Portfolio December 2011

Issue 72 ■ December 2011

Portfolio

emirates.com

Exclusive to Emirates First Class and Business Class

Georges Kern

AMAZON BOOKSChanging the Industry

FUSION POWERAre We Getting Closer?

MALE SCENTSClassics That Linger

Georges KernTime is the Brand

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December 2011

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We help you to protect, grow and pass on your wealth. Our commitment has always been rooted in transparency and long-term vision. Relying on these common sense values, we forge a lasting relationship based on trust

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Face the future with peace of mind.

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PortfolioExclusive to Emirates First Class and Business Class 11

Features

42 Flipkart Moves Fast in IndiaOnline sales in India have held great promise but failed to

deliver in the past. That is now changing, with flipkart.com

leading the charge.

46 Food: A Temperamental Star Why does the food on your plate never look as good as

in the TV ad? That’s because there’s a huge advertising

industry behind it.

52 Amazon Takes On PublishingAmazon.com has taught readers that they do not need

bookstores. Now it is encouraging writers to cast aside their

publishers.

Cover Story

This issueDecember 2011

34 The Evolution of AllureGeorges Kern was an untested executive when he joined the luxury group Richemont a decade ago. Placed in charge of Swiss watch manufacturer IWC Schaffhausen, Kern has since transformed the company into a prestigious global brand.

46

42

58 Germany Dims Its Nuclear PowerThe accident at Japan’s Fukushima nuclear plant caused

Germany to permanently shut down eight of the country’s

oldest reactors and plans to retire the remaining nine by

2022. But sceptics argue that the decision was premature.

64 Profit vs. RiskBanks are targeting the rapidly growing emerging markets to

keep profits flowing. But emerging markets are volatile and

pose unique problems.

52

11-12 Contents.indd 11 11/20/11 2:07:28 PM

17 NotebookWorld business in a nutshell.

23 ObserverSpotting and analysing business trends.

30 Column: Suzanne GoldenbergCleaning Up the Himalayas

PortfolioExclusive to Emirates First Class and Business Class

12

Departments

Essentials69 Slow Boat Through Russia

A cruise along the historic Volga-Baltic Waterway not

only takes in St Petersburg and Moscow but also all the

history and scenery along the route.

74 Yves Saint LaurentA massive retrospective exhibition covering famed

French fashion designer Yves Saint Laurent’s entire

body of work is on show until January in Madrid.

80 The Art of AppraisalKnowing how much your collection is worth is essential

for insurance purposes or when you want to sell. But

make sure you get the right appraiser, otherwise it can

be an expensive mistake.

84 Fusion Power: Is It Getting Any Closer?For decades, scientists have been predicting that one

day the same process that powers the sun will give

us virtually unlimited cheap, clean electricity. But the

technical obstacles remain huge.

88 That Man Smells FamiliarMen are far more brand loyal than women, which is why

classic men’s fragrances are still on the shelves. And

now there is even a retro movement afoot.

92 Northeast Passage Dream RevivedGlobal warming is shrinking the Arctic ice pack,

resulting in governments and companies scrambling to

exploit new opportunities in this previously inaccessible

region.

96 Other Business Portfolio takes a light-hearted look at the latest

business news.

Portfolio

68

Published for Emirates by

PO Box 2331, Dubai, UAE. Telephone: (+971 4) 2824060,

fax:(+971 4) 2824436, e-mail: [email protected] Printed by Emirates Printing Press, Dubai, UAE

Editor-in-Chief Obaid Humaid Al Tayer Group Editor & Managing Partner Ian Fairservice Group Senior Editor Gina Johnson Senior Editor Guido Duken Editorial Assistant Hilda D’Souza Art Director Tarak Parekh Designer Charlie Banalo Junior Designer Roui Francisco Senior Production Manager S Sunil Kumar Production Manager C Sudhakar Senior Advertisement Manager Jaya Balakrishnan Email: [email protected] General Manager – Group Sales Anthony Milne Email: [email protected] Business Development Manager Nicola Hudson Advertisement Manager Rameshwar Nepali

69

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Emirates takes care to ensure that all facts published herein are correct. In the event of any inaccuracy, please contact The Editor. Any opinion expressed is the honest belief of the author based on all available facts. Comments and facts should not be relied upon by the reader in taking commercial, legal, financial or other decisions. Articles are by their nature general, and specialist advice should always be consulted before any actions are taken.

AUSTRALIA/NEW ZEALAND Okeeffe Media; Tel + 61 89 447 2734, [email protected] BENELUX M.P.S. Benelux; Tel +322 720 9799, [email protected] chINA Publicitas Advertising; Tel +86 10 5879 5885 FRANcE Intermedia Europe Ltd; Tel +33 15 534 9550, [email protected] gERMANy IMV Internationale Medien Vermarktung GmbH; Tel +49 8151 550 8959, [email protected] hONg KONg/MALAySIA/ThAILAND Sonney Media Networks; Tel +852 27 230 373, [email protected] INDIA Media Star; Tel +91 22 4220 2103, [email protected] ITALy IMM Italia; Tel +39 023 653 4433, [email protected] JAPAN Tandem Inc.; Tel + 81 3 3541 4166, [email protected] NEThERLANDS GIO Media; Tel +31 6 2223 8420, [email protected] SOUTh AFRIcA Ndure; Tel: +27 84 701 2479, [email protected] SPAIN IMM International; Tel +331 40 1300 30, [email protected] TURKEy Media Ltd.; Tel +90 212 275 51 52, [email protected] UK Spafax Inflight Media; Tel +44 207 906 2001, [email protected] USA Totem Brand Stories; Tel +212 896 3846, [email protected]

INTERNATIONAL MEDIA REPRESENTATIVES

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NotebookBUSINESS NEWS IN BRIEF

December 2011

The Shanghai STock exchange

said it’s “basically ready” to let foreign

issuers sell stock, paving the way for

companies from HSBC Holdings to Coca-

Cola to list in the world’s second-biggest

equity market.

Trading should start “as soon as

possible when the time is ripe,” Xu Ming,

executive vice president in charge of the

international stocks board, said in an

11 November interview at the exchange.

There is no set timetable but the exchange

has finished work on technological and

regulatory requirements.

The trading of foreign equities will

mark the biggest change for China’s stock

market in more than five years and add

impetus to Shanghai’s drive to become

a global financial centre by 2020. It will

also broaden options for the nation’s

85 million individual investors who are

restricted from buying shares abroad by

China Ready for Foreign Shares

an earnings history and strong corporate

governance.

China has the world’s second-biggest

stock market with a combined market

value of $3.6 trillion for the Shanghai and

Shenzhen bourses as of November 2011.

The US is the largest with a market value

of $15.2 trillion. n

China’s capital controls.

Foreign firms could benefit from listing

in China through higher valuations and it

will give them access to Chinese currency

to fund their expansion in the world’s

second-biggest economy.

China is also seeking to revive investor

interest in an equities market that

has slumped the past two years as the

government raised interest rates and

imposed curbs on property transactions to

tame inflation and prevent asset bubbles.

Overseas companies are barred from

selling stock in China, though are allowed

to do so in Hong Kong.

The Shanghai stock exchange

has already been contacted by

foreign companies in the finance,

telecommunications, consumer goods

and manufacturing industries. Xu said

the exchange is looking for companies

that already have operations in China,

Xu Ming, an executive vice president at the Shanghai Stock Exchange.

17-20 Notebook.indd 17 11/20/11 2:05:17 PM

N u m b e r s G a m e

In FiguresThe World

29% plunge in Japan-based Olympus Corp’s shares sees its

stock price hit the lowest since 1995 after revelations

that its senior management admitted to have covered up investment

losses by using Us$687 million paid to advisers on the 2008

takeover of gyrus group and other investments in the 1990s.

$8.4 billion, that’s

how much

venture capital was invested

in start-up companies during

12 months, according to Dow

Jones Venture source. the

total climbed 29 per cent as

funds raised by consumer

internet companies more than

doubled from a year earlier.

the online ventures – including

search, entertainment and

social media – raised

$1.3 billion.

$6.3 billion is the

whopping

credit line readily available

to HNa group, a Chinese

financier in aviation, shipping

and hotels, if it chooses to

support acquisitions in europe

and the Us. the company

aims to boost its overseas

assets from 10 to 40 per cent

within the next five years with

investments in ge seaCo,

spain’s HN hotel chain and

a turkish air-cargo carrier in

the pipeline.

$3 billion is the sum

that British drug

maker glaxo-smithKline will

pay the Us government as

settlement for the multiple civil

and criminal investigations

into the pharmaceutical

firm’s marketing practices.

the settlement is the largest

in a federal case against a

pharmaceutical company,

surpassing the previous record

of $2.3 billion paid by Pfizer

in 2009.

the blue and white Chinese

porcelain was formerly owned

by swiss tycoons, the Zuellig

brothers.

$525 billion is set to be

spent on energy

projects in the oil rich meNa

region from next year to 2016

as per the arab Petroleum

investment Corp. saudi arabia

tops the list by committing

investments of $141 billion,

followed by the Uae with

$76 billion.

$43.2 million is the

record price for

Roy Lichtenstein’s 1961 comic-

style painting of a man looking

through a peephole sold at

Christie’s international at a New

york auction recently. the sale

is one of 13 records set at an

auction of contemporary art by

Christie’s and a world auction

record for the pop artist.

$89 billion savings plan

recently announced

by the French government will

be accrued by way of tax

increases and spending cuts

spread over five years. the big

package of budget savings

will help further slash its public

deficit and aid countering fears of

France getting dragged into the

eurozone debt crises.

$21.6 million, a world

record price for

any item of ming porcelain, was

reached at a sotheby’s Hong

Kong auction. Purchased by an

anonymous telephone bidder,

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18 Notebook

Portfolio

Tokyo’s record-low office rents

may post further declines

in the next six months as

landlords compete to fill space

with supply expected to reach

the highest since 2006.

New office space will rise

12 per cent to 1.54 million

square metres in Tokyo next

year, matching the level in

2006, according to a survey by

Mori Building Co. JP Tower, a

38-storey office tower located

in the city’s main business

district, will be completed in

the spring, while the 27-storey

Marunouchi Eiraku Building

will be built by January.

Tokyo’s office vacancy rate

rose to 8.8 per cent in October,

the first increase in seven

months, while rents slid to

a record low of 17,011 yen

($219) per tsubo. The city’s

office vacancy reached its all-

time low of 2.5 per cent in

November 2007, which drove

the average rent to a new

high the following year. A

tsubo, a standard measure of

property area in Japan, is 3.3

square metres.

Tokyo Office Rents Drop

Re

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17-20 Notebook.indd 18 11/20/11 2:05:20 PM

Sasol Investment Spree

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Dubai’s sunny OutlOOk

19Notebook

December 2011

Sasol, the world’s largest producer of fuel from coal, is looking

at spending an additional $5.06 billion in the southern African

region over the next three to four years. This is after spending a

total of $5.44 billion in the region over the past few years.

Speaking at the inauguration of Sasol Synfuels International’s

$126 million cobalt catalyst plant in Sasolburg, South Africa,

Sasol senior group executive Lean Strauss

said the company remained committed to its

South African roots.

Using noble metals to activate the

catalyst, the catalyst manufacturing process

has been described as the “heart” of the

technology that makes its gas-to-liquids

(GTL) process possible (converting gas to

petrol). Before the commissioning of the

new plant in Sasolburg, cobalt catalyst had

been supplied from Sasol’s manufacturing

partner, BASF, from the world’s first large

scale cobalt catalyst manufacturing facility in

De Meern, near Utrecht in the Netherlands.

Construction on the Sasolburg plant, based

on the design philosophy of the second plant

in De Meern, began in February 2009 and its completion means

Sasol now has its own 100 per cent held facility.

Sasol has been actively seeking to grow the number of GTL

plants it operates globally and while the SA plant will initially

be supplying its existing GTL sites in Qatar, Nigeria and

Uzbekistan, it would later become a supplier to new plants as

they were added.

Dubai’s ever-expanding tourism

industry has posted impressive

results. Dubai hotels hosted

6.64 million guests in the first

three quarters of 2011, up

by 11 per cent compared

with the corresponding period

last year. the guest nights

rose by 26 per cent to

reach 23.68 million, while

the average length of stay

increased by 14 per cent

during the same period.

Revenues of hotels and hotel

apartments increased by 19

per cent to cross $2.98 billion,

with the share in revenues

of hotels increasing by 20

per cent and that of hotel

apartments by 13 per cent.

the total revenues of

hotels and hotel apartments

during the first half of 2011

was over $2.19 billion, an

increase of 18 per cent over

the corresponding period last

year. Of this, about $1.9 billion

came from the hotels and

$290 million from the hotel

apartments. the number of

hotels and hotel apartments

also recorded a modest

increase of one per cent to

reach the number of 573.

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A Sasol GTL plant in Mozambique, southern Africa.

17-20 Notebook.indd 19 11/20/11 2:05:22 PM

eVeNt Name: INDIAN PROPERTY SHOW WeBsite: INDIANPROPERTYSHOW.COM

Date: 15-17 DECEMBER, 2011 VeNUe: AIRPORT EXPO

Real estate in India currently has an astounding growth rate of 10 per cent per annum, which is why there’s been a huge demand for property shows from Non-Resident Indians in the UAE. Unitech Ltd, Hiranandani Group and Godrej Properties are some of the real estate juggernauts amongst the 60 plus exhibitors at this ninth edition of the Indian Property show. Connecting buyers with developers at a prime time the show intends to tap into the growing niche at the luxury end of the market by introducing an exciting new plan – Property Dhamaka! That earns buyers rewarding and profitable deals from participating developers by way of discounts, amazing holiday packages for families and free property registration. In addition, there’s plenty of opportunity to acquire a general knowhow of the different investment options, financing sources and legal guidelines for buying property in India.

eVeNt Name: Middle East Industrial Gas Conference 2011 WeBsite: gasworld.com/conferences/middle-east-2011Date: 5-7 December, 2011VeNUe: Jumeirah Beach Hotel

The Middle Eastern Industrial gas community alongside international producers, distributors and end users converge at Dubai’s Jumeirah Beach Hotel for three days sharing perspective on this year’s theme ‘Balancing growth and investment’. The theme focuses on identifying drivers for growth in the region, current and future gas markets and gas supply options.

eVeNt Name: World of ScadaWeBsite: iirme.com/SCADADate: 12-15 December, 2011VeNUe: Mövenpick Hotel, JBR

The MENA region’s leading SCADA conference presents a unique platform for diverse companies – including telecom, water and transport – to network and exchange valuable information and insights into the operations of SCADA systems.

eVeNt Name: Gulf TrafficWeBsite: gulftraffic.comDate: 12-14 December, 2011VeNUe: Dubai International Convention & Exhibition Centre

As part of the UN’s ‘Decade of Action Road Safety 2011-2020’, the Gulf Traffic conference is the largest event in the Middle East that covers road safety and ITS. Increasing road safety and reducing traffic congestion are some of the key issues addressed by global speakers at the two-day conference.

eVeNt Name: Future Concrete 2011WeBsite: futureconcrete.comDate: 12-14 December, 2011VeNUe: Ritz Carlton, DIFC

More than 30 international experts will share insights on advanced construction materials, innovative practises and smart construction. The conference will feature the first Environmental Construction Exhibition that highlights products and technologies designed to make the construction industry environment friendly.

DUBAI

United Arab Emirates

DUBAI

20 Notebook

Portfolio

17-20 Notebook.indd 20 11/20/11 2:05:24 PM

Although you will probably never actually see most of the levers, wheels, and

springs in the SAXONIA DUAL TIME calibre, Lange’s master watchmakers

meticulously perfect them by hand. Aficionados will appreciate the fact that

not all of these lavishly finished parts are concealed. Fortunately, the sapphire-

crystal back reveals the fascinating interaction of quite a few of them. Treat

yourself to a close-up look. For instance at Ahmed Seddiqi & Sons in Dubai.

We perfect this watch by hand.Even the parts that you can’t see.

The SAXONIA DUAL TIME. Exclusively at:

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December 2011

The DeuTsche PosT office

across from the train station in Düsseldorf,

Germany, offers DVDs, umbrellas, phone

cards and toys – with the processing of

mail appearing nearly an afterthought.

And the facility housing it is not a post

office at all. Deutsche Post occupies a

corner space in a bank.

With mail volumes decreasing one to

two per cent annually in many countries,

European postal services from Germany

to Sweden to Switzerland have reinvented

themselves over the past decade as

multifaceted delivery and information

companies tailored to the virtual age.

Though Deutsche Post by law still delivers

to every address six days a week, it has

jettisoned tens of thousands of buildings,

100,000 positions and its traditional focus

on paper mail.

“We realised that being a national postal

provider was an endangered business,

that we had to redefine the role of postal

providers in a digital world,” said Clemens

Beckmann, executive vice president of

innovation of the German post office’s

mail division.

With the US Postal Service facing

insolvency, it is looking toward Europe for

new operating models, even though US

legislation currently precludes adapting

some of those innovations.

After selling off all but 24 of 29,000

post office buildings in the past 15 years,

the German postal service is now housed

mostly within other business ‘partners,’

including banks, convenience stores and

even private homes. In rural areas, a

shopkeeper or even a centrally located

homeowner is given a sign and deputised

as a part-time postmaster.

At the same time, many European

postal services have developed a host of

electronic services that are increasingly

making traditional post offices and

mailboxes obsolete. Bills and catalogues

can go first to digital mailboxes run by

the post office on customers’ computers,

and the customers can tell the post office

what they want it to print and deliver.

And while Americans are asked to send in

suggestions for what celebrity should grace

the next stamp, Germans can buy virtual

postage from their cellphones.

Deutsche Post has expanded package

delivery networks to profit from the

uptick in online shopping and has also

progressively expanded its offerings into

completely new areas, like running online

marketplaces for freelance writers similar

to eBay.

Instead of watching its business be

Due to decreasing mail volumes, European postal services had to adapt to the digital world in order to survive, reports Elisabeth Rosenthal.

Reinventing Post Offices

BUSINESS NEWS IN BRIEF

Observer©

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23-24 Observer Opener.indd 23 11/20/11 2:09:27 PM

Portfolio

Observer24

eroded by more aggressive marketplace

competitors, as has happened in the

United States, Deutsche Post completed

its purchase of the logistics company DHL

in 2002, meaning many Americans have

been customers of the German post office.

European postal services vary widely in

their degree of adaptation to the digital

age. “But the United States Postal Service

(USPS) is probably the best example

of a pure monopoly that has seen the

least change,” said John Payne, the chief

executive of Zumbox, a Los Angeles-based

startup that offers virtual mailboxes for

personal computers in the United States

on a private basis and that has sold the

program to foreign postal services.

Payne has empathy for the failing

postal service and for all the regulation it

must abide to, including not being able

to close an outpost “solely for operating

at a deficit.” He said: “They live under

legislative restrictions on what businesses

they can enter and are expressly prevented

from entering business unless it’s related

to physical mail.”

To close a projected $9 billion budget

gap, the USPS has proposed eliminating

3,700 of its 36,000 post offices and is

selling off historic buildings that have

anchored towns across America. The

1,579-square-metre neoclassical landmark

post office in downtown Greenwich,

Connecticut, was recently sold to a

developer. Meanwhile, the post office will

move to a former pet supply store.

European postal services started to think

about new business models in the 1990s,

when the European Commission opened

up postal monopolies to competition and

liberalised regulation. But the subsequent

changes have come in response to

declining mail volumes and, to a lesser

extent, pressure to reduce greenhouse

gas emissions.

While Deutsche Post was an owner

of 29,000 post offices in 1990, it is now

largely a tenant, with tens of thousands

of counters lodged in other businesses.

Outsourcing has allowed it to trim staff.

AfTer DeuTsche Post closed the post

office in the village of Dorn-Assenheim

seven years ago, it hired Renate Weitz, a

retiree, to dispense postal services from

her house each morning – though it

now has plans to close that ‘branch’ as

well. In Schmitten (population 10,000),

Jens Kinkel took over postal tasks at his

stationery store. “I run the post office to

get more customers,” Kinkel said. “Most

buy stamps and grab a paper as well.”

Dr Julia Neu, a professor of sociology

at the Niederrhein University of Applied

Sciences, said the loss of post offices had

been particularly painful for older people

in the former East Germany, where they

doubled as meeting places. “A lack of

post offices is mostly dealt with by people

helping each other by sharing cars or

dropping off mail for the ones who aren’t

mobile,” she said.

But overall, advocates say the expansion

into virtual services has improved

customer satisfaction, saved money and

helped reduce carbon emissions.

Virtual mailboxes can receive, store

and organise years of bills, sparing digital

customers the need to check one by one

the websites of credit card companies

and cellphone providers. While this free

service was slow to catch on in Sweden,

membership has spiked in the past year,

said Anders Asberg, head of product and

market development for the Swedish

post office.

For actual packages, Deutsche Post

customers can choose to pick up items

at automated banks of lockers in places

like train stations; the locker number

and opening code are sent to their

cellphones. Posten, the Swedish post office,

allows vacationers to transmit cellphone

photographs that Posten prints as

postcards and delivers as physical mail.

Surprisingly, perhaps, new postal models

have not meant the end of direct marketing

(aka junk mail), a lucrative business –

though executives say such promotional

material will be increasingly likely to arrive

via computers and cellphones.

PostNord – an umbrella company that

includes both the Danish and Swedish

postal services – now even helps smaller

companies develop direct marketing

campaigns through its ‘Advertising

Planner,’ which boasts: “It’s just as natural

for PostNord to ensure that your offer

reaches the right customer at the right

time via satellite and cyberspace as via a

traditional postman.” n

Renate Weitz, a retiree, dispenses postal services from her home in the German village of Dorn-Assenheim.

23-24 Observer Opener.indd 24 11/20/11 2:09:29 PM

chaumet.com

Creating watches for 200 years

UK-Emirates 206x270 dandy_UK-Emirates 206x270 dandy 06/10/11 17:25 Page1

O N E 2 W A T C H

International Business Machines Corporation (IBM), the

world’s largest computer-service provider, has selected its

senior vice president, Virginia M Rometty, as its new chief

executive officer effective from 2 January. Rometty, 54, will

become the first female chief executive to lead the New

York-based company in its 100-year history. She will replace

Samuel Palmisano who will continue as chairman from early

next year.

Rometty, a graduate from Northwestern University with a

degree in computer science, joined IBM in 1981 as systems

engineer and steadily progressed to the top of IBM Global

Services. Serving as the division’s strategy leader in 2003, she

oversaw the successful integration of PriceWaterhouseCoopers

Consulting after IBM bought the consulting firm for $3.5

billion. As senior vice president and group executive for

sales, marketing and strategy in 2009, she spearheaded the

company’s push into emerging markets such as China, India

and Brazil. In this position she was responsible for IBM’s

worldwide results, which exceeded $99 billion in 2010 and

drove the company’s shares to the highest level since it went

public in 1915.

IBM’s five-year plan, which was initiated by the outgoing

Palmisano, aims to enhance revenues by $20 billion by

expanding in markets such as cloud computing and analytics.

This is likely to flow smoothly with Rometty as chief and

working closely with Palmisano, as she’s well versed in strategy

and her experience in sales, service and acquisition

is invaluable.

It has been an uphill struggle, but Australian Prime Minister

Julia Gillard’s Clean Energy Futures plan is set to become law

on July 2012, setting a cost of A$23 ($23.80) on each metric

tonne of greenhouse-gas emissions linked to climate change. The

carbon levy is fixed until 2015, when Australia begins a so-called

cap-and-trade system to let the market set the price as emitters

buy and sell permits.

Australia’s emissions market is forecast to be as large as the

one planned in California and the second biggest after Europe’s.

Miners, energy producers, utilities and others bound by the new

law also have the option of importing emissions credits from less-

developed countries via the United Nations’ Clean Development

Mechanism. UN offset, known as Certified Emission Reductions,

have been trading in the US$9 range on the ICE Futures Europe

exchange in London. That’s less than half of Australia’s fixed

price in 2012. That means Australian companies could get a good

buy if they are willing to move early.

Australia, which burns coal to produce about 80 per cent of its

electricity, voted to put a price on carbon to help the country cut

emissions by five per cent as of 2020.

TExT: HildA d’sOuzA

Virginia M Rometty

Oz Carbon Trading

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26, 28-29 (Observer) Snippets.indd 26 11/20/11 2:10:32 PM

Magnifique French Inspired Design

From Paris to Dubai, from London to New York, from Munich to Beijing…

Live a magnifique life around the world.

www.sofitel.com

Dubai Munich beijing Paris

AP_Sof157_PP206x270_portfolio_41152.indd 1 12/04/11 15:28

India expects to have 10 gigawatts of solar power capacity by

2017, more than double what it initially targeted, as the industry

ramps up quicker than predicted.

The Ministry of New and Renewable Energy plans to award

permits for as much as 10,000 megawatts of grid-connected solar

plants by 2017, up from its initial target of 4,000 megawatts, Bharat

Bhargava, a director at the ministry, said at a conference in the

southern city of Hyderabad. It’s also doubling its target for off-grid

solar plants to 2,000 megawatts.

Asia’s third-largest energy consumer provides a bright spot for

solar panel makers facing plunging margins and slowing growth.

Developers of projects that generate electricity from the sun in

Europe, the world’s largest solar market, are unable to get bank

financing to start new plants, leading demand for panels to fall 10

per cent short of expectations this year.

Interest from solar power developers exceeded the amount of

available capacity on offer by more than seven times for India’s next

auction of permits, Bhargava said. The ministry has received 218

applications seeking to build 2,500 megawatts of solar plants. The

plants are scheduled to be finished by January 2013.

Mitsubishi, Japan’s largest

trading company, has agreed

to pay $5.39 billion for

a stake in Anglo American’s

Chilean copper unit in the

Asian nation’s biggest mining

acquisition.

Anglo sold 24.5 per cent

of Anglo American Sur SA

to Mitsubishi. The deal may

stymie Chile’s state-owned

producer Codelco from taking

up its option to buy a 49 per

cent stake in the operation.

Buying the stake in the

unit, valued at $22 billion

India’s Solar Boom

based on Mitsubishi’s offer,

will almost double the Tokyo-

based company’s copper

output as supply of the metal

used in wires and pipes

drops. Rio Tinto Group, the

world’s second-largest mining

company, expects global

copper demand to rise more

than 40 per cent by 2020.

Mitsubishi’s investment

will give it a share in Anglo’s

undeveloped Los Sulfatos

and San Enrique Monolito

assets, which Anglo says are

“world-class.”

Mitsubishi Buys $5.39 Billion Stake

President Barack Obama has

received a commitment by

eight other nations to join the

US in forging an Asia-Pacific

trade accord. Officials agreed

on a blueprint that will lead to

drawing up a formal Trans-

Pacific Partnership in the next

AsiA-PAcific TrAde Accord12 months, a deal that could

create a model for expanded

trade with more Asian

countries.

The current talks involve

Australia, Chile, Peru and

Singapore, all of which already

have separate free-trade

agreements with the US, as

well as Malaysia, New Zealand,

Vietnam and Brunei. Two-way

trade between the US and

those eight nations totalled

$171 billion last year, compared

with $457 billion with China.

President Obama said taken

together, the eight member

economies would be America’s

fifth largest trading partner.

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Citigroup agreed to sell EMI Group’s recorded music and

publishing businesses in separate transactions for a combined

$4.1 billion. The breakup of London-based EMI, the 114-year-

old music company that owns Abbey Road Studios, sells Beatles

albums and publishes songs written by the late Amy Winehouse,

ends a nine-month bidding war. Citigroup, the New York-based

lender, seized EMI in February after investor Guy Hands fell out

of compliance with loan covenants.

Vivendi’s Universal Music Group will buy EMI’s record labels,

home to Katy Perry and Coldplay, for $1.9 billion, and a Sony-led

group that includes billionaire David Geffen will pay $2.2 billion

for the publishing unit.

The auction had a surprise ending, with the two winning

bids outstripping rivals who had been in the lead for much of

the process. Warner Music Group, owned by billionaire Len

Blavatnik, offered $1.5 billion to $1.6 billion for EMI’s recorded

arm, according to sources. Sony was vying with BMG Rights

Management GmbH, the music company controlled by KKR &

Co., which had bid $1.8 billion to $2 billion for publishing.

Citigroup Sells EMI in Parts

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TOp 10 GlObAl FiNANCiAl CENTrEs (According to the 10th Global Financial Centre Index)

RANK CITY GFCI 10 RATING1. London 7742. New York 7733. Hong Kong 7704. Singapore 7355. Shanghai 7246. Tokyo 6957. Chicago 6928. Zurich 6869. San Francisco 68110. Toronto 680

WOrld’s 10 MOsT ExpENsivE COuNTriEs FOr CONsTruCTiON (As per the EC Harris report)

Rank 2011 20101. Switzerland Switzerland2. Denmark Denmark3. Sweden Finland4. Ireland Australia5. France Ireland6. Australia Sweden7. Germany Canada8. Austria Bahrain9. Belgium New Zealand10. Canada Singapore WOrld’s TOp rANkiNG NATiONs sHOWiNG HiGHEsT dEGrEE OF ECONOMiC FrEEdOM (2011 Index of Economic Freedom)

Rank Country Freedom score Change from previous

1. Hong Kong 89.7 0.02. Singapore 89.2 +1.13. Australia 82.5 -0.14. New Zealand 82.3 +0.25. Switzerland 81.9 +0.86. Canada 80.8 +0.47. Ireland 78.7 -2.68. Denmark 78.6 +0.79. United States 77.8 -0.210. Bahrain 77.7 +1.4

The World

Top 10

SOURCE: HERITAGE.ORG/INDEx/RANKING

SOURCE: ZYEN.COM

SOURCE: ECHARRIS.COM(Note: Japan and Finland have been excluded from the 2011 survey)

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Cleaning Up the Himalayas

Suzanne GoldenberG

The people who seT ouT To

climb Everest spend months dreaming

about reaching the summit. They pay

$65,000 in fees to the Nepali government,

they train, trek for days, endure extreme

discomfort, even danger. So it should

be a simple thing to get them to pick up

after themselves.

Apparently not. Nearly 60 years after

Edmund Hillary conquered Everest,

and 30 years after climbing turned

commercial, the region is still struggling

to deal with mass tourism.

By the standards of the 70s, when the

main climbing routes were littered with

discarded tents and food packets, Everest

is a lot cleaner, with just a smattering

of plastic bottles and sweet wrappers

on the rocky plateau that is base camp.

But a Nepali environmental coalition is

pressing the government in Kathmandu

to adopt a new management plan to

safeguard the Himalayas in the age of

mass tourism – and to make amends for

the environmental sins of the past.

“Everybody talks about waste in the

mountains but nobody talks about proper

solutions,” says Phinjo Sherpa, director

of Eco Himal. “Cleaning up Everest

every once in a while does not help.

The main thing is management, waste

management.” The group has lodged

a plan with the government that calls

for tougher penalties against litterbugs

at Everest and the surrounding areas.

They are also pushing for the installation

of portable toilets at base camp and

investment in waste treatment facilities –

which currently do not exist in the region

– with proposals for five incinerators and

sewage treatment plants.

It’s difficult to tread lightly in the

high-altitude environment, especially in

areas this remote. The first expeditions

to Everest were monumental in scale.

The 1953 attempt, which brought success

to Hillary, set off from Kathmandu

with 1,200 porters for their equipment,

according to Kancha Sherpa, the last

surviving member of the team that made

it to base camp.

Even Hillary admitted to leaving

equipment behind, and more than 2,500

people have made it to the summit since

his day. The heavy traffic left its mark.

“People were careless. They would take a

rubbish bag but they would still leave stuff

behind,” said Tshering Tenzing Sherpa,

an official of the Sagarmatha Pollution

Control Committee, the NGO charged

with overseeing the Everest cleanup.

Modern expeditions are much more

conscious of their footprint. Groups must

pay a $4,000 (£2,500) deposit on their

equipment – in the hope that they will

carry down everything they brought.

Repeat visitors to Everest see a difference.

“It’s visibly and spectacularly better,” says

Jan Morava, an electrical engineer from

the Toronto area who was attempting the

summit with his brother and a climber

from the UAE. “There were piles of

rubbish in base camp before.”

BuT conservaTion groups say the

deposit is small compared with the other

expenses associated with an ascent on

Everest. They also argue the Sagarmatha

Pollution Control Committee lacks the

resources to keep up with all the groups

climbing Everest and to make sure that

they do indeed carry all their equipment

back down to Kathmandu.

The committee says it brought back 25

tonnes of rubbish from Everest last spring

– including 12,000kg of paper and plastic.

But conservationists argue that waste

disposal is haphazard. There are rubbish

dumps with heaps of tuna cans and plastic

bottles only a few minutes’ walk away

from villages on the trekking trail.

And, says Tshering, there is plenty

more detritus of the past still out there –

rubbish discarded by climbers years and

even decades ago, preserved in ice and

snow. “Just above the ice falls at crampon

point you can see cans from 10, 20, 30

years ago or even older,” Tshering says.

“There’s a lot of old rubbish out there.”

Other high peaks less famous than

Everest are even dirtier, notes Tshering.

And with climate change, snow and ice on

mountaintops is melting, exposing even

more rubbish. “We are in a garbage race,”

he says. n

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The Evolution of AllureGeorges Kern was an untested executive when he joined the luxury group Richemont a decade ago. Placed in charge of Swiss watch manufacturer IWC Schaffhausen, Kern has since transformed the company into a prestigious global brand. Nick Rice visited the IWC headquarters in Schaffhausen to ask how he pulled off one of the most remarkable success stories in the watchmaking industry.

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The first watches with a digital hours

and minutes display were created here,

almost implausibly, way back in 1885. One

of the world’s first known wristwatches

left Schaffhausen destined for the market

in the 1890s. Just a few years later, the

fascinating history of the company reveals

that the lauded psychiatrist and founder

of Analytical Psychology, Carl Gustav

Jung, became a co-owner of IWC through

marriage in 1903.

Unique from the outset, IWC watches

were created when Florentine Ariosto

Jones selected this small, idyllic city

in Switzerland as the base to develop

and manufacture high-quality Swiss

watches for the American market. The

company had a successful beginning

and Jones flourished in his venture until

adversarial circumstances and fluctuating

financial markets forced the sale of IWC

to the Rauschenbach family in 1880.

This initial change of ownership and all

subsequent inheritors has not stunted

the American’s original vision though,

and the company has always stood on a

solid foundation. However, at the turn of

the present century, IWC was in need of

some rejuvenation. The injection of flair

required to elevate the company came in

the form of current CEO, Georges Kern.

Although quick to acknowledge the

intrinsic, historical weight of the brand,

Kern nevertheless knew he had to

shake things up. “At that time 10 years

back, IWC was a very regional-oriented

company. Well known in Austria,

Switzerland and Germany, and very

well established, but dusty and old. A

good brand, not a destroyed brand at

all – turning around a destroyed brand is

always more difficult than developing a

dusty brand – but what we have managed

to do over the years is to take a solid

regional brand and make it truly global.”

The son of renowned European jeweller

René Kern, Georges Kern was born in

Düsseldorf in 1965 and grew up in both

Germany and France before moving to

Switzerland to attend the University of

St Gallen. After graduation, Kern decided

to stay in Switzerland and found work at

Jakob Suchard. Four years later he secured

his first position in the watch industry

when he joined TAG Heuer – a role that

would provide valuable experience as the

company underwent rapid and expansive

growth. When Kern sensed that TAG

The first IWC watch in the Portuguese family was released in 1939. The Portuguese Yacht Club Chronograph, which was released last year, is the first model to bring a sporting note into the family.

Walking around the immaculate and imposing museum that was once the home of F.A. Jones, the American entrepreneur who founded the International Watch Company in 1868, it is immediately apparent that the IWC brand has a rich history.


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Clearly as sharp intellectually as he is

sartorially, Kern has a forensic knowledge

of the modern watch industry and knows

what he must do to maintain the growth

of the company.

“We didn’t have boutiques or marketing

tools when we were developing, and

many products were not in the portfolio,

but you evolve. The brand evolves or

you die, this is Charles Darwin, you have

to always adapt. Today’s management

and challenges are totally different than

from 10 years back. You have to manage

growth. The pressure when you have a

substantial size in the context of a big

group is different. Ten years ago the

question was ‘what shall I do, how do

I build the brand?’ Today you have to

Heuer was to be acquired he set his sights

on joining the Richemont Group.

Nicolas Hayek, head of the Swatch

Group, arranged for Kern to be contacted

by Franco Cologni at Richemont and Kern

made it into the Richemont Group and

was appointed CEO of IWC two years

later at the relatively young age of 36.

Kern recalls how he secured the premier

position with humility, in consideration of

IWC’s current global status. “Well nobody

else wanted to do it and, joking apart, when

Richemont acquired Jaeger LeCoutre and

A. Lange & Söhne back in 2001, the priority

was on those brands. IWC was just in the

package. The reality is that I was one of

the few people at Richemont who could

speak French, English and German and

I was looking for more responsibility. I

guess looking at the position of IWC today,

they would never give me the job again

considering the size of the company. But at

the time the company was not in the focus

and so they said ‘Okay, let the guy take care

of it.’ Now we are one of most successful

brands in the group.”

So how exactly did he take care of it?

What were the strategies, the creative

ideas and the plans to implement them?

“Well we had the right product, the

right advertising, the right communication

and the right distribution. We had the

support and we changed the strategy,

reworking the existing products.”

Maintaining fidelity with the company’s

six different lines of watches was crucial.

As Kern elaborates, “We have not launched

one single product which is totally new.

Everything we have, be it the Pilot, the

Portuguese or the Portofino, had been

there as part of IWC. What we have done is

bring them up to speed in a contemporary

way. I don’t think we need to change that.

We can grow with what we have.”

Kern is clearly in his element when

discussing the mechanics of brand

building. He adjusts the cuffs on his

colourful lime green shirt and his eyes

sparkle as he extolls on the subject.

(L-R) Georges Kern, CEO of the International Watch Company, Tim Jeffries, Peter Lindbergh and Matthew Fox attended the IWC Presents Peter Lindbergh Exhibition at this year’s Cannes Film Festival.

The International Watch Company was founded in 1868 by the American entrepreneur F.A. Jones. The company’s rich history is displayed in a museum housed in Jones’ former home.


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Ligurian coast of Italy was a famous

enclave for the Hollywood glitterati of

the 50s and 60s and has always been

associated with classical Italian elegance.

It was the obvious place to stage a

marketing masterstroke. A world-touring

exhibition by the celebrated photographer

Peter Lindbergh, featuring an extensive

cast of brand ambassadors, too many

to list, but that includes football legend

Zinedine Zidane, actors Kevin Spacey,

Jean Reno and Cate Blanchett, and

model Elle Macpherson (a particularly

fitting choice given that Lindbergh is

credited with creating supermodels and

deliver all the financial results. If we want

to become a classic brand – and you only

have a few classic brands in the world

– you have to act in a different way. To

become a global brand you have to make

it evolve.”

It is with this brand evolution in mind

and with a focus on creating the essential

myth around IWC that Kern approached

the recent revamping of the Portofino

line. Kern knew that he had to produce

something special.

“Over the last 250 years everything

has been invented in watchmaking. You

cannot change physics – a minute remains

Renowned photographer Peter Lindbergh shot an impressive cast of IWC brand ambassadors in the Italian town of Portofino. The resulting photographic exhibition was unveiled with the launch of the Portofino watch collection earlier this year.

Clockwise from top left: Oscar-winning Australian actress Cate Blanchett; renowned American actor Kevin Spacey; Japanese actor Hiroyuki Sanada with 80s supermodel Elle Mcpherson.

a minute. The challenges in the watch

industry are different now. First of all,

the world changed. Today when you buy

a watch you don’t buy it to read time. You

want a total emotional experience. So you

need a strong design and a story. And you

need high quality in terms of technical

features. You buy a package, an emotion,

a brand, a story and a design.”

The STory for the new Portofino

collection came to Kern instinctively.

A recreation of the timeless, enigmatic

style epitomised by Portofino itself.

The seductively beautiful village on the

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she was the first of the ’80s supermodels.

Macpherson’s first professional photo

session was with Lindbergh for Italian

Vogue and he remained a mentor).

Kern lighTS up when he recalls

the experience of creating the shoot in

late 2010. “You know that old perennial

question: ‘Who would you invite to your

perfect party?’ This was it. The question

put into practice. Not as good as I had

hoped for – better. Much better.”

For Lindbergh it was also a dream

job and he said afterwards that, “This

was the sort of shoot I became a

photographer for. The sort of shoot I

dreamed of as a teenager.”

The exhibition was unveiled to

compliment the launch of the new

Portofino collection earlier this year at

the Salon International De La Haute

Horlogerie (SIHH) in Geneva with a

star-studded array of celebrity ‘Friends

of the Brand’ in attendance. In Dubai the

appearance of the Lindbergh Portofino

exhibition will be on 10 December at the

Dubai International Film Festival.

Whilst creating a powerful brand

image is essential, there must be genuine

substance behind the allure, and this

is where IWC really triumphs. The

dedication to form and flawless design

is immediately evident the moment you

see and hold an IWC watch. A tour of

the manufacturing plant in Schaffhausen

reveals the astounding levels of precision

and the rigorous testing implemented

throughout. Dedicated employees

demonstrate the production of tiny

components barely visible to the naked

eye, which can only really be appreciated

with the aid of powerful microscopes.

Even then it’s only a partial insight into

the intense scientific testing each part

undergoes before it can be used in a

watch that will tell the right time for

centuries to come.

Ultimately it is the quality of each

IWC product that stands as an immovable

frame around which the fabric of the

brand can be weaved. This is central to

Kern’s continual striving to elevate IWC

to still greater heights. “I believe in ‘love

brands’ – meaning that, there are brands

out there, and I hope IWC will be one of

them, which you love so much that you

just go for it.”

He continues, “I truly believe that

wealth is growing, the wealth of humanity

will grow – you see it every year in

statistics. The question is who can reach

these wealthy people? If you have that

‘love brand’ quality, if you are able to build

one of them, then you are fine. That’s the

art, that’s the magic.”

And what are Kern’s plans for the

future? “In the next decade we will turn

IWC into an institutional brand,” is his

confident reply. n

Kern believes in ‘love brands’. These are brands that are so well-loved and known that they inhabit an exclusive realm.


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Online sales in India have held great promise but failed to deliver in the past. That is now changing, with flipkart.com leading the charge, reports Vikas Bajaj.

flipkart is India’s answer to Amazon. It delivers books, phones and other consumer items, but with no delivery charge, and customers can pay cash on arrival.

W hen Prabhu Kumar

could not find a book

he wanted in Bangalore’s

local bookstores, he found it online at

Amazon.com for $10. But he had to pay

more than $9 in fees to have Amazon

ship it to him.

Kumar, a software programmer, said

he would not be doing that again. He

now shops on India’s answer to Amazon

– flipkart.com – which delivers books,

phones and other items in as little as 24

hours at no extra cost. Kumar doesn’t

have to pay flipkart a single rupee until

a courier bearing his books arrives at his

door. He can then hand over cash or a

credit card. “I think it perfectly fits the

Indian mentality,” Kumar said.

While dozens of electronic commerce

firms have recently sprung up to capitalise

on India’s growing internet use, they have

a problem. Indians are not yet comfortable

with shopping on the web. Many of them

remain unwilling to use credit cards online.

So the Indian retailers have gone to great

lengths to gain customers. Clients may pay

cash on delivery, and the company fields

delivery squads to ensure shipments get to

customers quickly.

One recent afternoon, four flipkart

delivery men loitered at a bungalow in the

Koramangala section of Bangalore where

the company started. When a small delivery

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van arrived from the company’s warehouse,

the men rushed to take out two large duffel

bags filled with packages that they put onto

two tables in the house. After scanning the

packages with hand-held computers, they

put the boxes into large backpacks, which

they carried on their backs as they rode off

on motorcycles to deliver them.

Online sales still make up a small

portion of overall retail spending – one

estimate pegs it at $10 billion, a tiny

fraction of India’s $500 billion retail

market – but they are growing fast.

flipkart says it had revenue of 500

million rupees ($11 million) in its last fiscal

year, and is now clocking sales of about

10 million rupees a day. SnapDeal.com, a

coupon and deals site similar to Groupon,

expects sales of 1.5 billion rupees this year,

up from almost nothing the year before.

The top executives of the Future Group,

India’s largest retail company, says its daily

online sales are on pace to triple between

now and March next year.

43

Sachin Bansal, left, and Binny Bansal, founders of the Indian e-commerce company flipkart at the company’s head offices in Bangalore.

“This time it is for real,” said Kishore

Biyani, the founder and chief executive of

the Future Group, referring to an earlier

wave of e-commerce euphoria in the

early 2000s. “This is the biggest thing to

happen in India.”

That rapid growth has drawn the

attention of venture capitalists who poured

$183 million into 20 e-commerce firms

within the last year, up from $61 million

for 13 firms in the previous 12 months,

according to Venture Intelligence, a

research firm.

The rapid growth has also attracted

the notice of American online retailers.

Amazon, which has a software development

office in Bangalore, is now building a

warehouse and hiring employees for an

Indian site, according to two industry

officials. And earlier this year, Groupon

bought an Indian website, SoSasta.com.

But, like in frothy Silicon Valley, some

Indian analysts and investors are starting

to question the frenzied deal-making.

These sceptics find it difficult to justify

the high prices venture capitalists are

paying to invest in unprofitable Indian

e-commerce firms. For instance, VCCircle,

a news site, recently reported that flipkart

may soon raise $150 million, which would

give it a $1 billion valuation. (Executives

at the company declined to discuss its

financial plans.)

IndIa has 50 million to 100 million

internet users, according to various

analysts, and the number is growing by

about 30 per cent a year. JuxtConsult, a

New Delhi-based research firm, estimates

that 17 million people bought something

online this year, up from 10 million last

year. The Indian government estimates

that household consumption has increased

by more than two-thirds in the last five

years, and most of that increase has come

in the purchase of nonfood items.

“It seems to be more for real than a

flash in the pan,” said Kanwaljit Singh,


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its orders. It can also track packages

more accurately. And because labour

costs are relatively low in India, its

delivery cost is a modest $1 a package.

“More than 90 per cent of retail

transactions in India are in cash,” Bansal

said. “People like my dad and my uncle,

they are much more comfortable with

cash. If we want to increase our customer

base, we have to accept cash.”

FlIPKart Is not alone in tweaking its

model to suit Indian conditions. Myntra,

an online retailer of clothes, has a delivery

staff in Bangalore and plans to hire

couriers in other cities. SnapDeal offers

customers the option of making partial

payments online and paying the balance

to merchants whose products and services

it sells, said Kunal Bahl, a co-founder of

the service.

Consumers and suppliers laud flipkart’s

service and execution. But they expect the

company to soon face greater competition,

especially if Amazon starts an Indian

operation. “Today they are the best,” said

Ananth Padmanabhan, vice president for

sales at Penguin India. But, he asked, “If

Amazon comes here next month, and they

might, what will flipkart do?”

An Amazon spokesman, Craig Berman,

declined to comment on the company’s

plans for India, but Padmanabhan said

Amazon officials have been holding talks

with publishers, and another industry

official said the retailer has begun hiring

employees for an Indian site.

The Bansals say they are prepared

for competition from Amazon. Sachin

Bansal, who worked with Binny Bansal

as a software developer at Amazon

before starting flipkart, brushed aside a

suggestion that the firm would make for

an easy acquisition by Amazon.

“We are very keen on going our own

way,” he said. “The opportunity is so large

that we would want to grow it to a much

bigger level before we think of anything.” n

who is a senior managing director at

Helion Advisors, which has invested in

about a half-dozen Indian e-commerce

sites, including MakeMyTrip.

But capitalising on India’s growth

online will not be easy. Sachin Bansal

and Binny Bansal (who are not related),

the founders of flipkart, have had to do

things that their American or European

counterparts would never have. They

have set up delivery operations in 13 big

Indian cities like Bangalore, Mumbai

and New Delhi because Indian shippers

do not have the delivery and package-

tracking abilities that FedEx and UPS

provide for its American customers.

They plan to expand flipkart’s delivery

network to 25 cities within a year.

Sachin Bansal, the company’s chief

executive, said that by having its own

staff, flipkart avoids paying courier

services’ commissions of more than

two per cent to accept cash on delivery,

which make up about 60 per cent of

Couriers with flipkart sort packages in preparation of their delivery, at a distribution hub in Bangalore.


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Why does the food on your plate never look as good as the one in the TV ad? That’s because there’s a huge creative industry behind it, reports David Segal.

The sauce will not

behave. It is supposed to drip

twice, on cue, from the bottom

right-hand corner of a forkful of tortellini

– first as the fork is lifted above the plate

and, second, after the fork pauses briefly

in the air and starts to rise again. Two

drips. A sequence that lasts a second and

a half, tops.

A dozen men at MacGuffin Films, a

studio in Manhattan, are struggling to

capture this moment. For more than an

hour one recent afternoon, they huddle

around a table rimmed with enormous

stage lights, fussing over a casserole as

if it’s a movie star getting primped for a

close-up.

“Lights. Roll. Action. Drip!” shouts

Michael Somoroff, a veteran commercial

director who has shot television ads

for Red Lobster, Burger King, Papa

John’s and dozens of other fast-food and

casual-dining chains. A specialist in the

little-known world of tabletop directing

– named for the piece of furniture where

most of the work is set – Somoroff is hired

to turn the most mundane and fattening © 2

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staples of the American diet into luscious

objects of irresistible beauty.

If you watch television, you’ve seen

his work, and the work of the five or six

other major players in this micro-niche

of advertising. These men – yes, they’re

all men – make glossy vignettes that star

butter-soaked scallops and glistening

burgers. Their cameras swirl around fried

chicken, tunnel through devil’s food cake

and gape as soft-serve cones levitate

and spin.

Few outside the business know their

names. But given the more than $4 billion

in television air time bought by restaurant

chains and food conglomerates each year,

these directors arguably have some of

the widest exposure of any commercial

artists in the US. In a typical week, tens of

millions of viewers see their work.

“Aside from movie directors,” Somoroff

says during a break in shooting, “I don’t

know anyone with an audience as large

as mine.”

On this particular afternoon, he is

filming a commercial for a chain that did

not want to see its name in this article.

And you can sort of understand why.

If you’ve ever been to a restaurant and

thought, “This does not look like the dish

in the ad,” here’s the irony: The dish in the

ad doesn’t look like the dish in the

ad, either.

This casserole shot, for instance, is

an elaborate tango of artifice, technology

and timing. The steam wafting over the

dish comes not from the food, but from a

stagehand crouched under a table with the

kind of machine that unwrinkles trousers.

The hint of Alfredo sauce that appears

when the fork emerges from the pasta?

That’s courtesy of tubes hidden in the

A TemperAmenTAl STAr

Jimmy Furino lays a piece of chicken on a grill during a shoot for O'Charley's restaurants at MacGuffin Films in New York.

Food:

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back of the dish and hooked to what

look like large hypodermic needles.

Moments before each take, Somoroff

yells, “Ooze!” That tells the guy with

the needles, standing just outside of the

frame, to start pumping.

As for that quarrelsome drip from the

fork, it is the responsibility of Anthony

DeRobertis, a special-effects rigger who

holds his own hypodermic of sauce and

is having a hard time synching with a

hand model, a young man with a military

haircut who is clutching the fork.

“Anthony, the second drip is about

10 minutes after the shot is over,” says

Somoroff after five or six takes, sounding

faintly annoyed. “I’m right on it,”

DeRobertis says. “You’re on it, but it’s not

dripping when it has to drip.”

A break is called and a tube is attached

to DeRobertis’ sauce injector, which is

then taped near the bottom tine of the

fork, in a way that’s invisible to Somoroff ’s

immense Photo-Sonics camera.

Sauce and fork are finally in unison.

After a few more tries, Somoroff has a

take he likes enough to show to reps from

the client and its ad agency, a group of

whom are waiting in a nearby room that

is decked out with a large high-definition

TV. The pasta appears moist, the steam

organic and the minuet of drip and hand

nothing more than a diner on the verge of

a blissful bite.

“i make my living basically taking

food and painting a reality with it,”

says Somoroff, leaning back in a chair

in his office as the team preps another

set-up. “And if I succeed in a given

moment, you’re going to go buy that dish

because you’re going to identify with

the experience we’ve created. To do that

with something as banal as food is the

challenge. I mean, it’s easy to go out and

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shoot a beautiful sunset or a beautiful

girl. They’re beautiful, OK?” He gestures

toward the middle of the studio. “I’ve got

a noodle over here.”

This is a good moment to be a tabletop

director in the big leagues, particularly

if you specialise in food. Low- and mid-

priced chain restaurants are one of the few

segments of the economy that decided,

during the recession and in its aftermath,

to spend as much or more on advertising

than they did in the years before.

Fast-food, casual-dining and pizza

chains, as well as what are lumped

together as ‘doughnut and coffee

restaurants,’ spent $300 million more on TV ads is in serious trouble. “If you come

off television, when your sales dip, it

takes a long time to get them back to

where they were before they stopped

advertising,” says Michael Branigan, vice

president for marketing at Sizzler. “There

are a tonne of studies that show this. You

TV ads in 2010 than they did

in 2007, according to Kantar

Media, a market research

firm. If patterns hold, the

numbers will be even larger

this year.

“Generally speaking,

restaurant chains spend

about three per cent of

revenue on advertising,”

says Michael Gallo, an analyst at C.L.

King & Associates. “Because these

restaurant systems are large and have

density, television is an easy way to reach

customers in a cost-effective way.”

And any restaurant chain that forswears

Michael Somoroff, center, a tabletop director who shoots television ads for fast-food and casual-dining chains, with his director of photography, Nick Fuglestad.

Ed Fountain, who builds food-tossing devices, next to a catapult in his workshop at Silvercup Studios in the Queens borough of New York. Fountain originally constructed the contraption for a Long John Silver's commercial that featured colliding shrimp.

“Because these restaurant systems are large and have density, television is an easy way to reach customers in a cost-effective way.”


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lose brain share of your customers, and

it is expensive to get revenues up again.

If I stopped advertising, Sizzler’s revenue

would be down, minimally, 10 to 15 per

cent for the year.”

anything that flatters the food, of

course, is fair game, and that includes

gimmicks you’re unlikely to find in a

fridge. Glue is used to keep spaghetti on

forks and pizzas in place. The ice in a

beverage might be made of acrylic and

cost $500 a cube. The frost coming off a

beer could be a silicone gel, mixed with

powder and water.

The difference between enhancement

and fakery, though, becomes a little

murky, and some directors tiptoe right up

to, and well past, the marbles-in-the-soup

line. If the tomatoes in a client’s red wine

reduction aren’t visible, some fresh ones

may be sliced up and tossed in. On rare

occasions, the food you see on screen is

merely a facsimile of the product.

“We used lard and Karo syrup for an

ice-cream client,” says David Deahl, a

tabletop director in Chicago. “The lights

we have melt the product so quickly that

it’s impossible to make ice cream look like

ice cream. So we got permission from our

client to fake it.”

That’s a rarity. Deahl and other

directors say they expend far more

effort making the food look authentic

than they do glamorising it. The risk is

overpromising, a topic that comes up a

lot on sets.

Until the early 1970s, most TV

commercials for food and drink were

static, shot with a zoomed-in, wide-angle

lens mounted on a camera that didn’t

move. Then came Elbert Budin, a former

still-life magazine photographer, who set

up a studio not far from Penn Station in

Midtown Manhattan; his pet finches had

the run of the place. He used micro lenses

placed five centimetres from the product,

close enough to see individual droplets on

a soda can. With the help of a mini jib, he

would swing the camera in graceful arcs.

If tabletop has a vocabulary, Budin

coined many of the words. He popularised

prep shots (a kind of back story for the

product, typically ingredients being

chopped), crave shots (self-explanatory)

and hero shots (a glorifying farewell look

at the product, usually in the last few

seconds of the ad).

And it is from Budin that we get one

of the lasting visual tropes of American

advertising: flying food. Ever since he

launched an orange through a thin

sheet of water for Sunkist – showing in

gorgeous slow motion the hole left by the

fruit – everything that you can put in your

mouth and store in a pantry has been

hurtling through the air.

“Food has to be in motion to have

character,” says Alex Fernbach, another

Budin acolyte, who now works at Arf &

Co, a studio in Hoboken, New Jersey. “It

gives food a personality.” n

Food ads are carefully crafted and enhanced with gimmicks, such as using glue to keep everything on a pizza slice in place.

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in Dubai.Anand Ramchandani, Private Banking

Porfolio_EFC_270x206_Ramchandani_en.indd 1 18.10.11 10:39

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Amazon will publish

122 books by the end of the

year in an array of genres, in

both physical and e-book form. It is a

striking acceleration of Amazon’s fledging

publishing programme that will place the

retailer squarely in competition with the

New York and international houses that

are also its most prominent suppliers.

It has set up a flagship line run

by a publishing veteran, Laurence

Kirshbaum, to bring out brand-name

fiction and nonfiction. It signed its

first deal with the self-help author Tim

Ferriss, a favourite with young men.

Recently it announced a memoir by the

actress and director Penny Marshall,

for which it paid $800,000, a person

with direct knowledge of the deal said.

Publishers say Amazon is aggressively

wooing some of their top authors. And

the company is gnawing away at the

services that publishers, critics and

AmAzon TAkes on PublishingAmazon.com has taught readers that they do not need bookstores. Now it is encouraging writers to cast aside their publishers, reports David Streitfeld.

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agents used to provide.

Several large publishers declined to

speak on the record about Amazon’s

efforts. “Publishers are terrified and

don’t know what to do,” said Dennis Loy

Johnson of Melville House, who is known

for speaking his mind.

“Everyone’s afraid of Amazon,” said

Richard Curtis, a longtime agent who

is also an e-book publisher. “If you’re

a bookstore, Amazon has been in

competition with you for some time. If

you’re a publisher, one day you wake up

and Amazon is competing with you too.

And if you’re an agent, Amazon may be

stealing your lunch because it is offering

authors the opportunity to publish directly

and cut you out. It’s an old strategy:

Divide and conquer.”

Amazon executives declined to say how

many editors the company employed, or

how many books it had under contract.

But they played down Amazon’s power

and said publishers were in love with

their own demise. “It’s always the end

of the world,” said Russell Grandinetti,

one of Amazon’s top executives. “You

could set your watch on it arriving.”

He pointed out, though, that the

landscape was in some ways changing

for the first time since Gutenberg

invented the modern book nearly 600

years ago. “The only really necessary

people in the publishing process now

are the writer and reader,” he said.

“Everyone who stands between those

two has both risk and opportunity.”

Amazon has started giving all

authors, whether it publishes them

or not, direct access to highly coveted

Nielsen BookScan sales data, which

records how many physical books

they are selling in individual markets

like Milwaukee or New Orleans. It is

introducing the sort of one-on-one

communication between authors and

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Amazon, the online retailer, has long competed with bookstores; now it is starting to make deals with authors, bypassing the traditional publisher.

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“Publishers caught a glimpse of a future they fear has no role for them late in September when Amazon introduced the Kindle Fire, a tablet for books and other media sold by Amazon.”

their fans that used to happen only on

book tours. It made an obscure German

historical novel a runaway best seller

without a single professional reviewer

weighing in.

Publishers caught a glimpse of a future

they fear has no role for them late in

September when Amazon introduced the

When Penguin found out, it went

“ballistic,” Davenport wrote on her blog,

accusing her of breaking her contractual

promise to avoid competing with it. It

wanted Cannibal Nights removed from

sale and all mentions of it deleted from

the internet. Davenport refused, so

Penguin cancelled her novel and has said

it will pursue legal action if she does not

return the advance.

“They’re trying to set an example: If you

self-publish and distribute with Amazon,

you do so at your own risk,” said Jan

Constantine, a lawyer with the Authors

Laurel Saville self-published a memoir about her mother after it was rejected by conventional publishers. It caught the attention of Amazon editors who offered to republish it, in essence becoming a business partner.

Jeff Bezos, the CEO and founder of Amazon, introduced the Kindle Fire in September. The device may allow Amazon to develop, promote and deliver its products directly to the consumer.

Kindle Fire, a tablet for books and other

media sold by Amazon. Jeffrey Bezos,

the company’s chief executive, referred

several times to Kindle as “an end-to-end

service,” conjuring up a world in which

Amazon develops, promotes and delivers

the product.

For a sense of how rattled publishers

are by Amazon’s foray into their business,

consider the case of Kiana Davenport, a

Hawaiian writer whose career abruptly

derailed in September. In 2010 Davenport

signed with Riverhead Books, a division

of Penguin, for The Chinese Soldier’s

Daughter, a Civil War love story. She

received a $20,000 advance for the book,

which was supposed to come out next

summer. If writers have one message

drilled into them these days, it is this:

hustle yourself. So Davenport took off

the shelf several award-winning short

stories she had written 20 years ago and

packaged them in an e-book, Cannibal

Nights, available on Amazon.

Guild who has represented Davenport.

Davenport knows her real crime:

“Sleeping with the enemy.”

Penguin declined to comment.

If some writers are suffering collateral

damage, others are benefiting from this

new setup. Laurel Saville was locked

out by the old system, when New York

publishers were the gatekeepers. “I got

lots and lots of praise but no takers,” said

Saville, 48, a business writer who lives

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in the upstate New York town of Little

Falls. Two years ago she decided to pay for

the publication of her memoir about her

mother’s descent from California beauty

queen to street person to murder victim.

She spent about $2,200, which yielded

sales of 600 copies. Not horrible but far

from earth-shaking.

Last autumn, Saville paid $100 to be

included in a Publishers Weekly list of

self-published writers. The magazine

ended up reviewing her memoir, giving it

a mixed notice that nevertheless caught

the attention of Amazon editors. They

sent Saville an email offering to republish

the book. It got an editorial once-over,

a new cover and a new title: Unraveling

Anne. It was published in November.

Saville did not get any money upfront,

as she would have if a traditional

publisher had picked up her memoir. In

essence, Amazon has become her partner.

“I assume they want to make a lot of

money off the book, which is encouraging

to me,” said Saville, who negotiated her

deal without an agent.

Her contract has a clause that forbids

her from discussing the details, which is

not traditional in publishing. The publicity

plans for the book are also secret.

Can amazon secretly create its own

best sellers? The Hangman’s Daughter

was an e-book hit. Amazon bought the

rights to the historical novel by a first-

time writer, Oliver Potzsch, and had it

translated from German. It has now sold

250,000 digital copies.

“The great and fascinating thing

about Amazon’s publishing programme

is that there can be these grass-roots

phenomena,” said Bruce Nichols of

Houghton Mifflin Harcourt, which

republished the novel this summer.

Saville no longer even contemplates a

career with a traditional publisher. “They

had their shot,” she said. She is now

writing a novel. “My hope is Amazon will

think it’s wonderful and we’ll go happily

off into the publishing sunset,” she said. n

Amazon’s business model has already made severe inroads into conventional bookstores’ bottom line. Borders, a large chain, was forced to file for bankruptcy protection. Publishers fear they may be next.

Author Laurel Saville is happy with her relationship with Amazon and is no longer prepared to work with conventional book publishers.

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Germany, which has not suffered blackouts since World War II, is now bracing for that possibility after shutting down half its nuclear reactors.

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Germany Dims Its Nuclear PowerThe accident at Japan’s Fukushima nuclear plant alarmed Germany to such an extent that it permanently shut down eight of the country’s

oldest reactors and plans to retire the remaining nine by 2022. But sceptics argue that the decision was premature and emotional, reports Elisabeth Rosenthal.

NoT sInCe THe GrIm perIoD

after World War II has Germany had

significant blackouts, but it is now

bracing for that possibility after shutting down

half its nuclear reactors practically overnight.

Nuclear plants have long generated nearly a

quarter of Germany’s electricity. But after the

tsunami and earthquake that sent radiation

spewing from Fukushima, half a world away in

Japan, the government disconnected the eight

oldest of Germany’s 17 reactors – including the

two in the drab factory town of Biblis – within

days. Three months later, with a new plan to

power the country without nuclear energy

and a growing reliance on renewable energy,

parliament voted to close them permanently.

There are plans to retire the remaining nine

reactors by 2022.

As a result, electricity producers are

scrambling to ensure an adequate supply.

Customers and companies are nervous

about whether their lights and assembly

lines will stay up and running this winter.

Economists and politicians argue over

how much prices will rise.

“It’s easy to say, ‘Let’s just go for renewables,’

and I’m quite sure we can someday do without

nuclear, but this is too abrupt,” said Joachim

Knebel, chief scientist at Germany’s prestigious

Karlsruhe Institute of Technology.

He characterised the government’s

shutdown decision as “emotional” and pointed

out that on most days, Germany has survived

this experiment only by importing electricity

from neighbouring France and the Czech

Republic, which generate much of their power

with nuclear reactors.

Then there are real concerns that the plan

will jettison efforts to rein in manmade global

warming, since whatever nuclear energy’s

shortcomings, it is low in emissions. If

Germany, the world’s fourth-largest economy,

falls back on dirty coal-burning plants or

uncertain supplies of natural gas from Russia,

isn’t it trading a potential risk for a real one?

The International Energy Agency, generally

a fan of Germany’s green-leaning energy

policy, has been critical. Laszlo Varro, head of

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Germany Dims Its Nuclear PowerThe accident at Japan’s Fukushima nuclear plant alarmed Germany to such an extent that it permanently shut down eight of the country’s

oldest reactors and plans to retire the remaining nine by 2022. But sceptics argue that the decision was premature and emotional, reports Elisabeth Rosenthal.

NoT sInCe THe GrIm perIoD

after World War II has Germany had

significant blackouts, but it is now

bracing for that possibility after shutting down

half its nuclear reactors practically overnight.

Nuclear plants have long generated nearly a

quarter of Germany’s electricity. But after the

tsunami and earthquake that sent radiation

spewing from Fukushima, half a world away in

Japan, the government disconnected the eight

oldest of Germany’s 17 reactors – including the

two in the drab factory town of Biblis – within

days. Three months later, with a new plan to

power the country without nuclear energy

and a growing reliance on renewable energy,

parliament voted to close them permanently.

There are plans to retire the remaining nine

reactors by 2022.

As a result, electricity producers are

scrambling to ensure an adequate supply.

Customers and companies are nervous

about whether their lights and assembly

lines will stay up and running this winter.

Economists and politicians argue over

how much prices will rise.

“It’s easy to say, ‘Let’s just go for renewables,’

and I’m quite sure we can someday do without

nuclear, but this is too abrupt,” said Joachim

Knebel, chief scientist at Germany’s prestigious

Karlsruhe Institute of Technology.

He characterised the government’s

shutdown decision as “emotional” and pointed

out that on most days, Germany has survived

this experiment only by importing electricity

from neighbouring France and the Czech

Republic, which generate much of their power

with nuclear reactors.

Then there are real concerns that the plan

will jettison efforts to rein in manmade global

warming, since whatever nuclear energy’s

shortcomings, it is low in emissions. If

Germany, the world’s fourth-largest economy,

falls back on dirty coal-burning plants or

uncertain supplies of natural gas from Russia,

isn’t it trading a potential risk for a real one?

The International Energy Agency, generally

a fan of Germany’s green-leaning energy

policy, has been critical. Laszlo Varro, head of

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The anti-nuclear movement has always been strong in Germany and the accident at Japan’s Fukushima plant gave it added impetus.

prepared to make huge investments in

improving energy efficiency in homes and

factories as well as in new clean power

sources and transmission lines. So far,

there have been no blackouts.

Juergen Grossmann, chief executive

of the German energy giant RWE, which

owns two closed reactors here in Biblis,

about 64 kilometres south of Frankfurt,

expressed scepticism. “Germany, in a

very rash decision, decided to experiment

on ourselves,” he said. “The politics are

overruling the technical arguments.”

Germany’s planners believed

they could forgo nuclear energy in large

part because of the country’s remarkable

progress in renewable energy, which now

accounts for 17 per cent of its electricity

output, a number the government

estimates will double in 10 years. On days

when the offshore wind turbines spin full

tilt, Germany produces more electricity

from renewable sources than it uses,

according to European energy monitors.

Germany has “exceeded everyone’s

expectations on renewable power,” said

Varro, showing that it could be cost

effective and reliable.

Until it closed the reactors, Germany

was Europe’s leading energy exporter.

With a total of 133 gigawatts of installed

generating capacity in place at the start of

this year, “there was really a huge amount

of space to shut off nuclear plants,” Harry

Lehmann, a director general of the

German Federal Environment Agency and

one of Germany’s leading policymakers

on energy and environment, said of the

road map he helped develop. The country

needs about 90.5 gigawatts of generating

capacity on hand to fill a typical national

demand of about 80 gigawatts a day.

So the 25 gigawatts that nuclear power

contributed would not be missed – at least

within its borders.

To be prudent, the plan calls for the

creation of 23 gigawatts of gas- and coal-

powered plants by 2020. Why? Because

renewable plants don’t produce nearly

to capacity if the air is calm or the sky

is cloudy, and there is currently limited

capacity to store or transport electricity,

energy experts say.

New coal and gas plants will use the

cleanest technology available and should

not aggravate climate change, government

officials said, because they will operate

within the European carbon-trading

system in which plants that exceed the

allowed emissions cap have to buy carbon

the agency’s gas, coal and power markets

division, called the plan “very, very

ambitious, though it is not impossible,

since Germany is rich and technically

sophisticated.” Even if Germany succeeds

in producing the electricity it needs, “the

nuclear moratorium is very bad news in

terms of climate policy,” Varro said. “We are

not far from losing that battle, and losing

nuclear makes that unnecessarily difficult.”

The government counters that it is

German chancellor Angela Merkel inspects a commercial offshore wind farm in the Baltic Sea. Merkel extended the operating licenses of Germany's nuclear plants last year, but she had to do an about face earlier this year due to public pressure.

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Angela Merkel, herself a physicist, decided

last fall to extend the operating licenses of

Germany’s nuclear plants over concerns

that innovation alone would not satisfy the

country’s energy appetite.

Fukushima changed everything. That

Japan is a technologically advanced

country made the nuclear accident more

alarming to the German people than

the Chernobyl disaster, at an old Soviet

reactor. Despite that, industry experts and

residents of reactor towns like Biblis and

nearby Philippsburg were stunned by the

suddenness of the about-face. Both towns

will lose hundreds of jobs and millions in

tax revenue. German energy companies,

however, say they have been handed a

national energy template that looks good

on paper but is technically challenging.

Although the country’s production of energy

is bounteous, they say it is not always

available where and when it is needed.

Northern Germany has offshore wind

and coal deposits, but southern Germany

– a manufacturing epicentre that is

home to Mercedes, BMW and Audi –

has no plentiful local fuel source other

than nuclear. Germany’s current grid is

highly decentralised, lacking high-voltage

transmission lines to move electricity over

long distances. “Now, with the nuclear shut

down, we have a very difficult task,” said

Joachim Vanzetta, head of transmission

system operations at Amprion, the largest

of the country’s four grid operators.

This winter, Amprion predicts its

grid will have 84,000 megawatts of

electricity at its disposal, to provide 81,000

megawatts needed for consumption – an

uncomfortably slim margin of safety,

Vanzetta said. In prior years, electricity

was readily available for purchase on the

European grid if the price was right.

But exported German power is what

helped keep France glowing in winter.

“At the moment, we have a stressed

system, but it’s under control,” Vanzetta

said. “If we have days with no wind and no

solar and can’t buy energy from abroad,

then there is the risk of blackouts.” n

Stefan Martus is the major of Philippsburg. The town will lose hundreds of jobs and millions in tax revenue when its nuclear plant is closed.

credits from companies whose activities

are environmentally beneficial, thus

evening out the environmental ledger.

Electricity prices are expected to rise

by 35 to 40 euros ($50 to $60) per

household each year, or less than five per

cent, the government estimates. Although

nuclear energy generally costs less than

newer options, German law has long

stipulated that renewable energy must be

purchased first even if it is costlier.

But sceptics consider government

assumptions overly optimistic. Stefan

Martus, the mayor of Philippsburg, says

he believes energy costs could rise more

dramatically than government estimates;

the price of permits to offset dirty power

plants is highly unpredictable and

variable, like the value of stocks. And the

International Energy Agency does not

think Germany – or any other country –

will be able to reduce its emissions at a

reasonable cost without nuclear power.

even before Fukushima, nuclear

energy’s days in Germany were numbered.

Biblis had been the site of giant national

antinuclear demonstrations, and Germany

was already enacting a plan for slowly

phasing out nuclear energy by 2023.

The country has become the world leader

in wind power and a master at squeezing

more energy efficiency out of appliances and

homes, having built tens of thousands of

self-heating ‘passive houses’. Still, Chancellor

“The country has become the world leader in wind power and a master at squeezing more energy efficiency out of appliances and homes, having built tens of thousands of self-heating ‘passive houses’.”


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banking, legal, accounting and business services Advanced transport and telecommunications infrastructure with state-of-the-art high-speed

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“We are very happy to have selected

Cyprus as a base and aspire to maintain,

lead and expand our operations

from the island. Cyprus’ accession

to European Union has enhanced the

country’s credit standing, transferring

the image of a low tax jurisdiction to

a serious regional trading and service

hub. We also believe that the Euro

Zone entry upgrades the country’s

standing within the European Union.”

Mehran Eftekar, Director Nest Investments Holdings

If you are looking for a new business and investment gateway, take the time and consider Cyprus. Combining a rewarding standard of living in tune with nature and Cypriot hospitality, Cyprus is a dynamic place to live and work!

The Ministry of Commerce, Industry and TourismTel. + 357 22 867100, Fax + 357 22 375120www.mcit.gov.cy/ts, [email protected]

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Banks are targeting the rapidly growing emerging markets to keep profits flowing. But emerging markets are volatile and have unique

regulations, report Susanne Craig and Ben Protess.

Wall Street loveS

to crow about its

overseas conquests.

Vikram S. Pandit, the head of

Citigroup, boldly promised in 2009

that “we will be the single largest

emerging markets financial services

company.” Goldman Sachs’ chief

executive, Lloyd C. Blankfein, said

at a conference last year that one

of his firm’s big goals was “to be

Goldman Sachs in more places.”

But there’s a quiet truth to success

in those risky markets: The path to

profits is often filled with mistakes

and setbacks.

“A lot of big banks are looking to

developing markets, but historically

it’s tended to be a volatile move,”

said James Sinegal, a bank analyst

at the research firm Morningstar. “It

might not be as easy as they expect.”

Banks like Citigroup, Goldman

Sachs and Morgan Stanley are

chasing the potential payoff abroad.

The economies of countries like

China, India and Brazil are growing

faster than that of the United States.

Such places also represent an

untapped client base, with a growing

middle class and a large number of

wealthy individuals.

As profits wane on the home

front, Wall Street firms are

increasingly dependent on the

emerging markets to bolster their

bottom lines. Citicorp, a division

of Citigroup, draws about half

of its revenue from emerging

countries, up from roughly 25

per cent in 2005. International

markets account for 47 per cent

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Vikram Pandit, CEO of Citigroup, promised in 2009 that the bank would be the largest emerging markets financial services company.

of Goldman’s profits. Morgan Stanley

generated nearly a third of its net revenue

from outside the Americas.

“With the United States slowing down,

it is not surprising that institutions are

looking in the emerging markets,” said

Hamid Biglari, a Citicorp vice chairman

and chief of emerging markets.

But the perils can be plentiful, with

economic, political and regulatory

challenges. Foreign regulators have scolded

banks, fined them and even banned their

activities in various countries. Citigroup

twice ran into problems with Japanese

authorities. In turn, Wall Street says it has

cleaned house at overseas offices, taken

greater control of foreign ventures and

tapped local bankers to lead new projects.

Local knowledge is especially critical,

as firms try to navigate the regulatory and

political environment that is crucial to a

bank’s business. Earlier this year, Citigroup

found itself in hot water with Indonesian

regulators. After an investigation into

suspected embezzlement by an employee

and the death of a client after meetings

with the bank’s outside debt collectors, the

country’s central bank imposed sanctions

on Citigroup, including a one-year ban on

opening new branches.

In June, the bank removed its top

country officer, replacing him with a

native Indonesian, Tigor Siahaan, a

seasoned banker experienced in dealing

with local regulators and government

officials. Now, the bank is tweaking

its internal controls, bringing its debt

collecting in-house and regularly rotating

back-office personnel. The bank said it

was also working closely with Indonesian

authorities. “How to behave responsibly

in these markets comes with experience,”

Biglari said. “You have to figure out how

to work with the cultural norms.”

Financial firms have also realised that

they need to commit to a market, because

it can take years if not decades to build

up local relationships and understand the

country’s customs.

“Financial firms have also realised that they need to commit to a market, because it can take years if not decades to build up local relationships and understand the country’s customs.”

While Goldman says on its website

that it has had a presence in Russia since

1998, the firm has had its troubles in the

country. Not long after opening in Russia,

Goldman downsized its operations,

concerned about the financial crisis that

prompted the government to devalue the

ruble. It closed the Moscow office and

reassigned staff members. Christopher

Barter, co-chief executive for Goldman’s

Russia business, said the investment bank

should not have left the country. “We

missed out on years of a footprint there,”

he said. “When you go into a country, you

have to maintain your commitment.”

It took years to build up the business

in Russia again. Goldman reopened the

Moscow location in 2001, but it didn’t

fully ramp up there until 2006, when it

obtained a brokerage license. Today, the

firm has 140 employees in Russia, up from

Hamid Biglari, a Citicorp vice chairman and chief of emerging markets, stresses the importance of understanding the cultural norms of different markets.

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several times a year. And Blankfein,

along with other Wall Street chiefs like

Jamie Dimon of JPMorgan Chase, has

joined a committee set up by the Russian

government to help bring more foreign

money to the country.

Firms have also realised they need

30 people five years ago.

The company has established stronger

ties in the country since it has returned.

In 2008, Goldman held a board meeting

in Russia, a nod to its re-emergence

there. Michael Sherwood, vice chairman

at Goldman Sachs, now visits Russia

more management oversight of overseas

investments.

Morgan Stanley was one of the

first investment banks to establish a joint

venture in China. In 1995, it teamed up

with China Construction Bank to form the

China International Capital Corp. But the

Wall Street bank was a passive investor,

owning just one-third of the business, the

limit for foreign securities firms under

Chinese rules. It also ceded management

control to its partners. In 2010, Morgan

Stanley sold the stake to a group of private

equity firms. Since then, Morgan Stanley

has forged a new relationship with Huaxin

Securities. While it still owns a one-third

stake in the venture, called Morgan

Stanley Huaxin Securities, it has seats on

the firm’s board and plays a role in the

day-to-day management of the firm. A

Morgan Stanley managing director, Yang

Kai, is the chief executive of the company.

While foreign business is hardly a

guaranteed win, financial firms are willing

to take the risks. It’s one of the industry’s

few options as banks deal with costly new

regulations, sluggish economic growth in

their home markets and a volatile market

– all of which are weighing on profits.

“These guys are hurting and it gets

worse by the day,” said Michael Driscoll, a

professor at Adelphi University’s business

school and former senior trader at Bear

Stearns. “You can only squeeze so much till

you go looking elsewhere for a return.” n

Not everybody succeeds in emerging markets. Barclays and Banco Santander SA are among western lenders who abandoned retail operations in Russia as state companies gained market share and expanded into investment banking.

“It’s one of the industry’s few options as banks deal with costly new regulations, sluggish economic growth in their home markets and a volatile market – all of which are weighing on profits.”

Stephen Roach, non-executive chairman of Morgan Stanley Asia, has valuable local knowledge thanks to having lived in Tokyo, Hong Kong and Singapore.

The chairman and CEO of Goldman Sachs, Lloyd Blankfein, wants to expand aggressively in emerging markets.

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EssentialsThe besT of leisure and lifesTyle

RussiaA cruise along the historic Volga- Baltic Waterway not only takes in St Petersburg and Moscow but also all the history and scenery along the route, reports Christina Pfeiffer.

sLOW BOaT ThROugh

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Kizhi island is a unesco World heritage site, famed for its wooden buildings. The Church of the Transfiguration is russia’s oldest wooden church.

Valaam is an archipelago of islands in lake ladoga, which is the largest lake in europe.

that connect the Volga River to the

Baltic Sea. Cruising is one of the most

comfortable ways to travel through

Russia, where few people speak English

and reading the Cyrillic alphabet is next to

impossible. Then there is also the luxury

of only unpacking once and having your

belongings float with you.

After a $14 million refit, MS

AmaKatarina began cruising Russia’s

waterways in May 2011. By Russian

standards, the ship is luxurious with 10

stateroom and suite categories. Many

of the staterooms have balconies and

amenities such as new ensuite bathrooms,

satellite television, internet access and

a nightly turndown service with

chocolates on your pillow.

The ship accommodates 212 passengers

and it is the most spacious vessel on the

Volga-Baltic Waterway. There are two

restaurants, the Opera on the second

floor and the cosier Symphony above it,

and two bars. The atmosphere aboard

is convivial and the

open seating policy

makes it easy to make

new friends. Each

n ethereal calm

fills the air as the MS

AmaKatarina cruises past

fishing boats towards

a landscape of onion-

domed churches, spires,

monasteries and colourful

villages, towns and cities. Slicing across

Lake Ladoga, the ship creates ripples of

liquid gold to match the colour of the

sky. It is past 11pm at night and the sun

is a fiery ball sinking slowly behind the

forested shore. Yet it feels like it is still early

afternoon as I stand on deck, marvelling at

the Russian white night. Even after the sun

has set, magic lingers in the purple-pink

sky, leaving me with vivid memories of

midnight sunsets that flood my mind long

after I have left Russia.

The cruise between St Petersburg

and Moscow travels along a picturesque

section of the Volga-Baltic Waterway,

which flows through 1,367 kilometres

of lakes, rivers, reservoirs and canals

day there is a shore excursion in a village,

town or city, accompanied by a team of

attentive young English-speaking men

and women.

When passengers are not exploring,

there is a daily programme of cultural

and educational activities such as Russian

language lessons, history lectures, doll-

painting, balalaika-playing and cooking

lessons. The informative talks about

Russian costumes, tea and vodka were

particularly well attended.

St PeterSburg is the perfect place

to embark as this historic city is spread

over 101 islands and 66 canals, meaning

that water is never far from your mind.

From St Petersburg the Neva River

flows into Europe’s largest freshwater

lake, Lake Ladoga (it’s the world’s 14th

largest lake), then into the Svir River,

where the MS AmaKatarina cruises past

colourful timber houses and jewel-box

churches. After touring grand palaces,

golden-domed churches and museums

in St Petersburg, cruising through the

countryside is a relaxing contrast.

At Svirstroy, a small town with around

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1,000 residents, we stretched our legs

among villagers dressed in colourful

Russian costumes selling toys, lace,

hand-carved timber eggs, dolls, lacquer

bowls and crochet tops. The shopping in

Svistroy is much cheaper than in Moscow

and St. Petersburg, which makes it a good

place to buy souvenirs.

One of the highlights of the cruise is

Kizhi Island, which is a UNESCO World

Heritage site of timber buildings and

home to the oldest wooden church in

Russia – the 14th-century Church of the

Resurrection of Lazarus. In the 1950s,

dozens of historical wooden buildings were

moved to the island from various parts

of Karelia (a federal republic of Russia)

for preservation purposes. Nowadays, the

entire island and the nearby area form

a national open-air museum with more

than 80 historical wooden structures. Our

walking tour of the island took us in and

out of chapels, belfries, log houses, mills,

bath houses, barns and the jaw-dropping

18th-century Church of the Transfiguration

with its 22 silvery onion-domed cupolas

glittering in the sun.

Lake Onega is connected to the Kovzha

The rostov Kremlin state Museum is a major attraction in the yaroslavl region, which forms part of russia’s famed ‘Golden ring’ of cities

Passengers on the MS AmaKatrina can participate in daily cultural and educational activities.

“It’s at this point, as one gets closer to Moscow, that the cruise enters one of the most fascinating regions in Russia known as the ‘Golden Ring’ of cities.”

River via the Volga Baltic canal, which is

a series of locks that rise 80 metres (about

the height of a 30-storey building). The

river then flows into Lake Beloye and

Sheksna River where we docked at Goritsy

and toured the nearby Kirillo-Belozersky

monastery. The monastery is a massive

complex of 15th to 17th century churches

surrounded by fortress walls on the shore

of Lake Siverskoye. Inside are some of

the most intricate and beautiful historic

icons I’ve seen while just outside,

along the shores of the lake, is the local

swimming spot.

It’S at this point, as one gets closer to

Moscow, that the cruise enters one of

the most fascinating regions in Russia

known as the ‘Golden Ring’ of cities. The

main currents of history ignored these

cities, leaving towns such as Vladimir,

Suzdal, Sergiev Posad, Rostov Velikiy and

Yaroslavl as quaint and perfect as when

they were first constructed. The ‘golden’

refers to the historic and architectural

wonders preserved in these towns. Some

of them, like Yaroslavl, were centres of

powerful principalities subjugated by

Moscow during its rise to power. Others,

like Uglich, have never been large or

powerful but have still played important

roles in Russian history.

The MS AmaKatarina calls at two of

these towns. First is Yaroslavl, which is

one of Russia’s oldest cities and traces its

roots back to the Vikings. The historical

part of the city, a World Heritage Site, is

located at the confluence of the Volga and

the Kotorosl Rivers. Besides the unique

architecture in the old town, the Yaroslavl

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opportunity to experience modern life by

having breakfast in a local home. Some of

us got a taste of life with poor families in

the countryside while others visit Soviet-

era apartments in town. Many of the hosts

speak little or no English but we were all

served the same food: millet porridge,

blini and home-made jam.

the next and last stop is Moscow,

where the various tours naturally include

Red Square and the Kremlin, the Tretyakov

Museum, an optional visit to the Moscow

Circus, and Moscow’s famed Metro.

Tourism in Russia is still in its infancy

and the overall standard of cruise ships

is not in the same league as the luxury

cruise ships in Western Europe, where

companies compete to launch more

luxurious ships every year. Keep this in

mind when travelling through Russia

and you’ll enjoy the amazing history,

culture and architecture that the country

has to offer. After 12 days aboard MS

AmaKatarina, I know for sure I’ve fallen

in love with Russia. n

uglich, another Golden ring town, is full of architectural wonders. of particular note are the historic wooden houses with their ornate trim.

Museum of Russian Art – in the former

governor’s residence – has a unique

collection that includes Russian icons and

masterpieces of ornamental art. Museum

guides dressed in beautiful silk ball

gowns lead visitors through the grandly

furnished rooms. The tour ends in the

ballroom with a recital of chamber music.

Uglich is a small town with a bloody

history but you wouldn’t think so looking

at the picture-book Church of Prince

Dmitry on the Blood with its blue domes

yaroslavl’s Museum of russian art is housed in the former governor’s residence. Museum guides in ball gowns teach visitors the intricacies of ballroom dancing.

dotted with stars. Here, our guides regale

us with tales of treason and murder; this

is where Ivan the Terrible’s 10-year-old

son Dmitry had his throat cut in the

palace courtyard. Suspicion immediately

fell on the tsar’s chief advisor, Boris

Godunov. Official investigators concluded

however that Dmitry’s death was an

accident. The officials cut a ‘tongue’ from

the cathedral bell that had rung the news

of Dmitry’s death and ‘exiled’ it to Siberia.

In Uglich, we were given the

svirstroy, a small town of around 1,000 inhabitants, is known for its handicrafts, especially wooden carvings.

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A massive retrospective exhibition covering famed French fashion designer Yves Saint Laurent’s entire body of work, from his early days at Dior to his final spring/summer runway collection in 2002, is now on show until January at the Mapfre exhibition galleries in Madrid, reports Scott Adams.

YVES SAINT LAURENT

“He wAs THe ABsoluTe

embodiment of the French couturier,” says

France’s First Lady, Carla Bruni-Sarkozy,

who modelled his creations during her

years on the catwalk. “He turned art into

fashion and fashion into art and gave

women strength, beauty and freedom,” she

adds. But one shouldn’t think of Yves Saint

Laurent as solely French as he proved that

beauty had no borders. He was inspired by

the burning sun of the Mediterranean and

it was that fire that was always alive within

him and pushed his work forward.

Yves Mathieu-Saint-Laurent was born

in 1936 in Oran, Algeria, which, at the

time, was a French colony. As a child he

made costumes for paper dolls and later

designed dresses for his mother and sisters,

which his mother had made-up by a local

dressmaker. Saint Laurent moved to Paris

in 1954 after winning top prizes in the

dress category of a design competition. The

editor of French Vogue introduced him to

Christian Dior and history was made. Dior

took him on as an assistant in 1955 and

two years later, at just 21, Saint Laurent

became the house’s top designer after Dior

began suffering from ill-health. It was

during his time at Dior that Saint Laurent

met Pierre Bergé, who was to become his

astute business partner, and his friend for

life. Bergé now runs the Yves Saint Laurent

Foundation in Paris. Together, in 1961,

Saint Laurent and Bergé, with the help of

an American backer, opened the first Yves

Saint Laurent fashion house in Paris.

Yves Saint Laurent understood that

power lay with men, so he used men’s

clothes to dress women. “It was a transfer

of power,” says Bergé. Saint Laurent’s

pantsuits, jumpsuits and safari jackets were

men’s clothes, but when he made them for

women they became sensual, seductive

and feminine. “Yves Saint Laurent spent

his life thinking about women and how to

make their bodies look beautiful,” Bergé

confides. “So many designers stay in their

ivory towers, but Yves Saint Laurent helped

women move ahead and create a new

identity for themselves.” An entire wall of

the Madrid show is devoted to variations

of Saint Laurent’s 1966 Smoking Suit,

inspired by the tuxedo.

The spectacular exhibition succeeds in

synthesising an enormous body of work

in order to show the harmony in Saint

Laurent’s creations. “He was neither a

minimalist nor an extravagant baroque

type. He achieved a balance,” says Bergé,

describing what makes Yves Saint Laurent

so quintessentially French. One hundred

and fifty pieces of haute couture and

prêt-a-porter are displayed in a number

of galleries with low lighting and the feel

of a giant catwalk. The show’s 11 themes

showcase how he redefined the female

silhouette by introducing the trapeze line,

how he produced runway travelogues

that borrowed from Russian, Chinese

and Moroccan native dress, and how he

made the perennial fashion motifs of

flora and fauna his own. A keen art lover

and collector, Saint Laurent also took

inspiration from classical masters such as

Vermeer, Goya and Velasquez, as well as

contemporary artists including Picasso,

Mondrian and Jean Cocteau as can be seen

in the 1965 cocktail dress with blocks of

primary colours.

Numerous pieces stand out above

the rest – a 1988 Van Gogh Irises jacket

embroidered with 40 pounds of sequins

and beads; a 1997 garden party gown

with a thicket of pink and green organza

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Yves Saint Laurent with American actress Raquel Welch in 1975. G

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flowers, leaves, semiprecious stones and

satin ribbons; a 1990 coat flocked with

flame-coloured rooster, pheasant and

vulture feathers; and finally the black wool

dress with satin collar and cuffs worn by

Catherine Deneuve in the 1967 film Belle

de Jour. Reminding us of a by-gone era

the exhibition displays some of the most

luxurious gowns you’ll ever see all made to

order for the richest women in the world,

including Lauren Bacall, The Duke and

Duchess of Windsor, Nan Kempner, Marisa

Berenson and Princess Grace.

“I hate travel,” Saint Lauent once said.

“With my imagination and through books

with photos I travel to faraway lands.”

Morocco was the only country Saint

Laurent visited regularly. It was there

that he had a second home, Le Majorelle,

in the colourful city of Marrakesh. Today

the house and gardens are a museum

dedicated to his work. Many of the

pieces on show in Madrid are inspired by

journeys, either real or imaginary, which

connect the designer with foreign people.

There are garments with direct influences

from China, Japan and Russia. Then there

are six African-inspired pieces from the

1967 spring/summer collection beginning

with a silk organza column gown with

wood beading. It’s inspired by textiles from

the Congo and is combined with a raffia

coat as big as a wigwam.

Colours were essential to his work

and he particularly loved gold and red.

In the last room of the exhibition visitors

are treated to a series of gowns in a wide

variety of brilliant hues. The muslin gowns,

from his last collection in 2002, show his

brilliant use of colours, either as a singular

tone or in amazing combinations.

Yves Saint Laurent wasn’t always

acclaimed by the press and his summer

1971 collection was harshly criticised

by the fashion magazines. Although

Yves Saint Laurent started his career at Dior. In this 1957 picture he is working on a new collection.

28 loft suites and one Royal Loft Suite that boasts a baby grand piano.

Torero look from 1979.

Iconic Le Smoking tuxedo suit from 1966.

The 1965 homage to Piet Mondrian.

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78 EssentialsFashion

“So many designers stay in their ivory towers, but Yves Saint Laurent helped women move ahead and create a new identity for themselves.”

Yves Saint Laurent designed two haute couture and two prêt-à-porter collections annually.

seemingly inspired by the 1940s and the

war years in Paris, Yves Saint Laurent’s

real inspiration came from the type of

women he imagined living in that time.

The pieces were aimed to be worn by the

woman who wanted to provoke a reaction.

The bad press had no effect on sales

and the public adored the new style and

flocked to the boutiques. Perhaps that’s

why the most provocative pieces in the

show are the ones that changed the way

women dressed, back when haute couture

really was a design laboratory for ideas

that filtered out to the world. There’s a

wool pea coat from 1962, a cotton safari

jacket from 1968, and the first le smoking

from 1966. These are so basic, and yet so

groundbreaking. And they’re looks you

would find at almost

any department store

in the world today.

Even from a young

age, Saint Laurent

was hugely involved

in marketing and

maintaining the image

of his own label. In 1971 he posed naked,

albeit discreetly, for photographer Jeanloup

Sieff for an advertisement for his first

perfume for men. In Madrid visitors can

contemplate 14 other art-inspired images

from the same shoot for the first time.

There are also photos of the designer at

work, his models and portrait photos such

as the informal shot taken by Andy Warhol,

which provide a glimpse of the man.

Saint Laurent has been the inspiration

for many across a number of decades and

his influence and inspiration is still being

felt. This year saw the film L’Amour Fou

(Crazy Love) released. It tells the story of

the designer’s dramatic life from rags to

riches. A flurry of books and new editions

of biographies are also hitting the shelves,

such as Laurence Benaim’s emotional

chronicle Requiem pour Yves Saint

Laurent or Alice Rawsthorn’s biography

titled Yves Saint Laurent. The designer is

also the subject of an album of 16 songs

by Alain Chamfort that is set to open as a

full-scale musical in 2012 at the Parisian

Chaillot National Theatre.

It’s an interesting moment to think

about Saint Laurent’s work, now that

fashion is so important in women’s politics.

Hillary Clinton’s pantsuits and Sarah

Palin’s sexy secretary look are all inspired

by Saint Laurent’s work over the decades.

“Saint Laurent thought that if you took

the male garment and you passed it to the

women’s shoulders, you pass the power

from men to women,” Bergé says. “For

Saint Laurent, fashion was a dialogue,

a rendezvous between a designer and a

woman.” And according to Bergé, much of

fashion today is out of touch. “Designers

are telling women what to do, not listening

to what they want.” n

Yves Saint Laurent with Carla Bruni in 1996. Bruni married French president Nicolas Sarkozy in 2008.

The Madrid exhibition will be on show at the Mapfre Exhibition Gallery until 8 Jan 2012. More information at exposicionesmapfrearte.com.ysl

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Knowing how much your collection is worth is essential for insurance purposes or when you want to sell. But make sure you get the right

appraiser, otherwise it can be an expensive mistake, reports Ann Carrns.

W hether it is fine

wines, vintage movie posters

or abstract paintings, some

people spend a great deal of time and

money compiling collections of valuables.

Even if they’re collecting out of personal

passion, rather than as an investment, it

makes sense to keep tabs on how much

the collection is worth.

“You need to know what you own, and

to know the value of what you own,” said

Nancy Harrison, a fine art specialist with

Emigrant Bank’s fine art financing unit

in New York and the president of the

Appraisers Association of America.

Whether an appraisal is done for tax

purposes, for an insurance policy or to

divide property in a divorce, the most

important first step is finding someone

who has broad, deep knowledge about the

kind of pieces you collect.

The ArT of ApprAisAl

“All appraisers are not created equal,”

said John Cahill, a lawyer in New York

who specialises in art. “And even the good

ones are not good at everything.”

You can, of course, ask for referrals

from lawyers or wealth management

advisers. But even then, you should check

the appraiser’s qualifications. Personal-

property appraisers aren’t licensed, but

reputable professionals are affiliated

with at least one of the three major

appraisal organisations: the Appraisers

Association of America, which focuses on

personal property; the American Society

of Appraisers, which includes specialists

in real estate and other areas; and the

International Society of Appraisers.

These groups require members to keep

up to date with appraisal practices, called

the ‘Uniform Standards of Professional

Appraisal Practice,’ and to adhere to a

code of ethics. That means, for instance,

that they charge only fees based on

an hourly rate, or a negotiated project

rate, rather than on a percentage of the

appraised value. You can search for an

appraiser by name or expertise, and

review information about his or her

background, on each group’s website.

“If an appraiser says they know it all,

run as fast as you can,” said Jane Jacob,

an appraiser who specialises in American

and European fine art from the 19th

through 21st centuries.

Collectors have a variety of options for

getting pricing information for artwork,

collectibles and wine at online sites that

primarily track sales at public auctions.

Appraisers consult those sites too – but

only as a first step. Gayle Skluzacek, a New

York appraiser who evaluates both artwork

and wine, says a knowledgeable expert can

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A staff member holds a costume worn by Michael Jackson when he performed in the Jackson Five group. Record amounts have been fetched recently at movie and music memorabilia auctions, which has led to higher appraisals.

interpret the nuances of a given sale. Why

did it sell above or below the estimate? Was

it offered before? Only a professional, she

said, knows “what questions to ask when

discrepancies appear.”

Expertise is especially important with

appraisals that are submitted for tax

purposes, because the Internal Revenue

Service has detailed requirements for

appraisals submitted as documentation

for donations or estate tax calculations.

The IRS requires a written appraisal by a

qualified appraiser for any deduction taken

on items valued at more than $5,000.

The agency’s own appraisal staff

reviews valuations, and some appraisals

are subject to further review by its Art

Advisory Panel, a group of 25 volunteer

experts. The panel meets periodically to

review appraisals and may decide they

are too high (or, in the case of estate tax

from my experience in the art world,”

he said, “that they’re a well thought of,

responsible and reliable organisation.”

Susan Brundage, the director of that

group’s service, said it focused primarily

on appraisals of fine art for tax purposes.

It draws on the records of its member

dealers, she said, to supplement data on

prices for works sold at public auction.

The appraiser will often – but not

always – examine an item or collection

physically to determine its condition,

before conducting research into previous

sales of similar works to determine a

value. Personally examining an object

allows for a thorough assessment of its

condition, but sometimes appraisals

are done from photographs and other

documentation although that must be

disclosed on the appraisal report.

“You have more gravitas if you’re

valuations, too low). Last year, the panel

reviewed 475 items valued by taxpayers

at a total of nearly $235 million and

recommended adjustments on more than

half, according to its 2010 report.

Arthur fleischer, a New York

lawyer and arts patron whose collection

includes prints by the artist Elizabeth

Murray and images by the Dutch

photographer Hellen van Meene, said

he didn’t spend much time worrying

about the value of his collection because

his motivation was not to make money.

When he has made gifts to museums,

including the Whitney Museum of

American Art and the Solomon R.

Guggenheim Museum, he has worked

with the appraisal service of the Art

Dealers Association of America, for the

documentation the IRS requires. “I know

The ivory-pleated ‘Subway’ dress worn by actress Marilyn Monroe from the 1955 film The Seven Year Itch was expected to bring up to $2 million at auction. It sold for $4.6 million.

“Expertise is especially important with appraisals that are submitted for tax purposes, because the Internal Revenue Service has detailed requirements for appraisals submitted as documentation for donations or estate tax calculations.”

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Chinese artworks. Von Habsburg’s firm

was asked to appraise a collection of 20th-

century decorative jade and porcelain

pieces from an estate. Previous sale

records led to an estimated maximum

price of roughly $124,000, but they sold

for more than $1 million on the online

auction site iGavel.

The market for collectibles, like

Hollywood or sports memorabilia, is also

volatile; prices can surge when there is

a “landmark” auction taking place, said

Leila Dunbar, an appraiser who specialises

in such items. The auction earlier this year

substantiating something you’ve

seen in person,” said Elizabeth von

Habsburg, managing director of the

Winston Art Group.

Even with a thorough appraisal,

fluctuations in the art markets can

lead to surprises. Collectors must

understand that there is not “one

mammoth market” that determines a

work’s value, said von Habsburg, adding,

“There are many submarkets, and they

move at different rates.”

Lately, for instance, Chinese collectors

have been bidding up the prices of

of costumes owned by Debbie Reynolds,

for instance, increased the value of

outfits worn by Marilyn Monroe, Audrey

Hepburn, Grace Kelly and others.

BecAuse mArkets can change

quickly, insurance companies encourage

collectors to have works reappraised

periodically to make sure coverage is

adequate. Mary Sheridan, assistant

fine arts manager for Chubb Personal

Insurance, said collectors with extensive

inventories typically worked with

professional curators and kept their

appraisals current. Those with smaller

or lower-value collections – say, less than

$10 million – are sometimes reluctant,

however, to spend the money for regular

appraisals, which can cost as much as

$300 an hour, along with the higher

premiums an increase in valuation might

bring. “They do not see a need – until

there’s a claim,” she said.

Failing to keep up with rising values can

prove risky. Sheridan recalled an owner

who had a painting by the French artist

Raoul Dufy, illuminated by a picture light

attached overhead. The screws came loose

from the light, allowing the bulb to fall into

the painting and burn a hole through the

canvas. “It was a total loss,” Sheridan said.

The painting was insured on the

collector’s homeowner’s insurance policy,

for $18,000. The market for Dufy’s work

had grown, she said, and the painting’s

value at the time of the damage was close

to six figures. n

The value of the Ferrari 250 LM has risen and fallen with economic cycles. $2.5 million is the record price for a 250 LM in this decade, but it is well below the record price of $5.5 million paid in 1990.

Chinese art collectors are pushing the prices of Chinese art to record levels. Slave and Lion by Xu Beihong sold for $6.9 million in 2006, way above the estimate of $4.1 million. If it came on the market today it might sell for double.

“Because markets can change quickly, insurance companies encourage collectors to have works reappraised periodically to make sure coverage is adequate.”

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For decades, scientists have been predicting that, one day, the same process that powers the sun will give us virtually unlimited cheap, clean electricity. But the technical obstacles remain huge, reports Leo Hickman.

it is a “moral duty” to commercialise this

technology as fast as possible. Without it,

our species will be in “very deep trouble

indeed” by the end of this century.

If only it were that simple. Fusion

energy – in essence, recreating and

harnessing here on Earth the process that

powers the sun – has been the goal of

physicists around the world for more than

half a century. And yet it is perpetually

described as ‘30 years away’. No matter

how much research is done and money is

spent attempting to commercialise this

‘saviour’ technology, it always appears to

be stuck at least a generation away.

Cowley hears and feels these

frustrations every day. As the director of

the Culham Centre for Fusion Energy,

he has spent his working life trying to

shorten this exasperating delay. Fusion

energy is already a scientific challenge

arguably more arduous than any other we

face, but recent events have only piled on

further pressure: international climate-

change negotiations have stalled; targets

to ramp up renewable energy production

seem hopelessly unrealistic; and the

Fukushima disaster has cast a large

shadow over the future of fusion’s nuclear

cousin, fission energy, which has been

providing electricity since the 1950s.

But today, Cowley seems upbeat.

After an 18-month shutdown to retile

the interior of the largest of the centre’s

two ‘tokamaks’ – ring doughnut-shaped

chambers where the fusion reaction takes

place – he is bullish about the progress

being made by the 1,000 scientists and

engineers based at Culham.

“By 2014-15, we will be setting new

records here. We hope to reach break-

even point in five years. That will be a

huge psychological moment.”

Cowley is referring to the moment of

parity when the amount of energy they

extract from a tokamak equals the amount

Fusion Power: Is It Getting Any Closer?

A star is born. and, less

than a second later, it dies. On a

drab science park just outside the

Oxfordshire village of Culham in England,

some of the world’s leading physicists stare

at a monitor to review a video of their

wondrous, yet fleeting, creation.

“Not too bad. That was quite a clean

one,” observes starmaker-in-chief Professor

Steve Cowley. Just a few metres away from

his control room, a ‘mini star’ not much

larger than a family car has just burned,

momentarily bright, at temperatures

approaching 23 million degrees centigrade

inside a 70-tonne steel vessel.

Last year, when asked to name the

most pressing scientific challenge facing

humanity, Professors Stephen Hawking

and Brian Cox both gave the same answer:

producing electricity from fusion energy.

The prize, they said, is enormous: a near-

limitless, pollution-free, cheap source

of energy that would power human

development for many centuries to come.

Cox is so passionate about the urgent

need for fusion power that he stated that

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Fusion is the process that powers the sun. But replicating this

process on Earth poses huge technological challenges.of energy they put into it. At present, the

best-ever ‘shot’ – as the scientists refer

to each fusion reaction attempt – came

in 1997 when, for just two seconds, the

JET (Joint European Torus) tokamak at

Culham achieved 16MW of fusion power

from an input of 25MW. For fusion to be

commercially viable, however, it will need to

provide a near-constant tenfold power gain.

so, what are the barriers preventing

this great leap forward?

“We could produce net electricity

right now, but the costs would be huge,”

says Cowley. “The barrier is finding a

material that can withstand the neutron

bombardment inside the tokamak. We

could also just say damn to the cost of

the electricity required to demonstrate

this. But we don’t want to do something

that cannot be shown to be commercially

viable. What’s the point?”

At the heart of a star, fusion occurs

when hydrogen atoms fuse together under

extreme heat and pressure to create a

denser helium atom releasing, in the

process, colossal amounts of energy. But on

Earth, scientists have to try and replicate a

star’s intense gravitational pressure with an

artificial magnetic field that requires huge

amounts of electricity to create.

The fusion reaction occurs when the

fuel (two types, or isotopes, of hydrogen

known as deuterium and tritium)

combines to form a super-hot plasma

which produces, alongside the helium,

neutrons which have a huge amount

of kinetic energy. The goal of plasma

physicists such as Cowell is to harness the

release of these neutrons and use their

abundant energy to drive conventional

turbines to generate electricity. The

JET tokamak has been shut down for

the past 18 months while the interior

has been stripped of its 4,500 carbon

tiles and replaced with new tiles made

from beryllium and tungsten. The hope


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arguing that the money could be better

spent building offshore wind turbines.

Meanwhile, there is criticism from some

plasma physicists that the design of ITER

is wrong and alternative designs might

produce better results for much less money.

Francesco Romanelli, the Italian director

of the European Fusion Development

Agreement, the European agency that

funds JET, rejects this analysis. We simply

must make this investment, he says: “The

prize on offer is too tantalising to ignore.

Fusion doesn’t produce greenhouse gases,

it is intrinsically safe and it leaves no

burden on future generations. And the

fuel is virtually unlimited. All you need

is lithium and hydrogen. Sea water alone

could fuel current human consumption

levels for 30 million years.”

If fusion offers such glorious bounty, it

prompts the question why the world isn't

concentrating much harder on delivering

is that these new tiles will be far more

neutron resilient, allowing for shots to be

conducted for longer periods and at much

higher temperatures.

last year, bulldozers began clearing

land 60 kilometres north-east of

Marseille in southern France. By 2019,

it is hoped that the world’s largest and

most advanced experimental tokamak

will be switched on. The ¤15 billion

International Thermonuclear Experimental

Reactor (ITER) is being funded by an

unprecedented international coalition,

including the EU, the US, China, India,

South Korea and Russia. Everything

learned at Culham will be fed into

improving the design and performance of

ITER which, it is hoped, will demonstrate

the commercial viability of fusion by

producing a tenfold power gain of 500MW

during shots lasting up to an hour.

Professor Steve Cowley, a plasma physicist, is the director of the Culham Centre for Fusion Energy. He believes electricity from commercial fusion is still 30 years away.

But ITER’s projected costs are already

rocketing, and politicians across Europe

have expressed concern, demanding that

budgets be capped. Fusion energy also

has its environmental detractors. When

the ITER project was announced in 2005,

Greenpeace said it “deplored” the project,

The fusion reaction takes place inside

a ‘tokomak’ – a ring doughnut-shaped

chamber that has to withstand

temperatures up to 23 million degree

centigrade.


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to be, in my mind, a 10-fold increase in

fission power by 2050. We still need fission

because it is a bridging technology until

fusion becomes commercial. By 2100,

fusion could be producing 20-25 per cent

of all our energy.”

what Cowley is admitting, though,

is that as long as fusion research remains

underfunded (a term he doesn’t utter,

but the implication is there) then it

will never save humanity from climate

change, oil wars and the poverty and

underdevelopment caused by ever-higher

energy costs. As if to prove his point,

he admits that on occasion he has even

turned to eBay to buy spare parts for the

smaller UK-owned tokamak at Colham,

which is known as Mast (Mega Amp

Spherical Tokamak).

But such things do not deter him from

pushing forward as best he can, he stresses.

He is first and foremost a plasma physicist.

“Saving the planet is a nice thing to

do,” he laughs. “Doing something that no

one else has ever done is attractive, too.

But, ultimately, this is fascinating. Every

night on the train home I prefer to do a

calculation rather than a sudoku. I try

to work out things such as how a 200-

million-degree-celsius plasma behaves in

a magnetic field. Such things are critically

important for the future of our world, but

they’re really good fun, too.” n

Wu Bangguo (L), Chinese National People’s Congress Standing Committee chairman, and Kaname Ikeda of Japan (R), general director of the International Thermonuclear Experimental Reactor (ITER), look at a model of the ITER site in southern France.

it as fast as possible. Yes, ¤15 billion is a lot

of money to be spending building ITER.

But, by comparison, the global cosmetics

and perfume industry is worth some

$170 billion a year. If the motivation was

there, the global community could find

the money to fund 10 rival fusion projects

to fast-track the process of finding the

optimum design. So, why haven’t we seen a

Manhattan Project-style push for fusion?

“People – and particularly politicians –

still remember fission’s early claims that

it would produce electricity that was ‘too

cheap to meter’,” says Cowley. “We scientists

have to be honest, too: we thought it would

be easy to crack fusion. But there’s no other

comparable challenge. There is no model

for this technology. We’re having to start

from the very beginning.”

Cowley says a Manhattan Project for

fusion would, of course, greatly speed up

its delivery. “ITER will cost around ¤15

billion, but that is not expensive when

you consider the prize. At present, all

we can hope for is, if oil prices are still

high in 2015 and we pull off a big shot

demonstrating parity of power, this gets us

the international attention – and therefore

the funding – we need to really push on.”

It’s hard not to look at the potential of

“This is why there needs to be, in my mind, a 10-fold increase in fission power by 2050. We still need fission because it is a bridging technology until fusion becomes commercial. By 2100, fusion could be producing 20-25 per cent of all our energy.”

Rob Dunn, who is working with James Danoff-Burg, a field biologist from Columbia University, looks around the base of a tree for diverse ant species on a median in New York.

Scientists have to replicate a star’s intense gravitational pressure with a magnetic field to enable the fusion process.

fusion and scream: “We need this right

now!” But Cowley says we still face a

30-year wait for the magic day when we

flick a switch and electricity generated

from fusion flows from the socket.

“After ITER, we will then have to build

a demonstration plant. We hope to have

that built by 2040. This is why there needs

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As nostAlgiA for the eArly

1960s persists, a handful of men’s

fragrances from that period are getting

a second look. Their names evoke two-

button Botany 500 suits and drinks sipped

in a 707’s front cabin: Eau Sauvage, Habit

Rouge, Pour Monsieur. And although sales

are a fraction of the overall market for

fine men’s fragrances, experts in the field

acknowledge their lasting relevance.

“They’re like benchmarks – anything

that comes after is almost always a direct

descendant,” said Grant Osborne, founder

and editor of Basenotes, a website for

perfume enthusiasts.

Chanel Pour Monsieur, introduced

in 1955, “should by all rights be sitting

under a triple-glass bell jar next to the

metre and kilogramme at the Pavillon

de Breteuil as the reference masculine

fragrance,” wrote Luca Turin, the

biophysicist, olfactory scholar and an

author of Perfumes: The Guide.

Christian Dior’s Eau Sauvage,

introduced in 1966, revolutionised the

men’s category as the first perfume to

make heavy use of hedione, a synthetic

analogue of jasmine. Guerlain Vetiver,

based on the aromatic grass native

in India and introduced in 1961 after

similar scents by Givenchy (1959) and

Carven (1957), continues to beget modern

ThaT Man SMellS FaMiliarMen are far more brand loyal than women, which is why classic men’s fragrances are still on the shelves. And now there is even a retro movement afoot, reports Michael Walker.

iterations like Grey Vetiver, by Tom Ford.

These classic men’s fragrances “left

very long-lasting impacts on how people

develop perfumes,” said Eddie Roschi,

a founder of Le Labo artisanal

perfumery in New York. “You

look at what Guerlain did with

Vetiver, and so much of it has

been copied. In some countries

you can smell it in the subways

because everyone wears it.” (In

Europe, the classics still sell

as if it’s 1969; last year

Eau Sauvage was the

third best-selling men’s

fragrance in France,

according to the NDP

Group, a market research

company that tracks sales

in department stores.)

The vogue for

all things retro is a

marketing opportunity

not lost on perfume

makers. Christian

Dior promoted Eau

Sauvage with a print

and television campaign

built around a 1966

photo of French actor

Alain Delon. (The music

for one commercial

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As nostalgia for the early 1960s persists, a handful of men’s fragrances from that period are getting a second look.

was a snippet from the theme of Mad

Men.) In an age when hip young people

transformed the flat-lining Pabst Blue

Ribbon and Parliament brands into

winking fashion statements, it makes

sense that artefacts like Eau Sauvage

and Habit Rouge might follow.

indeed, the venerable Old Spice has

been brand-extended so deftly that most

younger users are probably unaware that

the formula dates to 1938 or was derived

from a women’s perfume.

Last year, the flagship Old Spice

line, including the original aftershave

in a buoy-shaped bottle, grossed $33

million at mass-merchandise outlets

excluding Walmarts, according to

Symphony IRI, a Chicago-based market

research company. Meanwhile Brut,

which was introduced in 1964 and

endorsed by quarterback Joe Namath

during his heyday, grossed $9 million.

“Brut is an amazing fougere,” said Roschi,

referring to the lavender-based fragrance

family also including Canoe (introduced in

1936 and still in production).

But for a generation raised on CK

Be and body sprays like Axe, retro

scents aren’t necessarily an easy sell. At

Beverly Hills Perfumery, which stocks

a comprehensive collection of vintage

perfumes, the owner, Alan Berdjis,

sprayed a test card with Pour Monsieur

and took a long sniff. “It’s kind of a thin,

creamy citrus,” he said approvingly. But

Berdjis, 30, added, “If you introduced

this today and it did not have the Chanel

brand recognition, I don’t think it would

do well.” Why? “You smell it and just

know,” he said. “This is an old fragrance.”

Epitomising the new is Acqua di Gio,

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and the No. 1-selling fine men’s fragrance

for the past 10 years, according to the

NDP Group. Acqua di Gio popularised

the light, quiescent ‘aquatic’ accord that

dominates men’s fragrances today and has

inspired countless imitators – “a slew of

apologetic, bloodless, grey, whippetlike,

shivering little things that are probably

impossible, and certainly pointless, to tell

apart,” Turin said.

CompAred to the breezy aquatics,

certainly, the classic ’60s scents – with

their base notes of musk, oak moss,

sandalwood and leather – can seem

leaden, especially to younger noses.

Nevertheless, sweet, unisex aquatics are

ceding market share to scents redolent

of woods and spices. Of the top four

men’s fragrances introduced in 2010,

“two were woods, one was a woody

oriental and only one was a water,” said

Karen Grant, a beauty industry analyst

with the NDP Group.

The introduction last year of Bleu de

Chanel, which despite its sport-aquatic-

sounding name is considered a woody

aromatic, was a sign that the pendulum

is swinging toward earthier accords; it

became the No. 3 best-selling men’s scent

in the United States.

The Old Spice ad, starring actor Isaiah Mustafa, makes fun of men’s fragrances that smell too feminine. The ad went viral on YouTube with millions of hits. Old Spice has been around since 1938.

“Epitomising the new is Acqua di Gio, introduced by Giorgio Armani in 1996 and the No. 1-selling fine men’s fragrance for the past 10 years.”

Men are far more brand-loyal than

women when it comes to fragrance, Grant

said, “which is why when something

becomes a top scent it continues to be

a top scent – it’s hard to break into that

ranking.” She added that in survey after

survey, men say the No. 1 consideration

when they buy a fragrance is that it appeal

to their partners.

“A lot of women feel the newer

fragrances for men are a little too

feminine,” Berdjis said, a sentiment

hammered home in the recent ‘The Old

Spice Guy’ campaign, which pointedly

mocked “lady-scented body washes” with

the tag, “smell like a man, man.” Female

customers at his store, Berdjis added,

“buy the older-type fragrances to give to

their boyfriends.”

“Their preference on a man goes back

to the more masculine type of smell,” he

continued. “That might speak to how

society has changed – you didn’t have

metrosexuals in the 1960s.”

Indeed, what constitutes a masculine

fragrance today, said Roschi, who himself

wore Chanel No. 5 for several months, “is

going to be much more diverse than it was

in the ’50s and ’60s, because masculinity

has evolved so much.” n

Christian Dior is promoting Eau Sauvage, which was released in 1966, with an ad campaign centred around a 1966 picture of famed French actor Alain Delon.


To the renegades. To those who do things for love not money.

160 years of winemaking.

Max SchubertWinemaking legend and creator of Penfolds Grange

Dreamed of making a truly Australian red with such balanced complexity it would mature and develop for at least 20 years and rival the world’s finest wines. First vintage maligned and misunderstood. Ordered to stop making it, he persisted (with the support of Jeffrey Penfold-Hyland). Penfolds Grange is now one of the most sought after red wines in the world.

Newspix/News Limited

Penfolds\Portfolio.indd 1 7/17/07 3:27:23 PM

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Global warming is shrinking the Arctic ice pack, resulting in governments and companies scrambling to exploit new opportunities in this previously inaccessible region, reports Andrew Kramer.

Rounding the noRtheRnmost

tip of Russia in his oceangoing tugboat

this summer, Captain Vladimir V. Bozanov

saw plenty of walruses, some pods of

beluga whales and in the distance a few

icebergs. One thing Bozanov did not

encounter while towing an industrial

barge 3,702 kilometres across the Arctic

Ocean was solid ice blocking his path

anywhere along the route. Ten years ago,

he said, an ice-free passage, even at the

peak of summer, was exceptionally rare.

But environmental scientists say there

is now no doubt that global warming is

shrinking the Arctic ice pack, opening new

sea lanes and making the few previously

navigable routes near shore accessible

more months of the year. And whatever

the grim environmental repercussions

of greenhouse gas, companies in Russia

and other countries around the Arctic

Ocean are mining that dark cloud’s silver

lining by finding new opportunities for

commerce and trade.

Oil companies might be the most likely

beneficiaries, as the receding polar ice cap

opens more of the sea floor to exploration.

The oil giant Exxon Mobil recently signed

a sweeping deal to drill in the Russian

sector of the Arctic Ocean. But shipping,

mining and fishing ventures are also

looking further north than ever before.

Iceland’s president, Olafur Ragnar

Grimsson, speaking at a recent conference

on Arctic Ocean shipping held in the

Russian port city of Arkhangelsk not

far south of the Arctic Circle, called it

“paradoxical that new opportunities are

opening for our nations” at the same time

that the threat of carbon emissions has

“become imminent.”

At the same forum, Prime Minister

Vladimir V. Putin of Russia offered a

full-throated endorsement of the new

business prospects in the thawing north.

“The Arctic is the shortcut between the

largest markets of Europe and the Asia-

Pacific region,” he said. “It is an excellent

opportunity to optimise costs.”

This summer, one of the warmest on

record in the Arctic, a tanker set a speed

record by crossing the Arctic Ocean in

6∏ days, carrying a cargo of natural gas

condensate. The previous record was

eight days.

Scientists say that over the last 10 years

the average size of the polar ice sheet

in September, the time of year when it

is smallest, has been only about two-

thirds the average during the previous

two decades. The Arctic Monitoring and

Assessment Programme, a Norwegian

group studying the Arctic, forecasts that

within 30 or 40 years the entire Arctic

Ocean will be ice-free in the summertime.

And so business plans are being drawn

up to capitalise on changes in a part of the

world that for much of seafaring history

was better known for grim final entries in

diaries of explorers like Hugh Willoughby

of England. He died with his crew in 1553

trying to navigate this shortcut from Europe

to Asia, known as the Northeast Passage.

The Russians, by travelling near the

coast, have been sailing the Northeast

Passage for a century. They opened it to

international shipping in 1991, after the

breakup of the Soviet Union. But only

recently have companies begun to find the

route profitable, as the receding polar ice

cap has opened paths further offshore –

allowing larger, modern ships with deeper

drafts to make the trip, trimming days off

the voyage and saving fuel.

In 2009, the first two international

commercial cargo vessels travelled north

of Russia between Europe and Asia. This

Northeast Passage Dream reviveD

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A decade ago it was rare that the Northeast Passage was

ice-free, necessitating the use of expensive icebreakers

to move shipping.

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94 EssentialsEnvironment

as abandoned Russian polar stations,” the

Australian operator, Aurora Expeditions,

noted in its promotional literature.

on some routes, the trip over the top of

Russia is now competitive with the passage

from Europe to Asia via the Suez Canal.

The voyage from Rotterdam to Yokohama,

year so far, 18 ships have made the now

mostly ice-free crossing.

The voyages included a scenic cruise

through the Northeast Passage, the first

ever, departing from Murmansk and

arriving in Anadyr, a Russian port in the

Pacific Ocean across the Bering Sea from

Alaska. “The voyage offered attractions such

THE NEW YORK TIMES

The Northeast Passage Opens UpThe Arctic ice cap has been shrinking, opening up new shipping lanes. This has given access to oil and gas fields, as well as fishing in international waters that were not accessible before. RUSSIA

UNITEDSTATES

ALASKA

CANADA

NORWAY

SWEDEN

FINLAND

GREENLAND(DENMARK)

ICELAND

North Pole

Observed iceextent in

September2011

Median iceextent in

September,1979-2000

Internationalwaters

Murmansk

Kirkenes

Arkhangelsk

DudinkaTiksi Khatanga

DiksonIsland

ReykjavikBaffinBay

BeaufortSea

BarentsSeaChukchi

Sea

BeringSea

HudsonBay

AtlanticOcean

Thule

Anadyr

Nome

Pevek

MAP KEYNortheastPassageShorter,more northernroutes nowaccessible

Portion ofthe Arctic’s

international waters ice-free

in SeptemberSources: The National Snow and Ice Data Center; Pew Environmental Group; [Russian] Partnership of Northern Sea Route Users; Natural Earth (map terrain)

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10

20

30

40%

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N.Y. Times News ServiceDate: 10/25/11Graphic Slug: ARCTIC-KRAMER-BSPRSize: 7.2 x 7.2With Story: (BC--ARCTIC-KRAMER-BSPR--NYT)

“The voyage to Lianyungang in China took 21 days in 2010, compared with the 37 days typically required to sail to China through the Suez. Tschudi executives estimate they save about $300,000 a trip. “Very few people in the shipping community know about this route,” Felix Tschudi, the chairman, said in an interview.”

Japan, via the Northeast Passage, for

example, is about 7,162 kilometres

shorter than the currently preferred route

through the Suez, according to Russia’s

Transportation Ministry. (Of course, the

Arctic route has far to go before catching

up to the 18,000 ships a year sailing

through the Suez Canal.)

But the primary use of Arctic Ocean

shipping so far has been to support other

industries heading further north, like

mining and oil drilling, according to

participants at the Russian conference.

Tschudi, a Norwegian shipping company,

has bought and revived an idled iron ore

mine in the north of Norway in order to

ship ore to China through the Northeast

Passage. The voyage to Lianyungang in

China took 21 days in 2010, compared with


December 2011

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frozen year round. Now, large portions

north of Alaska and eastern Siberia are

usually ice-free in the summer.

The spectre of hungry southern nations

fishing the newly navigable doughnut

hole prompted a recent report by the Pew

Environment Group to warn that without a

new set of regulations for the region, Arctic

cod populations might be decimated.

Meanwhile, because ice floes still

menace shipping even in the otherwise

open sea lanes, authorities in the United

States, Russia and Norway are studying

the business potential of overhauling

ports on both sides of the Northeast

Passage to transfer containers from

ordinary freighters to ice-class vessels that

would ply the Arctic Ocean, serving Asia,

Canada, the US West Coast and Europe.

Under this plan, now hopelessly remote

ports like Kirkenes in Norway or Adak in

Alaska, south of the Bering Strait, might

be transformed into bustling logistics

hubs for Arctic shipping.

Alaska’s lieutenant governor, Mead

Treadwell, was one of the attendees at the

Russian conference. He noted that about

$1 billion worth of goods passed through

the Bering Strait last year. “The ships,” he

said, “are coming.” n

Russian Prime Minister Vladimir Putin (R) shakes hands with the President of Iceland, Ólafur Ragnar Grimsson, during a meeting in Arkhangelsk to discuss the Arctic.

the 37 days typically required to sail to

China through the Suez. Tschudi executives

estimate they save about $300,000 a trip.

“Very few people in the shipping

community know about this route,” Felix

Tschudi, the chairman, said in an interview.

The Russian company Norilsk’s nickel

and copper mine can now ship its

metals across the Arctic Ocean without

chartering ice breakers, as in the past,

saving millions of rubles for shareholders.

In northwest Alaska, the Red Dog lead

and zinc mine moves its ore through the

Bering Strait, which is less often clogged

with pack ice than in past decades.

Citigroup’s Moscow office has identified

five Russian companies well positioned to

benefit from global warming in the north,

where temperatures are rising about twice

as fast as the global average.

Besides Norilsk, they included

Sovcomflot, the state shipping company,

and the nation’s two largest natural gas

companies, Gazprom and Novatek. The

fifth is Rosneft, the state oil company that

has entered the joint venture with Exxon

Mobil to drill in the Kara Sea, a part of

the Russian sector of the Arctic Ocean.

Russia is retooling a military shipyard

outside Arkhangelsk that built the Soviet

Union’s nuclear submarines to make ice-

capable oil and gas drilling platforms.

FoR the international fishing industry,

the target is the so-called Arctic Ocean

doughnut hole – the millions of square

kilometres in the ocean’s centre that

are beyond the 322-kilometre exclusive

economic zones of the coastal nations.

Until 2000, the entire doughnut hole was

Hong Kong flagged Nordic Barents, carrying 40,000 tonnes of iron ore, leaves Kirkenes in the north of Norway on route to China via the Arctic Northeast Passage. G

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96 EssentialsOther Business

Harrisburg, the cash-strapped capital of

Pennsylvania, USA, has enough muskets,

stage coaches, sheriff's badges and

ammunition to see off creditors. Nearly all

of the artefacts were collected by former

Mayor Stephen Reed, who dreamed of

building a Wild West museum in

Harrisburg that never materialised.

Desperate to climb out of a $300 million

debt crisis, Harrisburg has allowed

appraisers and

auction houses

into a storage

space where

more than

8,000 bits of

Americana

have been

gathering dust

for years. Reed

began buying

the artefacts

with tax dollars

more than five years ago. Two city

auctions of some of the Wild West

pieces in 2007 and 2008 have netted

$1.66 million.

Harrisburg spokesman Robert Philbin

said about nine companies have taken

a recent look at the artefacts and gave

the city hope some of the $8 million to

$15 million Reed spent to buy them will

be recouped.

Wild West Cash

Times are economically tough in Europe

and shoppers aren’t feeling very festive.

In France household spending dropped

1.3 per cent in September versus the

same month a year earlier and spending

on clothing fell 7.3 per cent, according

to France’s statistics office.

That’s why live rock and roll is

replacing recorded Christmas carols

in the windows of Galeries Lafayette

as the famed Parisian department

store seeks to drum up curiosity, and

client numbers, for this year’s gift-

buying season.

With a debt crisis forcing much of

Europe into austerity, consumption

has dropped in recent weeks, making

Rock Replaces Carolscrowd-pullers all the more important,

even for upmarket stores that can count

on a large tourist contingent in the

heart of the French capital.

Rock legend Iggy Pop has helped

Galeries Lafayette get the show on the

road, posing for photo fliers in red Santa

hat and matching shoes. The opening

weeks include nightly live shows in the

window by a variety of major-label rock

and folk bands.

Galeries Lafayette, which first

started doing its Christmas window

shows after World War II, says that

this year’s show was inspired by the

increasingly close relationship between

rock and fashion.

RE

UTE

RS

German Accounting BlunderThe German

government has

been scathing about

the accounting

practices of some

Eurozone countries,

so it was particularly

embarrassing when a

¤55 billion accounting mistake came to light.

Federal Minister of Finance Wolfgang

Schaeuble said it was “an extremely annoying

mistake” for the nationalised mortgage

bank Hypo Real Estate (HRE) and the PwC

accountancy firm to have let such an error slip

through undetected.

The blunder briefly raised Germany’s total debt

by more than ¤55 billion, and Schaeuble and the

government were lampooned by cartoonists and

pilloried in editorials.

As a result of the corrected debt, Germany now

expects its ratio of debt to gross domestic product

to be 81.1 per cent for 2011, 2.6 percentage points

less than previously forecast.

96 Other business.indd 96 11/20/11 2:34:32 PM

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