely to opt for other countries in the region with lower penetration levels. As such, despite healthy growth between 2007 and 2011, the growth forecast of the Puerto Rican insurance market to 2017 is limited.

Tax avoidance measures hit Crown Dependencies

  • About £600 billion in assets under management is held in the Crown Dependencies of Jersey, Guernsey and Isle of Man.    
  • At least £305 billion is held in banking deposits in these three islands.
  • Guernsey and Isle of Man, the two Overseas Territories to have recently signed up to FATCA-styled tax disclosure treaties with the UK, hold over £152 billion in banking assets.
  • Jersey, which today pledged to sign a similar agreement, is the largest crown dependency offering reduced tax rates.
  • There are over 1.7 million non-doms currently living in the UK.
  • The global private banking industry has AuM of $19.3 trillion. Offshore centers account for 42% or $8.3 trillion of this total.

According to WealthInsight’s analyst, Oliver Williams: “The 2013 budget sends a clear signal to the Crown Dependencies that their days of tax freedom are limited. Today, all three islands have pledged to agreements allowing greater tax transparency and HMRC have promised to recover £1 billion over the next five years. This will affect many of the 1.7 million non-doms living in the UK and even more HNWIs who hold assets in the Dependencies”.

Asian Banks; Asian Demands

Eastern banking institutions are no longer looking to the West for innovation, focusing instead on the specific needs of the Asian market.

The global economic downturn, combined with the higher expectations and more sophisticated banking needs of customers in Asian markets, have seen Eastern banking institutions break from the past trend of following Western innovation. Consequently, their focus has shifted to the specific needs of the Asian population, as well as away from expensive, large-scale technology projects towards the efficiency and efficacy of existing processes and technologies.

The specific needs of the Asian population

Shifts in the Asian banking sector are being driven by two major trends: a rise in the proportion of the population that require banking services, and a rise in the expectations and sophisticated financial needs of those customers. The hands-on mentality of many customers has meant banks must invest in comprehensive transactional capabilities, whilst the typical personal relationship in branches is being transformed by customer demand for more digital interaction. Further characteristics of the Asian market include an aversion against fees and high-price sensitivity, and a need for personalisation and differentiation from others.

The importance of banking channels

These same trends have further cemented channels as a key area in Asian retail banking innovation, with physical and digital channels being fine-tuned to better reflect the needs of the market. Internet and mobile banking are becoming increasingly intuitive tools to help customers manage their finances, with progressive digitisation and automation impacting the design of some branches, where the high counter has been removed.

A shift in innovation

Although they fared better than their Western counterparts, the global economic crisis did impact Asian retail banking institutions, consequently moving their focus away from expensive, large-scale technology projects that were failing to meet expectations. Instead, their focus has turned to ensuring the efficiency and efficacy of existing processes and technologies.

This shift has seen significant business value added to organisations that have revisited crucial customer-facing processes, such as account opening, loan approval and business continuity, as well as dealt with the surge of new know your customer (KYC) requirements.

Insurance Sector in Central African Republic Set to Expand 10.7% by 2017

Despite challenges, the small but rapidly expanding insurance market in the Central African Republic offers significant investment opportunity.

New research suggests the insurance industry in the Central African Republic (CAR) is set to grow at a CAGR of 10.7% between 2012 and 2017, making it an attractive proposition for foreign investment. Stable economic development, the continued expansion of the mining industry, and a host of modernising infrastructure projects is contributing to significant growth in the CAR’s insurance sector.

Despite the substantial obstacles yet to be overcome – primarily a lack of public awareness regarding insurance products, and the low life expectancy that limits demand – the insurance market’s projected growth remains healthy. The industry’s small market size, with insurance penetration standing at only 0.36% in 2012 – in comparison to the global average of 6.8% – provides new market entrants willing to tackle these challenges with substantial positive growth potential.

Key market insights include:

Stable economic development to support insurance industry expansion

The performance of a nation’s insurance industry is closely correlated with its economic growth; thus, the stable economic development of the CAR spurred an increased demand for insurance from 2008-2012: a trend that is set to continue. This is in no small part thanks to the nation’s burgeoning mining industry, and a range of infrastructure investment, including the laying of fibre-optic cable, the modernisation of transport routes, and improvement of energy capacity.

Low rates of insurance penetration to attract new business

Despite the CAR’s rising insurance penetration rates, total penetration in 2012 remains low – at 0.36% – compared to the global average of 6.8% Thus, the CAR represents an excellent opportunity for new market entrants to experience substantial positive growth.

Low life expectancy and lack of public awareness limit the demand for insurance

World Bank statistics show the CAR as having one of the lowest life expectancy rates in Africa, at only 48.3 years in 2011. This limits the demand for health, pension and life insurance coverage – a factor that is compounded by a lack of public awareness with regards to insurance products. Addressing this latter concern should be a high priority of insurers in the CAR.

High combined ratio in life insurance segment

A combined ratio of more than 100% reflects underwriting losses. The life insurance segment recorded a high combined ratio from 2008-2012, reaching a peak of 249.8% in 2009. A substantial improvement in the quality of underwriting must therefore take place to curb these losses.