Transcript presentation - Armenian International Policy Research Group

"Creating economic
development through regional
cooperation in the Wider Black
Sea region"
Vasilios Margaris
General Director of
Thessaloniki Stock Exchange Centre
HELLENIC EXCHANGES GROUP
"Creating economic development through
regional cooperation in the Wider Black
Sea region"
• Why economic cooperation?
• FDIs in the Black Sea Region
• Key figures for Black Sea Region
….PROPOSALS.....
• Harmonization of the legal framework in the economic
environment
• Interconnecting the local stock exchanges trading platforms
• Creation of a Black Sea Emerging Capital Market/ Regional
Energy Derivatives Market
• Exchange of know-how in the economic development fields
• A single entry point for investments in the region
"Creating economic development through
regional cooperation in the Wider Black
Sea region"
Why economic cooperation?
Economic co-operation
Economic co-operation among countries has been a key
factor of world economic development for many years.
Globalization of economic activity has made co-operation
even more essential.
Pursuing mutual economic interests diminishes conflicts and
disputes.
Special organizations has played a significant role and have
acquired high esteem, like the “Organization for Economic
Co-operation and Development” (O.E.C.D.), World Trade
Organization (W.T.O.), and of course the E.U., which was
initial a treaty for economic co-operation.
Bilateral and multilateral agreements have been achieved to
further enhance common economic interests.
Economic co-operation
Economic co-operation:
 Supports sustainable economic growth
 Boosts employment
 Raises living standards
 Maintains financial stability
 Contributes to growth in world trade
Economic co-operation
A country seeking to implement a policy, can
learn valuable lessons from its peers on what has
worked and what has not.
This can save time, and costly experimenting, in
crafting effective national policies.
The recommendations resulting from such a review
can also help governments win support at home
for implementing unpopular measures.
And perhaps most importantly, because of the
fact that everyone goes through the same exercise,
no country feels it is being singled out. Today’s
reviewers will be in the hot seat themselves
tomorrow.
"Creating economic development through
regional cooperation in the Wider Black
Sea region"
FDIs in the Black Sea Region
FDI inflows
FDIs is the most important form of investment.
It is the main drive force for economic growth.
Facilitating healthy investment environment is
vital for all economic policies.
Global FDI inflows
Global FDI flows approach their 2000 peak level, driven by
cross-border M&As with the increasing involvement of private
equity funds and resulting in further growth of international
production.
Global FDI inflows
 “The upward trend in foreign direct investment (FDI) that
began in 2004 accelerated further in 2006.
 FDI flows increased in all the major country
developed countries, developing countries
transition economies of East Europe
Commonwealth of Independent States (CIS)
varying rates.
groups –
and the
and the
– but at
 The sustained growth of FDI and related
international production primarily reflect the strong
economic performance and increasing profits of
many countries in the world, further liberalization
of their policies, and other specific factors such as
currency movements, stock exchange and financial
market developments and high commodity prices.”
UNCTAD,
FDI inflows by region, 2005 and 2006
Source: UNCTAD
FDI inflows by region, 1992-2005
27.818
30.000
17.320
24.589
19.585
16.871
19.014
Black Sea
SEECs
CEECs
14.600
25.000
20.000
7.362
9.849
15.000
10.000
4.060
3.773
3.755
4.844
12.445
5.732
6.895 13.283
1.198
5.000
2.344
862
1.270
1.114
1.363
2.517
10.341
5.260
6.141
2003
2004
Black Sea
0
'92-'97
annual
average
1998
1999
2000
2001
2002
CEECs
SEECs
2005
FDI flows to SEE and CIS countries
 FDI flows to East Europe and the
Commonwealth of Independent States
increased for the sixth consecutive year.
 FDI inflows into East Europe and the CIS grew by
68%, to $69 billion.
 Services sector was particularly buoyant because
of increased cross-border M&As in the banking
industry, the primary sector received higher
inflows as a result of soaring demand for natural
resources.
 FDI related policies continue to be in line with
their accession or aspirations to accede to the EU,
and with their aim to step up the privatization of
stateowned enterprises
"Creating economic development through
regional cooperation in the Wider Black
Sea region"
Key figures for Black Sea Region
Key figures for Black Sea Countries
2006
POPULATION
in million
NOMINAL
GDP (US$
bil)
GDP PER
CAPITA
(US$)
GDP
GROWTH
CPI
FOREIGN
FDIs
DEBT/ GDP (US$ mil)
ΝΟΝ-ΝΑΤΟ
ARMENIA
GEORGIA
UKRAINE
AZERBAIJAN
MOLDOVA
TOTAL ΝΟΝ-ΝΑΤΟ
3,0
4,4
46,6
8,4
4,2
66,6
$12,50
$7,78
$102,20
$19,85
$3,40
145,73
$1.997,00 13,50%
5,20%
$1.768,18 9,40%
8,80%
$2.190,00 7,10% 11,60%
$2.351,00 34,50% 11,40%
$809,52 4,00% 14,10%
$1.823,14 13,70% 10,22%
25,10%
20,60%
52,90%
9,90%
73,40%
36,38%
$343
$1.076
$5.203
-$601
$222
$6.243
ΝΑΤΟ BL-SEA
BULGARIA
ROMANIA
GREECE
TURKEY
TOTAL ΝΑΤΟ
TOTAL NATO
7,7
21,6
11,1
74,2
114,6
181,2
$49,10 $4.091,00
$121,90 $5.649,00
$225,00 $20.290,00
$402,81 $5.430,00
798,81 $8.865,00
944,54 $5.322,34
6,10%
7,70%
3,80%
6,00%
5,90%
9,83%
6,50%
4,90%
3,30%
9,70%
6,10%
8,79%
78,10% $5.172
28,80% $11.394
$5.363
51,50% $20.120
52,80% $42.049
45,03% $48.292
SOURCES: EMERGING EUROPE MONITOR, UNCTAD
Key figures for Black Sea Countries
 Figures show significant differences between
members and non-members of NATO in relation
to growth levels of the economy.
 Non-members have basic similarities, as far as
low GDP per capita, high inflation,high
growth rates and on the other hand, FDI
inflows and Foreign Debt on GDP vary
considerably.
 Members of NATO have a significantly higher
GDP per capita, lower inflation, but also
lower growth rates.
Key figures for Black Sea Countries
 Members of NATO produce 85% of the total GDP of
the region, they have more that double GDP per
capita, and 87% of the total FDI inflows.
 The average growth rate of non-members is more
than double compared to members.
 FDI inflows to non-members are low, compared to
members, but exhibit significant growth rates over
the years, indicating strong growth potential for the
economies.
ECONOMIC OUTLOOK
FACTS:
Development is hiking
Investment is booming
However:
Macroeconomic problems still exist
Rapid development is not always followed
by required infrastructure
MONEY MARKET
The banking sector in almost all the Black Sea
countries is witnessing a significant restructure.
Foreign banks penetrated recently, through
acquisitions
and
independent
network
development, bringing:
New products
Know-how
Investment capital
CAPITAL MARKET
Capital Markets have shown booming development
in terms of:
Capitalization
Turnover value
Number of participants
However:
size is still not comparable to developed countries,
Major reforms are still required
Capital market culture is not adequate
"Creating economic development through
regional cooperation in the Wider Black
Sea region"
PROPOSALS…
….CREATING THE GROUND FOR
COMMON DEVELOPMENT…
… a Black Sea Economic Network
Creating the ground for common
development
Harmonization of the legal framework in the
economic environment
Interconnecting the local stock exchanges trading
platforms
Exchange of know how in the economic
development fields
Creation of a Black Sea Emerging Capital
Market/ Regional Energy Derivatives Market
A single entry point for investments in the region
..Proposal I….
Harmonization of the legal
framework in the economic
environment
Harmonization of the legal framework in
the economic environment
In order to attract foreign capital as a region, investors need
competitive investment environment, that has the
following features:
A regulation and legal regime that is:
• harmonized across the region and
• harmonized to EU and international standards
capital movement structure that is:
• Liberal
• Cost efficient
Harmonization of the legal framework in
the economic environment
The establishment of a Black Sea Economic Network will undertake
the task to harmonize the legal framework of the participating countries
and will also help in the development of entrepreneurship in the region
of the Black Sea by utilizing available business networks and becoming
an access point for the business development.
Black Sea Economic Network may be part of the “ORGANIZATION OF
THE BLACK SEA ECONOMIC COOPERATION” or may even be an
independent organization that will be run by representatives of each
country.
As far as harmonization is concerned BSEN can focus on specific areas:
Development of a study for the harmonization of legal framework.
Propose the required changes for the harmonization.
..Proposal II….
Interconnecting the local stock
exchanges trading platforms
Developments in the Exchange industry
EU regulation
Aims to simplify investor access to any issue across
Europe
US Exchanges
Transcontinental expansion aiming to increase range of
products coverage
MIFID
Threat to the large European Exchanges
Information
Technology
International
liquidity
No longer a barrier to entry…
…but still a significant operating cost
Outsource of IT expertise to low labor cost countries
Data vendors, order routing systems & news agencies
businesses converging
Looking for cost effective ways to invest in smaller
regional markets
Liquidity is critical for Regional
Market survival
Regulation costs
costs
- Harmonization
MiFID
- IT
Customization
of local
costs
- Transparency
Directive
Rules
& Regulations
to
Sector
Consolidation
for
faster
execution
- Prospectus
Directive
EU requirements
- transcontinental
- larger
lines bandwidth
- Code
of Conduct
(C&S)
expansion
- Giovannini
barriers
- new functionalities
- equity sharing
- order routing
- mergers & acquisitions
Need for new products
- Need
Capital
forraising
new services
- primary listings
Need
for LIQUIDITY
- dual
fast listings
APIs
to members
- GDRs/ADRs
- international
investors
-- share
algorithmic
trading
capital increase
look for new trades
- ETFs
- spread
trading
- business
networks
- derivatives
- new pools of
liquidity
- consolidated
feed
- indices
CHALLENGES AND PROSPECTS
The purpose is to maintain sustainable liquidity and market
operating processes.
The challenge is to acquire adequate size in order to attract
foreign investment.
Cooperation through a common platform guarantees the
a single entry point for international liquidity pools.
Create a big visible virtual regional emerging market,
guaranteeing a win-win cooperation status for all the
participants:
Black Sea Virtual Regional Emerging Market
Black Sea Virtual Regional Emerging Market
1st Solution: A Common trading Platform
Brokers investors
MF
Stock
Exchange 1
Stock
Exchange 2
Brokers investors
Communications
Network
MF
Trading Platform
MF
MF
MF
Clearing &
Settlement
System
Local Clearing/Settlement
Clearing &
Settlement
System
Local Clearing/Settlement
MF
Black Sea Virtual Regional Emerging Market
2nd Solution: interconnecting Stock Exchanges
Black Sea
Exchange 3
Black Sea
Exchange 1
Members
Investors
Data vendors
Black Sea
Exchange 2
Communications
network
Intermediaries
Black Sea
Exchange N
Black Sea Virtual Regional Emerging Market
benefits for market participants
Significantly
reduce
operating costs
Increase the
participating
exchanges’
sources of income
exchanges split
cross border income
Increase the
capacity to raise
capital
listed companies
gain access to
capital available
through all
participating
exchanges
Opportunity for
local members to
expand abroad
at no additional cost
for infrastructure
Conclusion
Both the Common platform and the interconnected
markets solutions proposals are unique
and ensure a regional exchange’s organic growth




Preserve the autonomy and national identity of the participating
exchanges
Provide a modern trading and post-trading environment
Utilize a common infrastructure based on a compatible
regulatory and operational environment
Low cost investment and operation
Can be a true success story of regional cooperation
in the Black Sea Region
…Proposal III..
&
Black Sea Emerging Capital Market
..AND..
Regional Energy Derivatives and
Emmission Rights Market
Regional Energy Derivatives Market..
Development of a derivatives market that would cover a
wide range of products in a competitive and innovative
manner:
 Financial derivatives (stocks, indices, bonds)
 Energy (electricity, oil, gas)
 Commodities (agricultural, metals, resources)
The activation of such a market can foster economic
development by providing essential products and
resources at competitive prices and at adequate
quantities.
…and Regional Emmission Rights Market..
Development of an Emmission Rights market, an exchange
that will offer a range of environmental products (futures,
options, and swap contracts) for markets focused on
renewable energy, solutions to climate change, and other
environmental challenges :
 Environmental derivatives
trading in global carbon-based contracts,
as well as contracts for regional Green-e
certified voluntary renewable energy certificates
 Renewable energy derivatives
…Proposal IV..
Exchange of know how in the
economic development fields
Exchange of know-how in the
economic development fields
Through the collaboration that will emerge from these
activities, a new independent organization is proposed to
be created.
The “Black Sea Economic Network” could be funded by the
previously mentioned activities (by keeping part of the
cross border fees on transactions) and would undertake
the task to create an information network aiming to
enhance economic development.
Black Sea Economic Network can alternatively be a part of
the “ORGANIZATION OF THE BLACK SEA ECONOMIC
COOPERATION”, with focus on specific fields of activity,
described so far.
“Black Sea Economic Network”
“Black Sea Economic Network” would help in the development of
entrepreneurship in the region of the Black Sea by utilizing
available business networks and becoming an access point for the
business development.
BSEN could focus on specific areas:
Macroeconomic and microeconomic information portal.
Development of business supporting services (consultation).
Dynamic business network information center.
Human resource development.
International educational services provider.
Think tank for policy making on regional development.
…proposal V..
A single entry point for
investments in the region
Black Sea Economic Network
Black Sea
Country 3
Black Sea
Country 1
Consulting
Trading
services
Trading
fees platform
training
Black Sea
Country 2
Regional
derivatives
market
Black Sea
Country N
COMMON CULTURE COMMON FUTURE
The biggest advantage in wider Black Sea region, is
the common culture, common characteristics,
common way of thinking and strong economic ties.
Business operations and co-operations in the region
have proved that there is sound ground for success.
COOPERATION IS THE FUTURE
The countries in wider Black Sea region have the chance
to built their future together by:
Remaining independent cooperating markets,
Servicing their customers locally,
Utilizing all the available business networks,
Creating a significant virtual emerging market visible
to the worlds investor community..
Thank you for your attention..
Vasilios Margaris
General Director of
Thessaloniki Stock Exchange Centre
Member of Hellenic Exchanges Group
[email protected]
Tel.+302310567777
Fax +302310530455
www.helex.gr
16-18 Katouni str.
546 25 Ladadika
Thessaloniki
Macedonia
GREECE