8 ★ FINANCIAL TIMES Thursday20 February 2020
SWF governance model
that works for Singapore
I refer to your interview with Zafer
Sonmez (“Turkey fund head insists on
being his own man”, February 18),
which reported comments on
Singapore’s GIC and Temasek.
By their very provenance, sovereign
wealth funds (SWFs) cannot but be
related to governments. Nevertheless,
with the right governance models and
organisational values, governments can
manage SWFs on a strictly
professional, arms-length basis.
This is the case with GIC and
Temasek. Both are commercially
oriented entities whose mission is to
deliver long-term returns. The
government sets the broad mandate for
each, but is not involved in decisions
on investment transactions.
The GIC board is chaired by the
prime minister and includes other
ministers, but confines itself to setting
GIC’s overall risk orientation and
strategic asset allocation. Temasek has
no government representation on its
board, and makes its own investment
decisions.
Governance models for SWFs will
vary, and there is no one right
approach. Singapore’s SWF model
combines state ownership with
autonomous operations insulated from
political pressures. It has worked for
us.
Lim Zhi Jian
Director (Reserves & Investment),
Ministry of Finance, Singapore
No, Germany should not
invest in military tech
Wolfgang Münchau is spot on in
outlining Germany’s loss of
technological leadership during
chancellor Angela Merkel’s reign
(“ Merkel’s successor must confront
Germany’s decline”, February 17). The
country’s reliance on carbon-fuelled
cars, boosted by state governments’
strong role in preventing
diversification away from cars, and car
manufacturers’ efforts to become
software leaders in cheating, instead of
addressing burning problems of
society, has led to the present demise of
the economy and a pessimistic outlook
on the future.
However, I wholly disagree with part
of Mr Münchau’s sectoral proposal,
that Germany invest in new
technologies in green areas and
military solutions. Germany’s
armaments industry has nothing like
the ability of the US Defense Advanced
Research Projects Agency to generate
dual-purpose innovations — GPS, the
internet — which helps to overcome
society’s ills. Germany’s reluctance to
invest in its military has its well-argued
historical grounds. It should stay there.
However, I support Mr Münchau’s
idea of concentrating on combating
climate change and environmental
degradation, a wide field where
Germany’s technological prowess
would come in handy. May I remind FT
readers that there is high demand for
innovation in the fields of public
health, in the care economy and in the
social sector in general. The necessary
drive for innovation must not stop at
technology in goods, but must extend
to organisational and procedural areas.
These are widely untapped fields in
Germany.
Kurt Bayer
Vienna, Austria
Former board director at the World Bank
and the EBRD
Tax changes risk loss of
a valuable resource pool
Banks have no shortage of challenges
ahead, so it is very worrying that they
may lose vital specialist contractor
staff (“Deutsche Bank faces freelancer
revolt”, February 17). The changes to
off-payroll tax legislation (IR35) are
borne of a foundation of necessary
change and clarification within the
industry. However there are
considerable risks in substantially
eroding valuable skilled specialists in a
period of sustained change for financial
services.
The concept of contingent resourcing
was built on the need for flexible — and
often highly specific — skills that
needed to be deployed rapidly on
projects and short-term assignments. It
is true that the financial services sector
had become bloated with confused
roles and even shadow employees
operating in limited company
structures. Some of these were reaping
highly favourable rewards, through day
rates and tax breaks designed for
genuinely short-term contractors in
lieu of traditional job security.
The reforms rightly aim to eliminate
any prevalent “gaming” of the system.
But the contracting industry also
offered banks and specialist finance
houses a valuable, and often hard-to-
obtain, resource pool. These
contractors came with subject-specific
skills, honed over many years, that the
employed market would not — and
could not — sustain. They have become
victims of unintended consequences as
HM Revenue & Customs tries to reset
the balance and level the playing field.
Hence the very necessary and urgently
needed review.
Rebalancing the landscape must not
eliminate this talent pool, which banks
need now more than ever. Regulators
the world over are clear that we must
de-risk financial services as far as
possible. It would be ironic — if not
catastrophic — if in its laudable efforts
to close a tax loophole the UK
government succeeded in banishing
the very people the banks need to do
that.
Haney Saadah
Partner and Head of Regulatory Risk &
Compliance (Non-lawyer),
Addleshaw Goddard,
London EC1, UK
Digital upgrade should be
on chancellor’s to-do list
Huw van Steenis concludes his nicely
comprehensive op-ed “The UK can find
ways to make divergence work sector
by sector” (February 17) by saying that
the transition from cash to digital
payments “is accelerating, but to do
this without leaving anyone behind will
require significant upgrades to
broadband and mobile telephony
networks”.
I live near Cranleigh in Surrey —
hardly “the back of beyond” — where
mobile reception, regardless of
operator, is almost non-existent and
certainly totally unreliable. Broadband
is so poor that we have a small group of
frustrated residents planning to fund
provision of fibre to our homes
privately, at quite significant individual
capital outlay. I can’t believe we are
alone in our frustration, while many
others may not be fortunate enough to
be able to self-fund broadband
improvements.
Our young (and impressively
credentialed) chancellor’s new
spending priorities should surely
include a profound upgrade of the
entire UK’s digital infrastructure, to
enable everyone — business and
individual alike — to take full
advantage of the brave new world that
digital and artificial intelligence
promise post-Brexit UK.
Peter Breen
Cranleigh, Surrey, UK
Virus will cost Africa
billions in lost exports
Your report “Chinese exports hit as
world supply chains suffer” (February
13) is right to emphasise how countries
dependent on China for trade in goods
and services (for example tourism) are
likely to be affected by the outbreak.
However, it does not mention the
indirect effects on low and middle-
income countries through a decline in
trade prices for commodities such as
oil, copper and coffee.
This is one of the most significant
ways in which poorer countries will be
affected globally. ODIanalysis uggestss
that sub-Saharan African countries
face a $4bn loss (0.3 per cent of gross
domestic product) in export revenues
following a slowdown in China and a
decline in oil prices of 20 per cent for
just one quarter.
A more diversified import and
export basket in both products and
geographies can help countries to
become less vulnerable to such price
shocks.
Dr Dirk Willem te Velde
Overseas Development Institute,
London SE1, UK
My Polish painter didn’t
bother with permission
Current proposals tocontrol
immigration rom EU countries remindf
me of my experience in France 10
years ago. Discussing with a Polish
painter decorating my Paris apartment
how he managed to get permission to
work in France, he answered: “I did
not. Come by car on a three-months’
tourist visa, work, go home for a week,
come back to start again.”
Christopher Adam
London SW7, UK
Lakefront property owners lose sleep
over flood risks. High school students
fill sandbags to protect the fragile
coastline. America’s Great Lakes, the
largest body of fresh water n Earth,o
are at, or near, historically high levels.
That scenario sounds all too
familiar to local residents: last month
Lake Michigan, the most variable of
the Great Lakes,hit its highest levels
since records began. But actually, I’m
describing 1969, when I was one of the
high-schoolers happy to be let off
lessons to break my back on lugging
sandbags, rather than my brain on
trigonometry. There was ample angst
then, too, about high water and the
disappearing coastline. The difference
was, no one blamed it on global
warming way back then.
Today, climate change is everyone’s
go-to explanation. When I walk my
dogs on lakeside paths turned to ice
rinks by the overflowing water, other
dog owners mutter darkly about
global warming. When Lake
Michigan’s waves crash over Chicago’s
lakefront hiking trails, the radio
anchor fingers climate change. When
Lake Superior floods my camper van
site in the wilds of the state’s Upper
Peninsula, a fellow camper assures me
it’s because “Republicans don’t believe
in global warming”.
But is that really what’s going on? In
this presidential election year, and in
the deeply liberal corner of the
Midwest where I live, questioning the
reasons for Great Lakes flooding can
be seen as a political act.
Even the experts admit there are
contradictory factors at play: “It’s a
cycle. The Great Lakes have gone up
and down forever and there’s every
reason to believe they will continue to
do so,” says Richard Norton, who
works on Great Lakes coastal
management at the University of
Michigan’s Taubman College of
Architecture and Urban Planning.
“The lakes go down just long enough
for people to forget that they go up
again.” While Prof Norton does not
question the evidence of global
warming, he confesses it is hard to
predict its future effect on lake levels:
“In terms of overall water levels, who
knows what the impact of climate
change will be?” he asks.
Some experts predict that warmer
temperatures will lead to more
precipitation, thus higher lake levels.
They note that last month was the
hottest January on Earthsince records
began, according to the US National
Oceanic and Atmospheric
Administration. Others predict rising
temperatures will lead to more
evaporation and thus lower lake
levels. “There is some reason to think
that the fluctuations might come
faster, and highs will be higher and
lows lower, but even that isn’t certain,”
saysProf Norton.
“One thing we know for sure is that
the Midwest has seen an increase in
precipitation of about 10 per cent over
the past five decades,” says Donald
Wuebbles, an atmospheric sciences
professor at the University of Illinois
at Urbana-Champaign and lead author
of 2019 reporta nto the impact ofi
global warming on the Great Lakes.
Prof Wuebbles, a former climate
change adviser toBarack Obama,
notes that much of that precipitation
is coming in ever more violent storms,
which have an outsized effect on Great
Lakes coastlines.
“Is this going to be more the norm?
We don’t know yet. It’s likely to be
cyclic, as it’s been in the past, but
maybe it will weight to having higher
lake levels. We don’t have the
definitive studies we need to know.”
“It sounds dramatic to say it’s a 100-
year high,” says Prof Norton. “But it’s
been high like that in the past and it
will be high like that in future.” What
is different now from my sandbagging
days 50 years ago, he says, is the
amount of property that has been
built alongcoastlines since then.
“It’s not so much nature that is
changing but that we haven’t paid
attention to nature. There is a lot
more property at risk than in the
1970s and 1980s.” What we call
natural disasters only end up that way
because we have “moved too close and
not paid enough attention to nature”,
he adds.
So will my dogs soon be able to run
along the beach that has disappeared
since the summer? Will Chicago’s
Lakeshore Drive have to be closed
again, as it was when it flooded in
1987? Will I be able to camp on Lake
Superior next summer without my
camper van floating away to Canada?
It could go either way.
[email protected]
Rising water
sparks climate
change fears in
the Great Lakes
Lex is unduly harsh and strays into
error in characterising NatWest as “a
toxic name” with a horrid history —
fraud, botched expansion and
spendthrift ways” (“RBS/NatWest:
time trouble”, February 15).
The main charge against it in its 30-
year history between its birth as the
merger of National Provincial Bank
with Westminster Bank and its
acquisition byRoyal Bank of Scotland
was of cautious conservatism, as is
proved by the fact that its Moody’s
long-term debt rating was Aa2 when it
was swallowed by its smaller but
suddenly more aggressive Scottish rival
— a rating no UK bank matches today.
It never paid eye-popping bonuses to
its traders or directors. It offered its
customers free banking through the
UK’s largest network of branches and
ATMs, while being at the then forefront
of automation including the innovation
of telephone banking. Its expansion
was cautious, its main foreign venture
being the acquisition of mid-market
retail banks in New York and New
Jersey from 1979, which were
successfully rebranded as NatWest
USA and suffered no worse in the US
real estate crash of 1991-93 than
mighty names such as Citibank.
Its merchant bank subsidiary,
County NatWest, was homegrown
rather than splashily purchased after
the 1986 “Big Bang”, and Jonny
Cameron, the only RBS director who
was fined and banned by the Financial
Conduct Authority following the RBS
bailout, was well controlled when he
started his career there in the 1980s.
Fraud was largely conspicuous by its
absence. The bank never had to restate
its accounts or was fined for any
regulatory misconduct or mis-selling;
the one high-profile stain was the so-
called “Enron Three” whose
convictions in the US, while revealing
an unethical business culture in their
unit Greenwich NatWest at the time,
were for defrauding the bank of value.
Ironically, the scandal only came to
public attention long after RBS had
taken over NatWest and when Enron
collapsed in 2002.
We old NatWesters said nothing good
would come of our banking alma mater
being swallowed up by RBS, however
complacent and stodgy it had proved
from time to time, and sadly we were
proved right in just a few years.
NatWest never took a penny of public
money, and in fact coughed up most of
its profit in 1982 to the Treasury in
then chancellor Geoffrey Howe’s one-
off “banking levy”.
With no prospect of the taxpayer
recovering the full £45bn bailout of
RBS, Lex should be kinder in its
remembrance of a bank which served
its customers well and took its
corporate responsibilities seriously.
Whether the time is yet ripe to try to
use theNatWest ame to rehabilitaten
RBS may be open to debate, but what
goes around, comes around.
Tom Brown
London SW5, UK
Graduate Trainee, NatWest International
Banking Division, 1979
Be kinder to the memory of a bank that served customers well
Letters
T H U R S DAY2 0 F E B R UA R Y 2 0 2 0
Email: [email protected]
Include daytime telephone number and full address
Corrections: [email protected]
If you are not satisfied with the FT’s response to your complaint, you can appeal
to the FT Editorial Complaints Commissioner: [email protected]
‘What’s your star sign?’
Britain’s new migration policy is a gam-
ble.The new rulesrevealedyesterday
assume that if businesses cannot hire
low-paid migrants, they will invest in
training, automation and recruitment
to improve workers’ productivity.
Companies, however, could also shut
shop or relocate abroad, damaging the
economy and leaving consumers with
high prices and less choice.
Branded as an “Australian-style
point system” but in reality a more
blunt instrument, the scheme requires
migrants to collect 70 points. Fifty of
these come from “essential” criteria:
speaking English, having a job offer
and being above a “skills threshold”.
There are only four routes to gain the
remaining 20 points and they cannot
be traded off against each other.
Migrants can earn above a salary
threshold — £26,500 for most workers;
have a PhD in a relevant field to their
job; have a PhD in any field and meet a
slightly lower salary threshold; or work
in an occupation where there are short-
ages of workers.
The rules are significantly tighter for
EU migrants than at present. The
Home Office estimates that 70 per cent
of theEU citizens currently in the UK
would not qualify under the points-
based system. But the rules would be
slightly looser than now for non-EU
migrants thanks to a lower salary
threshold and the introduction of a
two-year period in which ex-students
can remain in the UK without a job.
Such a regime will make it difficult
for many industries that currently rely
on low paid migrant workers. Hospital-
ity, social care and food and drink man-
ufacturers are all in the line of fire.
The lack of any means for self-
employed workers to move to the UK
also hits the construction industry,
which depends heavily on contractors.
All businesses will face increased red
tape when recruiting from overseas.
The government hopes this will
stimulate efforts to improve the UK’s
dire productivity performance or help
workers into the labour market. As
home secretary riti Patel saidP : “If we
invest in people and also if we put [in]
the right investment in terms of new
technology and skills, more people
would be able to work in many
sectors.”
Yet there is little evidence so far that
restricting migration affects productiv-
ity in the same way as even the slight
benefits from introducing minimum
wages.Research from the UK’s Low Pay
Commission ays there has been “mod-s
est” automation following rises in the
minimum wage in the UK. Astudy in
Germany ound the introduction of af
minimum wage improved productivity
as small companies closed and workers
moved to bigger outfits.
It will help that there are pressure
valves in the UK migration regime to
alleviate skills shortages, including
youth mobility schemes and family
reunification. Many businesses turned
to these routes to find workers after the
Brexit vote. These routes will remain
and the Migration Advisory Commit-
tee, an expert body, can simply desig-
nate jobs in struggling sectors as
“shortage occupations”, eliminating
the salary floor.
The sector most at risk is social care.
Without a derogation, it will struggle.
Hourly pay in the sector is lower than
in nearly every UK supermarket chain,
thanks to a decade of underfunding of
local authorities.
Low pay leads to high staff turnover,
so shortages could loom after the new
migration rules are introduced. Unless
the government presses ahead with
social care reform and finds ways to
pay higher wages, it could face a crisis
in a key public service well before it
finds out whether its broader produc-
tivity gamble has paid off.
Restrictions will hit social care, hospitality and food processing
Britain gambles on a
new migration policy
Almost a year afterFacebook’s founder
Mark Zuckerberg irst called for globalf
regulation, the social network has
attempted to flesh out his ideas. Face-
book’s “white paper” on regulating
content reflects Big Tech companies’
realisation that government action is
inevitable. But it lacks substance, and
leaves too many questions unan-
swered. Sophisticated, effective online
regulation needs real co-operation
between platforms and legislators.
The22-page paper rgues that set-a
ting performance targets such as
removing content within a specific
timeframe could create “perverse
incentives” for companies to take deci-
sions which would harm users. It could,
for example, lead companies to mas-
sage statistics on policy violations by
making it more difficult for users to file
complaints. Instead, the report pro-
poses that regulators assess whether
companies have “systems and proce-
dures” for harmful material, such as
monitoring using artificial intelligence.
There are certainly dangers to free
speech from heavy-handed regulation.
Facebook argues that treating all plat-
forms as publishers, across the board
and not just in cases such as child por-
nography, could drive companies to
engage in self-censorship. Yet like
other platforms, Facebook offers lim-
ited suggestions on how it could be reg-
ulated. A focus on “systems and proce-
dures” mayentrench big companies’
market dominance. It would reward
established players who have the time
and expertise to develop such systems,
without considering how efficient they
are in removing detrimental content.
Facebook’s paper says nothing on
political advertising, despite the criti-
cism it has faced over its choice to
exempt irect statements and advertsd
from politicians rom fact-checkingf
procedures it applies to other content
and ads. (Facebook notes it does not
allow politicians’ adverts to link to false
content elsewhere.) By contrast,Twit-
ter ast yearl banned most political ads,
whileGoogle made it more difficult for
political advertisers to target users
through data such as email addresses.
Facebook was also criticised for reduc-
ing the visibility of an edited video of
Nancy Pelosi, speaker of the House of
Representatives, rather than removing
it entirely. It is unclear whether such
content, on the borderline of satire and
misinformation, would breach rules
the group has adopted this year on
“manipulated media”.
The paper fails to address, too, how
the company can moderate content on
the messaging services of Facebook,
WhatsApp nda Instagram nce theyo
are integrated into an encrypted sys-
tem. This month, more than 100 chari-
ties and academics called for a halt to
the integration until it is proven that
child safety will not suffer as a result.
The algorithms that control content
on Facebook should be open to scru-
tiny. Critics have argued that the algo-
rithms contribute to cases of self-harm
by creating feedback loops, presenting
vulnerable users with more harmful
content. Vera Jourova, the European
Commission’s vice-president in charge
of transparency and values, haspro-
posed opening algorithms o audit.t
Access to anonymised data sets also is
necessary to study the impact on users.
The debate around tech legislation
has often been a binary one — between
regulatory diehards who want to pin all
responsibility on platforms, and the
tech companies which see themselves
as merely conduits. Tech companies’
longtime recalcitrance to engage fully
with regulators has stymied efforts to
find solutions lying somewhere in the
middle. That is changing. But the
stated backing for regulation does not
absolve the companies of their own
responsibility.
Stringent regulation is needed to ensure removal of harmful material
Facebook’s proposals on
content are far too weak
Michigan
Notebook
by Patti Waldmeir
FEBRUARY 20 2020 Section:Features Time: 19/2/2020- 18:32 User:alistair.hayes Page Name:LEADER USA, Part,Page,Edition:USA, 8, 1