Oceans Exploration Technology Takes Research to New Depths Underwater Living Building Homes on the Ocean Bed

The Credit Suisse Magazine Since 1895 Issue 3 Aug./Sept. 2008 International Edition

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Fish Have It Easy. After all, 71 percent of the planet’s surface is covered by oceans. And fish have ravines and trenches – sometimes several kilometers deep – in which to roam, surrounded by gigantic underwater mountain ranges and endless expanse. The freedom they enjoy down there, in the depths of the sea, must be truly without bounds.

By contrast, the small world inhabited by land dwellers – who have less than one-third of the planet’s surface between them – seems cramped. What’s more, humans can only use their living space on a two-dimensional basis because gravity always forces them down. If – on occasion – they want to join the birds or the fish in the third dimension, they’re forced to squeeze themselves into flying metal tubes or huge steel whales. The fish are also likely to be amused by the lumbering hulls that land dwellers use to get from one island to another – leaving themselves exposed to the full force of the elements as they traverse the open sea.

Humans are nevertheless proud to consider themselves the rulers of the seven seas. Incidentally, that particular number – seven – was a rather arbitrary choice. Today’s geographers distinguish between only three oceans: the Indian, Pacific and Atlantic Oceans. Previously, however, there were other, secondary oceans depending on your outlook and zone of influence – such as the Caribbean, Yellow and Black Seas, as well as the Baltic, North and Mediterranean Seas.

But back to the so-called lords of the seas. According to American oceanographer Steve Hammond, little more than 10 percent of the oceans has been researched. Or, to illustrate the absurdity of it all: We know virtually everything there is to know about the topography and make-up of the surface of the Moon. We send special probes and satellites to Mars. Yet, when Gold Winner it comes to what lies dormant in the depths of the ocean – outside our very own front door – we know practically nothing. In an era in which natural resources – including the space available for humans to live – are becom- Gold Winner ing increasingly scarce, the growing interest in the blank spots of the world’s oceans is inevitable. It’s unlikely, however, that the unchecked pillaging of resources witnessed on dry land will be allowed when it comes to the oceans. Climate change and global warming are urgent reminders of the vulnerability of our “Blue Planet.” The oceans are important for survival – not only for fish. Daniel Huber, Bulletin Editor-in-Chief 1. R ang Photo: Cédric Widmer Cédric Photo: Solway Firth, Cumbria, England, March 28, 2006, 12:00 a.m. Contents 05

27 _ Business 28 _ Alois Bischofberger The retiring chief 18 economist makes his ﬁ nal economic forecast 30 _ Asset Management Credit Suisse further strengthens its commitment in India 31 _ Succession Seminar Strategies provided for Latin American family businesses 32 _ Nanotechnology News There is a big market in the making of small things 34 _ Ship Finance Credit Suisse enjoys a leading position thanks to 65 years of experience

35_ Economy 36 _ Ocean Economy How long can mankind ignore the creeping waters of climate change? 38 _ Personal Perspective Columnist Matthew Rees on the state of the fi shing industry 40 _ Iceland’s Dilemma Can it transition from emerging market to industrialized nation? 44_ Global Infl ation High oil and food prices continue to fuel infl ation woes 46_ Digital Defl ation Information, the commodity most in demand, becomes cheaper

43 _ Bulletin plus Classical Music Oceans in Depth This upside-down ice diver explored the frigid deep waters of the Arctic Ocean to uncover hidden 49 _ Sponsorship worlds of life in these extreme conditions. To date, just 50 _ National Gallery Credit Suisse enters into a 10 percent of the oceans − which cover 72 percent of our three-year partnership with the museum planet − have been explored. 52 _ Summer of Art Segantini, Balthus and Hodler on show in Swiss museums 53 _ Art & Entrepreneurship A new generation of 06 _ Slowing Earth’s Rotation When a day gets ever longer artists refl ects the DNA of Credit Suisse due to the Moon and the tides 54 _ Live at Sunset An all-star lineup of singers perform at Zurich’s outdoor concert series 08 _ Underwater Living The seafl oor is becoming a likely solution for new living space 55_ Credit Suisse in Society 14 _ Back to the Future Sea travel looks back to the wind 56 _ Science Festival New York celebrates scientifi c discovery and innovation and sun as new methods of propulsion 58_ Children’s Storefront Volunteers help 18 _ Secrets Buried Deep New technologies help explorers school kids in Harlem get a better education shed new light on the mysteries hidden in the deep 59 _ Love Ride Children with muscular diseases benefi t from biggest Swiss bikers’ meet 22 _ Ambitious Port Project “Tanger Med” will soon make 60_ Dragon Award Employees pitch ideas for Morocco the Dubai of the Mediterranean charitable causes to win a large donation

62 _ Leader Koﬁ Annan An interview with the former UN Secretary-General

In Every Issue 35_ Good to Know 48 _ Reading Up 54 _ Masthead 66 _ @propos and In Focus The Forest Stewardship Council (FSC) sets the standard for environmentally and socially responsible forest management. Swiss paper (Z offset, with 30 % FSC component), from European pulp, produced by Ziegler Papier

Coverphoto: www.oceanexplorer.noaa.gov AG, Grellingen (ISO 14001-certiﬁ ed). Your link to our know-how: www.credit-suisse.com/infocus Solway Firth, Cumbria, England, March 27, 2006, at 5.20 a.m.

How Ebb and Flow Alter the Course of Time Oceans Tides 07

Many people say they could do with a few more hours in the day to of astronomical standards it’s a different matter. Indeed, this small fit in everything they need to do. At some point in the – albeit increase already influences our calendar. Because no matter how extremely – distant future, their wish may well be granted. Day in, small the discrepancy, this time delay has to be corrected on a day out, the Earth’s vast oceans and the Moon are doing their regular basis. For that very reason, a leap second was last inserted level best to make this a reality. at the end of 1998. The time delay makes itself even more clearly It is a well-known fact that 71 percent of the Earth’s surface is felt when seen over very long periods of time. covered by ocean. For one thing, these vast reserves of water Coral Records the Length of Day ensure that life as we know it can exist. But no matter how strange it might sound, the world’s seas also influence the length of day on An examination of present-day coral shows it contains more than Earth. To do that, however, they need the Moon’s help. The Moon 360 growth lines in annual skeleton growth – equivalent to one orbits the Earth on a slightly elliptical path, at a current average growth line per day. Scientists examined the growth rings from distance of 384,000 kilometers. fossilized coral, and discovered that 400 million years ago a day on Earth lasted only 22 hours while a year comprised more than Moon Ascribed Many Influences 400 days. Many influences are ascribed to the Moon – in many instances If we turn the clock back even further – to around 900 million probably too many. But one phenomenon caused by the Moon can years before our time – the length of a day was only about 18 hours. be seen plainly on a twice-daily basis: the tides. Twice a day the Back then, a year comprised roughly 490 days. Due to the friction oceans rise, before falling back again to a lower level. Due to the exerted by the tides, the speed at which the globe is rotating has Moon’s orbit, the ebb and flow shows itself across the world as a since slowed to the current 365.26 rotations per year with the perpetual rhythm. 24-hour day we are familiar with. Indeed, the force of the tides causes a deformation of the solid People used to believe that nautilus shells recorded a perfect Earth as it rotates within the gravitational fields of the Moon and lunar calendar, in that they produce one growth ring for each orbit Sun – with the degree of deformation reaching around half a meter of the Moon. The two scientists Peter Kahn and Stephen Pompea near the Equator. The regular ebb-and-flow action means that the caused a furor in an article they penned at the end of the 1970s. Earth’s rotation is slowly but surely being slowed by the friction of Using nautilus shells, they showed that the Earth used to rotate the seas on the surface of the planet. However, it is not only ocean more quickly and that the Moon orbited our planet at a much closer water that is responsible for slowing the Earth’s rotation: The distance. From their investigations, they concluded that the Moon “internal oceans”– consisting of liquid magna – also produce friction has been distancing itself from Earth by about one meter per year effects that play their part in slowing the Earth’s rotation. since time immemorial. However, the latest measurements show Fortunately, the speed at which the Earth’s rotation is slowing that this number was vastly overestimated. is minimal. The length of a day on Earth is currently growing by Moon’s Rotation Has Slowed around two milliseconds every century. That length of time is mean-

Photos page 4 and 6: Michael Marten(www.michaelmarten.com) ingless in terms of the life of a human being. But if we think in terms The friction caused by the tides has already slowed the rotation of the Moon around its axis to the extent that the side it shows to Earth is always the same one. Other than Apollo astronauts, no human There are 24 hours in a day. Though being has yet seen the far side of the Moon directly. In the Earth- this may seem rather obvious at first Moon system, the tidal forces between the Earth and Moon also mean our satellite distances itself from the Earth by 3.8 centimeters glance, it hasn’t always been so and each year. won’t remain that way either. The fact is In 15 billion years’ time, a single rotation of the Earth would take that the Moon is slowing the speed of around 48 of today’s days. Likewise, the Moon would need 48 days the Earth’s rotation with the help of the for a single rotation of the Earth. In this very distant future, the oceans, meaning each day is slowly Earth and Moon would always show the same side to each other. but surely getting longer. However, no human being will live to see this. Current knowledge says that in around ﬁ ve billion years’ time the Sun will expand into a gigantic red star around 100 times brighter than the current Sun and extending as far as Mercury’s path. Temperatures on Earth will reach extreme levels, with the oceans evaporating and the planet’s surface becoming blazing hot – thus extinguishing all life. The Sun will then turn into a white dwarf. Once the Sun has reached this stage it will still possess about half the mass of today’s Sun, but will be only just about as big as Earth. < Text: Andreas Walker

Credit Suisse Bulletin 3/08 08 Credit Suisse Oceans Bulletin 3/08 Underwater Living Blue Sea Deep the in Life >

Fotos: Muster Mustermann Fotos: Muster Mustermann The pressure underwater isenoughto underwater The pressure Text: Ute Eberle Text: Ute up colonies at the bottom of the sea. the of bottom the at colonies up stopped dreamingstopped aboutsetting like Yet Duck. Donald peoplehave never effect makes human the voiceeffect sound crush helium andthe everyday objects, Oceans Underwater Living Credit Suisse Bulletin 3/08 > Photo: Pierre Mion, National Geographic Image Collection 09 10 Oceans Underwater Living

Will Lloyd Godson go down in the annals of underwater living? start applying for a place. “I’m talking about a subsea city, a place Will he be the man who took that crucial step: the Neil Armstrong where whole families can live,” says the American. of oceanic conquest? Life underwater – why not? From a purely rational point of view, If so, people reading about Godson in 100 or 150 years time it makes an enormous amount of sense. The fact is that water cov- won’t be able to resist a smile as they sit in their underwater living ers more than two-thirds of the surface of our planet. Land, on the rooms, behind vast acrylic windows, looking out onto their coral other hand, is comparatively rare at just 15 billion hectares. And in gardens, onto the tunnels that connect the bungalows to their neigh- some places – like Macao – nearly 10,000 people are squeezed bors and onto the moored-up minisubmarines that take them out into every square kilometer of dry land. on extended trips through their new world. They’ll be able to laugh First Long-Term Trials in the 1960s at Godson’s bright-yellow, windowless subsea habitat made from steel – closely resembling an oversized toolbox. Technologically speaking, survival underwater is not a problem And about the fact that it didn’t sit on the seabed but on the either: That has been clear since September 7, 1962. It was then floor of a flooded quarry. About the 100-percent humidity level that Belgium’s Robert Stenuit became the first “aquanaut” in his- inside and the tiny dimensions. The refuge in which the 29-year-old tory. For 26 hours, he sat in a four-meter-long aluminum tube lived for 12 days underwater in April last year was just two-and-a- dangling 60 meters down in the Mediterranean. Almost simulta- half meters wide, three meters long and two meters high. There neously, Frenchmen Albert Falco and Claude Wesly also relocated was a camping mattress, a stationary bicycle, a chemical lavatory, underwater. In September 1962, under the command of legendary a couple of pictures posted on the wall – but not much room for marine scientist Jacques-Yves Cousteau, they spent a whole week anything else. in a habitat named “Conshelf I,” a five-meter-long, two-and-a-half- Even as we speak, it’s difficult to think about Godson without meter-high steel cylinder anchored at a depth of 10 meters above smiling. For one thing, the Australian marine biologist was always the bottom of the sea off the coast of Marseilles. The aquanauts in such an infectiously good mood when reporting to the outside got air through tubes connected to land, were kept warm by infrared world on an almost daily basis via his video dispatches. For instance, heaters, had foam rubber on the walls to keep their home dry – and when he was fishing from his bed – a task he accomplished by had a record player for entertainment. Courier divers brought food, holding the rod above the open entry hatch on the floor of his and twice daily a doctor would swim to the undersea container to habitat – but didn’t catch anything for his supper. When, in the dim ensure Falco and Wesly were coping well with the permanently light, he banged around on the two minidrums he got from his elevated pressure. girlfriend. Or when he realized – and was slightly distressed by the This was just the beginning, and was followed by a phase of fact – that mosquitoes had penetrated his underwater home. intensive experimentation with living underwater. Sixty-five habitats were set up around the world over the following two decades. Colonies of Algae for Oxygen Production Some – at a depth of five meters – were scarcely beneath the waves, His way of spending the time might seem pretty pointless. But the while others – such as the US Navy’s “Sealab III” – were 300 meters marine biologist achieved great things in the eyes of many people. down in the inky darkness. Even countries that didn’t actually have It’s not the fact that he managed to survive longer underwater than a coast – such as Czechoslovakia – joined in the rush toward a new RougerieJacques | Créations anyone before him: That particular honor (still) goes to a man by form of living. Among the most bizarre constructions to be built on the name of Rick Presley, who in 1992 spent a whole 69 days down the ocean floor at the time was a rubber tent that US scientists put there. But Godson was the first to systematically attempt to live up near the Bahamas in 1964 at a depth of 130 meters. (The two independently of land-based infrastructure. He produced at least aquanauts who spent the night there were awoken from their sleep part of his oxygen supply himself by equipping his habitat with a several times when a powerful grouper fish crashed up against their colony of algae. rubber dome whilst on the hunt for sardines.) Every day, he would pedal away for several hours on his ergom- Other habitats impressed by virtue of their amazingly luxurious eter to drive the pump that rinsed water through the oxygen- fittings. “The dwellings have nearly all traditional comforts, such producing plants – and also generate the power to run his laptop. as air-conditioning, shiny new kitchens, refrigerators, telephones, The algae also absorbed the carbon dioxide that Godson exhaled, and closed-circuit television,” wrote “Time Magazine” about Con- and was even suitable for consumption. “Inhabiting the bottom of shelf II – a successor to Falco and Wesly’s underwater ref uge – in the ocean is one of the last things that has yet to be achieved,” 1963. “Should the occupants get bored inside, they can don their Godson said after returning to dry land. “If we approach it in an diving gear and leave via the door of their house: a hole in the floor. intelligent manner, the construction of underwater colonies could Once outside, they can roam around to their heart’s content – gath- be one of the greatest achievements of the 21st century.” ering tasty seafood which they can then go home to cook in their Someone with a tremendous interest in Godson’s experiences is dream kitchen.” In those days, a total of more than 800 aquanauts Dennis Chamberland, a bioengineer and longstanding employee of spent time underwater. Those with the greatest staying power of the US space agency NASA. That’s because the American himself all spent two months nonstop in the deep. wants to relocate underwater in the spring of next year. Together After all, this was the era in which humankind’s scientific yearn- with his wife Claudia and another companion, the experienced diver ing knew no bounds. The Cold War incited the superpowers to intends to spend 80 days in a privately ﬁ nanced habitat off the coast conquer all that remained unconquered. Apart from space, that of Florida. And that’s just the warm-up. If all goes to plan, Cham- primarily meant the “inner cosmos” (as the underwater world was berland will be setting up a permanent colony on the ocean ﬂ oor as known at the time). Visionaries waxed lyrical about ocean settle-

early as 2012. By visiting his website, interested parties can already ments whose residents would visit dry land on only an occa- > Photos: Carolina Sarasiti, www.biosub.com.au | Handout, Getty Images | OAR/National Undersea Research Program(NURP), U.S. Navy

Credit Suisse Bulletin 3/08 Oceans Underwater Living 11

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Pages 8 and 9 The “Conshelf II” underwater refuge was set up in the Red Sea in 1963 under the leadership of Jacques Cousteau. There, more than 800 “aquanauts” spent up to two months underwater. 1 29-year-old marine biologist Lloyd Godson spent 12 days underwater in a large steel box measuring two-and-a-half by three meters. 2 What was pioneering about Lloyd Godson’s attempt was the fact that he himself generated at least part of his oxygen with the help of algae colonies. 3 The US Navy’s “Sealab III” lay at a depth of 300 meters off the coast of California. 4 The “Village sous marin” vision was developed in 1973 on behalf of US space agency NASA and the National Oceanic and Atmospheric Administration (NOAA). At a depth of 40 meters, the station was designed for long-term scientific residencies. 5 The “Galathée,” built in 1977, was a part-mobile, free-floating underwater habitat for use in coastal zones. The 56-cubic-meter station can house up to seven occupants.

Credit Suisse Bulletin 3/08 12 Oceans Underwater Living

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1 Situated off the coast of New England, the 370-square-meter deep-sea station “Ocean Base One” will be built at some stage at a depth of 180 meters, offering accommodation for up to 60 occupants. 2 “Ocean Base One” is reached via a Manta submarine moored at a special docking station. 3 and 4 The “Poseidon Undersea Resort” (picture 3 shows the view of a room from outside) is to become a reality on the Fijian archipelago off Mystery Island in 2009 (www.poseidonresorts.com). At a depth of around 20 meters, 24 units are to offer 5-star luxury accommodation. There will also be fine dining and a library. 5 The “City in the Ocean” vision off the coast of Abu Dhabi, designed by French architect Jacques Rougerie, is planned to soar some 320 meters into the sky and also offer extensive underwater living space.

Credit Suisse Bulletin 3/08 Oceans Underwater Living 13

sional basis. They would spend their days mining for underwater water compresses gases in the blood and these gases begin to minerals, drilling for oil, or maintaining production platforms. The bubble if the affected person reaches the surface too quickly. Only possibility of building nuclear power stations on the seabed was toward the end of their stay would these aquanauts have to accli- even considered. “In tomorrow’s world,” aquanautic pioneer Stenu- matize themselves gradually to conditions on land – a process it predicted, “a settler will look out on his land through the portholes likely to take nearly seven days. Cooper estimates it will cost be- of his underwater ranch.” tween 50 million and 70 million dollars to build Ocean Base One. But it didn’t come to pass. A number of aquanauts died in diving Five-Star Luxury Suites Overlooking the Coral Reef accidents, and there was such an outcry that some projects were halted. It also began to become clear that the oil industry – an That means his project will presumably be significantly cheaper than early sponsor of underwater habitats – could perform tasks like the Poseidon Undersea Resort – an underwater hotel currently drilling more cheaply using robots and ROVs (remotely operated being developed for the South Pacific. Poseidon will offer 5-star vehicles). Nascent environmental awareness also helped restrain luxury on the ocean bed. There are plans for transparent elevators, the previous enthusiasm toward plans to exploit everything the which will whisk visitors 12 meters down into the water. With their ocean had to offer. Even the spectacular lunar landings impacted feet still dry, they will then enter one of 24 suites forming a terrace negatively from the aquanauts’ point of view because they mo- along a coral reef. nopolized attention: The public at large forgot about the idea of Large acrylic windows (part of the roof will also be transparent) settling the oceans. will enable guests – even from their beds or ensuite jacuzzi – to watch the fish splashing about in the azure waters. A restaurant, More People Live in Space Than Underwater conference room, wedding chapel, and wellness center are also Today, thanks to the International Space Station, more people live likely to feature beneath the waves. After several setbacks, the in space than underwater. Leaving aside the small number of luxury establishment is now set to open in 2009 near a private island military submarines nomadically patrolling the deep sea, people in the Fijian archipelago. Reservations will be accepted from Sep- who visit the immense expanse of the ocean still only do so on tember 15 this year – provided applicants have the rumored 15,000 flying visits. For instance, up to six guests can rent nights at dollars that it will cost for their stay in the underwater hotel, includ- “Jules’ Undersea Lodge,” a disused underwater habitat from the ing flight to the private island. 1970s, located more than six meters deep in a mangrove lagoon The Hydropolis Undersea Resort, designed for the Jumeirah in Key Largo, Florida. The “Aquarius” – the sole survivor of the coast off Dubai, is set to be even more magnificent. Plans include former fleet of undersea research habitats – is jacked up close transparent tunnels that will take guests from the land-based by. Marine biologists normally lodge there for 10 days, whilst study- reception to their rooms 20 meters below in the Persian Gulf. The ing the surrounding coral. Privacy is certainly not something they 10-hectare hotel (which has also suffered delays) will reportedly can expect. Just 14 meters long by three meters wide, the rather offer 220 rooms, a cinema, a clinic for cosmetic surgery, and an spartanly furnished Aquarius is fitted out for six occupants. underwater ballroom. Also in the Persian Gulf, plans are afoot But there are still people who have not given up the dream of a for the “City in the Ocean” – a futuristic project commissioned by permanent presence under the waves – and are convinced that the Abu Dhabi from French architect Jacques Rougerie. Like Neptune’s time is ripe for a fresh approach. Indeed, Dennis Chamberland is teeth, model drawings depict three 320-meter-high accommodation not the only person working seriously on this sort of project. For towers above a circular settlement built entirely in the water and example, a marine biologist from the University of Connecticut is also containing underwater units. currently raising money for two ultramodern underwater habitats. Even if many of these visionary projects are still at the planning In only two to four years’ time, Richard Cooper – founder of the stage, those who yearn for a life under the waves would seem to charitable “Ocean Technology Foundation” – hopes to begin con- have their best prospects in decades. “Soon, families will be living struction of a two-storey underwater dwelling at an as yet un- and working underwater. Children will attend school there, and a specified tropical location. Unlike nearly all past underwater projects, new generation will be born there: The first citizens of an ocean this station – at a planned depth of 18 and 40 meters – will also be civilization whose most important task will be to adapt to the world’s accessible to civilians such as leisure divers wanting to spend more oceans and protect them,” claims effusive ocean-colonialist-in- time in the water. the-making Chamberland. “This is not an illusion or a daydream. In the long term, however, Cooper wants to tackle an even more It’s a plan that can gradually become a reality.” < ambitious project: a 370-square-meter deep-sea station the size of a do-it-yourself store, located off the coast of New England. The bottom of “Ocean Base One” would be 180 meters beneath the surface. There, two cabins would offer space for as many as 60 occupants. The air pressure of one compartment would be arti- ficially kept at the same level as at the ocean surface, to enable fast trips into the deep. The pressure in a second cabin, however, would be that of the local environment: 19 bar. This is designed to enable residents to make extended trips underwater without having to worry about the “bends.” That is the term given by divers to the painful and poten-

Photos: JMS NavalSalvage Archtiects& Engineers | Poseidon Undersea Resorts | Créationstially Jacques Rougerie fatal physical phenomenon where elevated pressure under-

Credit Suisse Bulletin 3/08 14 Oceans Shipping

Full Speed Back to the Future

Credit Suisse Bulletin 3/08 Oceans Shipping 15

Peter Schenzle sports an emblem of the future on his belt buckle: 5 percent of all global CO2 emissions into the atmosphere. In addi- the Maruta Jaya. This sailing freighter was developed back in the tion to sulfur dioxide and nitrogen dioxide, shipping is responsible 1980s by a German-Indonesian research project with a view to for environmental disasters through accidents, air pollution in major transporting goods between Indonesian islands. The sail structure – port cities, and so forth. The dramatic rise in the size of the global known as the rig – of the three-mast schooner was the brainchild commercial shipping fleet is compounding problems. Just recently, of shipbuilding engineer Schenzle himself, who at that time worked at the “European Maritime Day,” the European Parliament discussed for the Hamburgische Schiffsbauversuchsanstalt (HSVA – Hamburg the introduction of emission certificates as well as higher taxes and Institute for Experimental Shipbuilding). fees for heavy freighters with a view to finally reducing the pollution At 1,050 square meters, the so-called INDOSAIL rig has an by-products of the shipping industry. enormous surface sail area, guaranteeing strong momentum for “Shipping really is an area where there is huge potential to imple- the 63-meter-long freighter. In addition, the ship is equipped with ment sustainability,” explains Schenzle. “Maritime transport is 10 a diesel-electric engine capable of generating 140 brake horse- times as efficient as railroad or HGV transport. And as much as a power (bhp). The sail is reefed and adjusted electrically, which 100 times as efficient as air freight. But for more than a 100 years, means that there is no need for the kind of large and expensive the whole shipping industry and its associated processes, such crew required by the old windjammers. But compared to an engine - as logistics, port machinery, packing and loading, have revolved driven ship of this size, the Maruta Jaya uses around 70 percent around the cheap price of oil. That’s why changes come about less fuel. The Greenpeace schooner “Rainbow Warrior II” was like- only very slowly, in very small and halting steps.” wise fitted with an INDOSAIL rig. Since 1989, the ship has been Ever since the end of the 19th century, when steam-powered shown to save up to 40 percent in fuel consumption during a variety and engine-driven ships drove sailing vessels from the oceans into of test voyages. Schenzle’s invention has therefore been a success. history books and museums, the widespread prejudice has prevailed And yet there has been no interest from the commercial shipping that such vessels are only the territory of playful romantics. How- industry. This despite the fact that major shipyards such as Linde- ever, enthusiasts for these apparently obsolete sailing ships also nau in Kiel are supposed to have various INDOSAIL projects cover- include some intelligent visionaries. As early as 1967, the Hamburg- ing tankers to cruise liners stored away in their project drawers. based engineer Wilhelm Prölss submitted plans for a modern sailing freighter with a revolutionary rig – the DYNARIGG, a construct 90 Percent of Goods Are Transported on the High Seas imposed of giant rotating masts with no lashing that would suppos- However, the soaring cost of heavy fuel oil together with rigorous edly enable a 150 -meter-long ship to sail up to 50 degrees against environmental and climate protection regulations are increasingly the wind. The sails could be pulled in or rolled out between the forcing conservative shipyards to consider alternative forms of halyards at the touch of a button, providing a continuous surface locomotion such as free wind – to save fuel and at the same time from the base of the mast right up to the top. operate in a more environmentally friendly and thus sustainable way. According to calculations undertaken by Prölss, the vessel would As things stand, 90 percent of all global cargoes are transported be able to undertake a crossing of the Atlantic at a speed of up to

Photo: Amory Ross Photo: by ship. However, maritime travel accounts for the release of around 20 knots. Prölss believed that ships of this nature would once again be crossing the high seas by the 21st century at the latest – a belief expressed at a time when sustainability, the price of oil and envi- Oil-driven shipping is responsible for ronmental protection were on few agendas. Prölss died in 1974 approximately 5 percent of global without ever seeing his ship sail. Although shipyards have frequently expressed their interest in DYNARIGG since the first oil crisis of CO2 emissions, and is therefore a huge 1973, this interest inevitably dwindled once the price of oil fell back burden on the environment. The search down to a tolerable level. is now on for alternative forms of power, Almost four decades were to elapse, therefore, before Prölss’ and two old favorites are making the idea became reality. In 2006, the Maltese Falcon was launched, a running: wind and sun. superyacht equipped with a DYNARIGG modified by the Dutch design engineer Gerard Dijkstra. Financed by the US billionaire Tom Perkins, the yacht has three masts, each standing 58 meters tall, and a sail area of 2,396 square meters. “He told me that he had Text: Ingo Petz long dreamed of building this rig,” explains Schenzle, “as he believed that the idea was too good not be realized.” On its maiden voyage across the Atlantic, the Falcon achieved a maximum speed of around 24 knots (approximately 43 km/h).

Wind Ships as Tourist Attractions

New-style wind-powered ships genuinely have the potential to carve out a market niche in the high-end cruise tourism market. This has been successfully proven by the two windjammers “Sea Cloud” and “Sea Cloud II,” as well as by the “WindCruiser.” But for modern freighters to sail by wind power alone and thus largely consign fuel-driven ships to the history books is deemed >

Credit Suisse Bulletin 3/08 16 Oceans Shipping

Shipping, the Great Polluter For a long time, not catch on, as maintenance and repair costs proved unexpect- maritime transport was viewed as being particularly edly high, and the low price of oil meant that no one was forced to kind to the environment. But there are now around rethink their approach and consider long-term savings. 40,000 freighters, cruise ships, ﬁ shing trawlers, and Another form of supplementary propulsion currently undergoing ferries, which collectively – like the air travel a revival is the Flettner rotor. It was first invented back in the 1920s, industry – account for around 5 percent of global in northern Germany. This invention was also predicted to have a CO2 emissions. Experts predict that strong growth great future. The rotor consists of a vertical rotating cylinder that in the world’s merchant ﬂ eet will increase emis- may not look particularly attractive, but nonetheless generates very sions by around 75 percent by 2020. There have efficient propulsion thanks to the so-called Magnus Effect. Using recently been an increasing number of demands for the same area, the rotor can produce 10 times the force of a normal politicians to bring the shipping industry into line sail. When the wind blows against the rotating cylinder, it is pulled on the environmental front. For example, in a report along by the front side of the cylinder, speeding up the air current published in 2007, experts from the Intergovern- there. On the other side of the cylinder, it is held up, and so slows. mental Panel on Climate Change (IPCC) expressly The resulting slipstream pressure differential produces forward mo- recommended equipping tankers and freighters mentum. A 130 -meter-long freighter with four Flettner rotors is with supplementary sails as a measure to curb fuel currently under construction in a Kiel shipyard. “The advantage over consumption and thus CO2 emissions. a sail is the significantly reduced requirement for space and greater thrust,” reckons Jacob-Heye Waldecker, shipbuilding project engineer at Lindenau. In the 1980s, the French maritime research- improbable by experts. “Ships that rely on sail alone could perhaps er Jacques-Yves Cousteau had the research ship “Alcyone” built, occupy niches here and there,” muses Schenzle. “But the more which also relied on active slipstreams to influence propulsion. The realistic solutions at the moment revolve around hybrid propulsion, “Alcyone” was not driven by rotors, however, but by a so-called i.e. wind ships with engines, or engine-propelled ships with wind Turbosail that generated up to 30 percent of the ship’s power. assistance.” This is because the development costs for revolutionary Pure solar energy could also take shipping in a more environ- ships – such as the 215-meter-long sailing freighter “Windship 1,” mentally-friendly direction in the future. A number of projects in the conceived by the Dane Knud E. Hansen – are simply astronomical. 1980s experimented with solar apparatuses, solar film for sails, and Added to this is the fact that the risk tolerance of shipyards has solar wings based on the design of aircraft wings. In 2007, the narrow limits that do not go beyond efficiency and profitability. Swiss catamaran “Sun21” made its first Atlantic crossing – using Moreover, ship-loading technology was not designed for large ships nothing but the sun’s energy. However, the average speed of the with several masts. “For this reason,” reckons Schenzle, “short-term small 14-meter-long boat was just five to six knots. Given its solutions like that pursued by the company SkySails are more in- limited performance capacity and the large amount of space it takes teresting and more appealing.” The Hamburg-based firm produces up, solar energy is likely to remain unreliable as a means of propul- aerial kites that use wind power to drag tankers and freighters sion for large commercial ships. But it is conceivable that purely across the sea. Stefan Wrage, founder of SkySails, believes that solar boats such as small ferries or pleasure boats could replace shipowners can save up to 35 percent on their fuel costs by apply- motorized vessels for exploring nature reserves along the coast or ing his supplementary form of propulsion. With a small freighter 87 on lakes, particularly in regions that enjoy a lot of sunshine. In meters long, this would amount to as much as 250,000 euros every addition, there is obviously a place for a hybrid engine using solar year. Wrage is hoping to sell 1,500 kites by 2015. energy, as demonstrated by the Australian “Solarailor.” This boat In March this year, the MS “Beluga SkySails” completed her accommodates up to 600 people and saves up to 40 percent on maiden voyage, becoming the first large freighter to be pulled by fuel costs thanks to its solar device. a kite measuring 160 square meters. The success of the com- Intelligent Combination of All Alternative Forms of Propulsion pany shows that alternative propulsion concepts now need to be taken very seriously by shipowners, and should no longer be dis- Swedish shipowner Wallenius Wilhelmsen has developed a very missed as romantic nonsense. “Innovations of this kind are impor- futuristic vision indeed. At EXPO 2005 in Japan, the company tant,” opines Heinz Otto of the Federal Association for Wind En- unveiled the “Orcelle,” a trimaran freighter that can accommodate ergy (BWE) in Hamburg. “But they represent only the start of the up to 10,000 vehicles and is driven with only regenerative energy – journey towards sustainable ship propulsion technology because namely wind, sea swell, solar energy and temporarily stored wind power has much greater potential to save energy and thus hydrogen. Schenzle also views such adventurous projects as crucial cut emissions.” Otto has been lobbying politicians and shipowners to the future. “The intelligent combination of wind power and solar to move toward wind-powered ships for more than 30 years. It energy to provide the propulsion of the future is just the first step,” has been a task that he describes as “an exhausting battle.” As he says. “If we really want to take the opportunity of creating he explains, “shipowners are prisoners of the global competitive emission-free sea transport seriously for once, then a great deal pressures that define their industry. They simply haven’t invested has to change. And not just in technical hardware: It needs to any time to think about a future after oil.” encompass energy management on the part of the producers and Back in the 1980s, Japanese shipowners fitted tankers and consumers on board, and flexible organization of season- and freighters like the “Usuki Pioneer” and the “Shin Aitoku Marumit” weather-dependent travel times and harbor departures throughout with rigid sail constructions that could be collapsed when the ships the transport chain.” In other words, maritime transport of the future

entered port. However, despite their success, these innovations did has barely made its first steps. < LibraryCross Photo | Dylan RossScience | SkySailsRosenfeld,Amory | Alexis Photos:

Credit Suisse Bulletin 3/08 Oceans Shipping 17

1 2

3 4

Page 14 and 1 Maltese Falcon: The 88-meter-long superyacht was built to order for US billionaire Tom Perkins. It has a special sail apparatus (DYNARIGG), on which three large sails are attached to revolvable masts. 2 Maiden ﬂ ight for the SkySails kite that assists the propulsion of the MS “Beluga SkySails.” 3 Built to order for Jacques-Yves Cousteau, the “Alcyone” has two modiﬁ ed Flettner rotors. These so-called turbosails also use the Magnus Effect of wind on cylinders, but without any internal rotation taking place. 4 The Swiss- built “Sun21” catamaran was the first motorized vessel to cross the Atlantic powered exclusively by solar energy. It entered the harbor of New York on May 8, 2007.

Credit Suisse Bulletin 3/08 18 Ocean Exploration

Exploring Earth’s Final Frontier

Credit Suisse Bulletin 3/08 Ocean Exploration 19

The importance of the oceans to life on this planet is undisputed. dangerous. To deal with the hazards and complications of increased They are not only fundamental for world trade and our economic pressure at depth, there has been a trend toward unmanned explo- well-being, but far more importantly, they are an essential aspect ration with pricey, though effective, remotely operated vehicles of the Earth’s life support system. The oceans are key in maintain- (ROVs) and, most recently, autonomous undersea vehicles (AUVs). ing the oxygen and carbon dioxide balance in the atmosphere and These new technologies make it possible to explore more of this in regulating the earth’s climate. These are the facts that have been immense environment, but they also increase the cost for each proven to date; however, the world’s vast oceans teem with undis- mission. “The fact is, it can cost upwards of 50,000 dollars a day covered species and resources with untold value for humankind. “In for the equipment to run a research vessel equipped with state- order to find out just what’s out there waiting to be revealed, much of-the-art technologies and there aren’t enough of these ships,” more needs to be invested in exploration,” says Steve Hammond, Hammond explains. But the good news is that the need for explo- acting director of the National Oceanic and Atmospheric Adminis- ration and for funding has been recognized. tration’s (NOAA) Office of Ocean Exploration (OOE). During Bill Clinton’s second term in office, a President’s Panel Technological advances have transformed the ocean sciences, on Ocean Exploration was established to consider the development making it possible to delve ever deeper into its depths. Despite of an ocean exploration program to investigate unknown and poorly these developments, about 90 percent of our oceans still remain known ocean areas in order to make scientific advances. The pan- unexplored. “This is something that has been said again and again, el’s findings, released in a report titled “Discovering Earth’s Final but it is literally true that we know more about the surface of Frontier: A US Strategy for Ocean Exploration” underlined that the the Moon and Mars than we do about the topography of our own oceans are essential to life on this planet, having economic, public planet. And while it is certainly important to explore other planets, health and environmental significance. The panel also made his- it is at least equally important to explore and understand our own,” tory by proposing a national strategy for exploration of the global stresses Hammond, who has been an oceanographer for more oceans – the first of its kind worldwide. Based on this strategy, than 40 years. NOAA, the US’s civilian ocean agency, established the Office of He is convinced that the oceans are the last frontier and that Ocean Exploration in 2001. “The NOAA exploration project goes to they should be explored for the good of all life on our planet. “What places where people haven’t gone before to measure the right things happens to the oceans is absolutely critical to all of us, and while to better understand what the ocean is doing in a particular place, we have made significant discoveries with relatively small budgets, and to discover what kinds of life there are,” explains Hammond. To there are many more secrets to be discovered.” understand the fundamental aspects of the oceans, the OOE has biologists, geologists, chemists and every kind of oceanographer Deep Space vs. Deep Ocean Exploration there is, working hand in hand. Ocean exploration is, in many ways, comparable to space and plan- One of the main tasks of the OOE is to map the seafloors in etary study. Both have provided new insights into the origins and order to provide a basic framework and context for exploration. workings of our own planet. And as in space, manned exploration Some of the best-known global seafloor maps were published

Photo: Peter Batson, DeepSeaPhotography.com of the ocean’s harsh terrain is expensive, difficult and sometimes several decades ago by the National Geographic Society and the US Navy. More recent maps are based on satellite altimetry and, together, these maps provide a glimpse of the often amazingly With his globally televised exploits, complex topography of the seafloor. But they lack detail, according to experts. “These well-known maps might seem to convey that Jacques Cousteau did for the there isn’t much left to discover,” says Hammond, who emphasizes oceans what Neil Armstrong did that, in reality, “the oceans remain almost wholly unexplored.” for the moon – he exposed the world to a previously alien universe. The Oceans Remain a Mystery Despite his life’s work and that of The truth is, according to Hammond who has been with OOE since countless others, scientists today its beginnings, first as chief scientist and for the past four years as still know more about the lunar acting director, that we don’t know what the shape or topography surface than they do about our of the seafloor is like in any detail over the vast majority of the ocean. planet’s oceans. We also don’t really know how the ocean works, particularly the deep ocean. As if to illustrate the fact that we know considerably less about Text: Michèle Bodmer the oceans than we might believe, ocean explorers are finding out new things with each scientific outing. “With each and every mission, remarkable discoveries are being made; each is important in its own way. There is an incredible number of species in the oceans, and not just fish. There are also invertebrates and microorganisms that potentially have biomedical and other technical applications,” underscores Hammond. With acoustic monitoring technology, mapping, ROVs and high- definition cameras, scientists working with the OOE have been able to pinpoint where there are volcanoes on the seafloor and they >

Credit Suisse Bulletin 3/08 20 Ocean Exploration

2 3

1 The black anglerfish is a tiny deep-sea predator. The males are very small in comparison with the females, and live as permanent parasites on the female until the bloodstreams of the two fishes become connected. The male will degenerate over time and simply become a source of sperm. 2 Three nautiliniellid worms live in the mantle cavity of this clam recovered with a deep sea, human- occupied submersible on a NOAA expedition. 3 These tubeworms cover Zooarium, a sulfide chimney discovered by NOAA scientists in the depths off the coast of western North America, in the Pacific Submarine Ring of Fire – an active volcanic chain.

have been able to film eruptions and gather valuable water samples According to recent findings from oceanographers working with the from deep in the northeastern and western Pacific. “Microorganisms Office Ocean Exploration there are hundreds of volcanoes at the have been discovered that live in water temperatures of more than bottom of the ocean, which are not only hosts to unique ecosystems, 100 degrees centigrade and thrive in a poisonous brew of chemicals but some are also spewing the greenhouse gas, carbon dioxide

that spew out of vents,” Hammond explains. “These and other (CO2). Although submarine volcanoes have been venting CO2 into strange microorganisms discovered within huge hot water plumes the ocean for hundreds of millions of years, ocean explorers are created by deep volcanic eruptions were the key to revealing the only now beginning to discover and understand the roles these “new”

presence of immense global microbial ecosystems that are thriving sources of ocean CO2 play in the global ocean carbon cycle.

beneath the seafloor in volcanically active areas.” The ocean also absorbs atmospheric CO2 and this process is increasing the acidity of the global ocean as humans significantly Valuable Life on the Sub-Seafloor increase the level of CO2 in the Earth’s atmosphere. “When you add

Microbiologists who have studied the samples from such plumes CO2 to water, you get carbonic acid,” Hammond explains. “This speculate that the biomass in the sub-seafloor ecosystems may acidification has the potential for disrupting the ocean’s biology on

rival the combined biomass of life forms on land. “Many of these a massive scale. Submarine volcanoes that are venting CO2 are microorganisms live in a chemical soup laden with heavy metals acidifying the ocean around them and so they can be extremely that would be toxic to anything that lives on land,” Hammond says. valuable natural laboratories for understanding how life in the ocean “Microbiologists tell us that finding these organisms is like finding reacts to increased levels of acidity and thus what we might expect life on another planet. If that weren’t enough, the organisms also if current trends continue.” offer prospects of becoming natural resources as they may be The planet has gone through acid ocean cycles in the geologic genetically engineered to enable pharmaceutical applications, to past before, Hammond says, and this has lead some people to ask catalyze manufacturing processes, and be used for environmental what the fuss is about. The difference is that while the planet has

remediation.” In other words, microorganisms gathered from the been subject to these cycles before, now human-produced CO2 is deep might eventually be introduced into polluted environments on a new addition to Earth’s atmosphere. “The truth is that we are

land to purify them by selectively removing toxic substances. measurably altering the ocean’s natural state,” says Hammond. Photos: David Shale, DeepSeaPhotography.com | www.oceanexplorer.noaa.gov

Credit Suisse Bulletin 3/08 Ocean Exploration 21

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4 Chemosynthetic microbial mats cover red algae and coral. Hydrothermal vent and coral reef communities overlap here at 190 meters depth, witnessed by scientists on the Submarine Ring of Fire Expedition. 5 The Okeanos Explorer, a global exploration vessel soon to be commissioned by NOAA’s Office of Ocean Exploration. 6 Active “smoker” chimneys precipitating iron, copper and zinc sulfides from 230 ºC fluid. 7 The Hercules ROV is used to study biology and geology in the deep sea. 8 An ice diver takes a picture of the surface through a dive entry hole. This diver was among an international team of scientists exploring the Canada Basin in the Arctic Ocean.

While discussions on the what to do about this alarming truth may Principles of Ocean Literacy Understanding the go on for years, the explorers from OOE will be doing their part ocean is integral to comprehending the planet to provide political leaders, scientists, and the public with ocean on which we live. To help build ocean literacy, NOAA, environmental information essential to making vital decisions. the National Geographic Society’s Oceans for Life “Ocean exploration is exactly relevant to these kinds of political and Initiative and numerous other organizations devel- societal discussions. We need ocean explorers to continue, and to oped a guide highlighting seven essential principles expand, their observations so that we will know how the ocean is of ocean literacy for school children and adults. changing and how to appropriately respond,” Hammond explains. 1. The Earth has one big ocean with many features. A Flagship for Ocean Exploration 2. The ocean and life in the ocean shape the features of the Earth. To further that cause, the Office of Ocean Exploration will soon commission a global research ship dedicated solely to ocean ex- 3. The ocean is a major inﬂ uence on weather and climate. ploration. Up to now, the OOE has used NOAA’s ships as well as those in the US academic fleet, but with this vessel, christened 4. The ocean makes the Earth habitable. Okeanos Explorer, it will be possible to conduct globally ranging 5. The ocean supports a great diversity of life and explorations year round. Everything the explorers discover will be ecosystems. able to be viewed in real -time online in newsrooms, classrooms and 6. The ocean and humans are inextricably inter- living rooms, thanks to an innovative satellite connection and high- connected. definition broadband video, says Hammond. “We want the public 7. The ocean is largely unexplored. and scientists around the globe to participate with our oceano- For more information visit: graphers as they make discoveries. That has never been done be- www.coexploration.org/oceanliteracy fore at this scale. We believe the Okeanos Explorer will become www.oceanexplorer.noaa.gov much like Cousteau’s Calypso – an iconic oceanographic vessel that people will recognize and remember for years to come.” <

Credit Suisse Bulletin 3/08 2Oceans 22 Credit Suisse Bulletin 3/08 Tangier Trade Trade Where Where Converge Routes Routes >

Fotos: Muster Mustermann Fotos: Muster Mustermann The Moroccan city of city The Moroccan Tangier is planning Text: Beat Stauffer Beat Text: Mediterranean region’sMediterranean freight leading and public in euros billion 3 some By 2015, “Tanger Med” – second Dubai on the Straits of Gibraltar. Straits onthe second Dubai hubs and container ports. hubs andcontainer private funds – will becomeoneof the a huge port that would that a huge create port a ﬁ nanced by nanced Oceans Credit Suisse Credit Suisse Bulletin 3/08 Bulletin 3/08 Tangier > Photo: Driss Manchoube 23 24 Oceans Tangier

Until recently, Ksar es-Sghir was a remote spot on the Mediterra- rampant in broad sections of the population. Many observers feel nean coast just over 30 kilometers east of Tangier. It was a Moroc- that the country needs to take a quantum leap forward if it is to can village like thousands of others: a handful of small shops, retain its current political setup. simple cafés and restaurants along the main street, a mosque, some Little wonder, then, that Morocco’s King Mohamed VI is the modest habitations and a few dozen new buildings of indeterminate driving force behind the Tanger Med project. It is due to him that design put up by migrant workers back from Europe. the project – into which the Moroccan state has already pumped Mourad, a powerfully built man in his thirties, is sitting in one of more than a billion euros of taxpayers’ money – has been rushed the cafés. His clothing and tanned skin betray his profession. As he forward at such a brisk pace. The monarchy’s absolute powers, the sips his coffee, he gazes across the old gardens with their olive absence of any opportunities for appeal, and the shrewd decision trees to the place where a small river flows out into the sea. “A new to create a dedicated agency to handle the project – the Tangier era has dawned at Ksar es-Sghir,” Mourad dryly comments. “Noth- Med Special Agency (TMSA) – have facilitated this rapid implemen- ing is the same any more.” tation. Given the otherwise slow-moving Moroccan administration, The precise implications of this statement only become evident out- this alone is a considerable feat. side the village. All of a sudden, the massive infrastructure works – Tangier, a Logical Choice either under construction or already completed – heave into view. Virtually every minute, a big articulated truck or a huge construction It was logical that Tangier, with its unique strategic location, should machine thunders down the main street. A new highway and a have been chosen for the project. The new deep-sea port is not railroad track have been hewn through the surrounding hills, their only located directly on the Straits of Gibraltar, through which more bold alignments taking them over bridges and across causeways. than 100,000 ships pass every year, it is also at the crossroads for And just five kilometers from the village, you face the enormous freight passing both in the north-south and the east-west directions. container and ferry port facilities that have materialized here with- Moreover, few ports are able at present to handle the latest gen- in an amazingly short time. eration of container ships and supertankers measuring up to 400 meters in length. Gigantic Container Gantries From China Given the meteoric rise in commerce between Europe, the What used to be a remote bay, coveted by surfers for its fine sandy Maghreb, the US and the Far East, experts have identiﬁ ed huge beach, has been altered beyond recognition. Protected by a jetty pent-up demand for new deep-sea ports in which container loads protruding far into the sea, an ultramodern deep-sea port has can be transferred to smaller vessels or to road or rail vehicles. taken shape, with an 800-meter pier, gigantic container gantries Tangier is predestined to take on such a role. Seen in this light, the and vast transhipment and storage areas. outwardly overambitious plan to make Tanger Med a sort of second The entire site backing on to the actual port, however, is still at Dubai – a world-class hub for international freight – appears more an early stage of construction. Amid an ear-splitting din, huge than realistic. excavators swarm over the site like monstrous insects, churning up To implement the deep-sea harbor scheme, the Moroccan gov- the earth and reshaping the rocky landscape. Warehouses, office ernment commissioned leading global companies with experience buildings, transhipment yards and huge sheds will soon be erected of such large-scale projects. These include French construction on this site. giant Bouygues, the world’s biggest shipping company Moeller- “When the first five container gantries arrived by ship from China Maersk and the Geneva-based Mediterranean Shipping Company and were assembled here last March,” says Mourad, “the mere sight S.A. ( MSC), which – depending on the method of calculation used – of it almost made my head spin.” Somehow, neither Mourad nor his is either the number two or the number three in the sector. These acquaintances from the village could believe that the ambitious companies have formed a consortium which is now building the new plans really were being implemented. But then, about a year ago, deep-sea port for TMSA and setting up the related infrastructure. in July 2007, the first terminal commenced operations. Now, Mou- In fact, Morocco has succeeded in winning over these interna- rad – who, not so long ago, was scratching a living from farming tional companies, as well as the European Union, as joint financiers and smuggling, works on one of the numerous Tanger Med building of the project: They are expected to provide about two-thirds of sites: He too hopes to share in at least some of the progress and the total construction costs of approximately 3 billion euros. prosperity that is now leaving such an indelible stamp on the area. Second Terminal Operational This Summer The Tanger Mediterrannée scheme – or Tanger Med for short – is the most ambitious project Morocco has ever undertaken: It is This summer – just one year after the port was officially inaugu- seen as key to mastering the challenges of the 21st century. And rated by King Mohamed VI – a second terminal is due to commence these are considerable: Population growth is still excessive, with operations. But that’s not the end of it: Contractors are now being hordes of young people either unemployed or working in precarious invited to submit bids for phase two, due for completion by 2012. jobs, and hundreds of thousands of people eking out an existence Tanger Med would then, within the foreseeable future, become on the periphery of Morocco’s cities. Africa’s largest port and one of the leading freighter ports in the All these people aspire to the better life that they can see, day entire Mediterranean region. after day, on TV programs broadcast from the nearby continent However, Tangier doesn’t just want to be one of the region’s which for most of them will remain unattainable: Europe. The result main crossroads for international trade, it also wants to exploit its is deep-seated social unrest, which could potentially destabilize excellent location as a manufacturing base. The Tanger Free Zone, Morocco’s Alawi monarchy at any time. Moreover, a strengthened already accommodating some 150 companies, was set up near

Islamist movement is increasingly capitalizing on the frustration Tangier airport 10 years ago. Further logistic and industrial free- > TMSA Photo:

Credit Suisse Bulletin 3/08 Oceans Tangier 25

Tanger Med I Container terminals 1 and 2, with a capacity of 3 million TEU Vehicle terminal, with a capacity of 1 million vehicles (Opening 2007)

CT4 CT3

CT1 CT2 Tanger Med II Ferry Port Container terminals 3 and 4, Capacity of 7 million with a capacity of 5 million passengers, Twenty-foot equivalent units (TEU) and 700,000 vehicles Logistics Free Zone (Opening 2012) Storage Area Hydrocarbon Zone STEP (Opening 2009)

0 m 500 m 1000 m

Pages 22 and 23 The first Tanger Med I terminal commenced operations in July 2007. Container ships up to 400 meters in length can dock at the newly constructed peer. The capacity of the port, with its strategically ideal location, is due to be expanded on a continuous basis to reach 3.5 million containers per year by 2015. Above Satellite image and design sketch: In addition to the container port, a ferry port capable of handling 7 million passengers and 700,000 vehicles per year is being constructed. The planning and development of Tanger Med II has already begun. This second container port is due to be completed in 2012.

Credit Suisse Bulletin 3/08 26 Oceans Tangier

The Myth of Tangier Few cities have continued living That is not something to be taken for granted in a city that has been off a myth as long as Tangier has done. Located on stagnating for the last 50 years and in which, not so long ago, the the Straits of Gibraltar where the waters of the Medi- main “investors” included traffickers in drugs and illegal migrants. terranean and the Atlantic meet, this city can look Akalay’s view probably reflects that of a large majority of his fellow back on a 3,000-year history. The passing centuries citizens: They see the gargantuan projects as a unique opportunity have seen a constant mixing and cross-fertilization for their city and its region. of all the Mediterranean cultures, with trade ﬂ ows and The Tangier “makeover” is already apparent for everyone to see: military conquests also leaving their mark. The rather Dilapidated buildings are being renovated, while streets, squares racy image conjured up by the city today is due mainly and other components of the city’s infrastructure are being refur- to the special status it enjoyed under international bished. Given the new air of optimism, opponents of the rapid pace administration between 1923 und 1956. During this of development are few and far between – only a handful of intel- relatively brief period, Tangier became a haunt of lectuals and artists have called it into question. Orientalists, writers, eccentrics, multimillionaires The critics include economics professor Najib Boulif, who rep- and travelers in search of pretty young boys, as well resents the Islamist-oriented Justice and Development Party (PJD) as a listening post for Cold War spies. in parliament. Boulif is not opposed to the Tanger Med scheme on By 1956, Tangier had become Morocco’s leading principle. Mostly, he criticizes the fact that the megaproject’s social tourist destination. It lost its international status – repercussions have been completely ignored. “By 2012, a new city and thus also its unique character – when Morocco with a population of over 120,000 will have sprung up around Ksar gained its independence. Tangier then increasingly es-Sghir,” says Boulif. “That will completely change the lives of the became a center for the smuggling of people and people living there, and will trigger an enormous dynamic.” The goods, a “holding area” for refugees, a trading place professor feels that many of the people now living there are being for dubious merchandise of all kinds, and a city in steamrollered by events and that this undesirable development will which drug barons from the Rif mountains held sway. inevitably lead to social unrest. This all changed when the present King Mohamed VI came to the throne in 1999 : In contrast to his late Local Population Not Consulted father, Hassan, Mohamed VI is doing all he can to The Moroccan economist Najib Harabi, a lecturer at the Northwest promote and develop the city, and regularly spends Switzerland University of Applied Sciences, also harbors doubts his vacations in his palace there. about the project. Although he considers Tangier to be an excellent strategic location, he feels that the local population has not been sufficiently involved. According to Harabi, a typical “top-down” approach had been adopted in which all the important decisions were made at the highest governmental level. Overall, however, Harabi believes Tanger Med is a good thing for Morocco. In contrast, Omar Brouksy, a political commentator and trade zones covering a total of 10 square kilometers are now being writer, doubts whether the giant project will actually help the Moroc- set up close to the new port for the processing of goods (such as can economy to take off. He believes Morocco’s problems to be of textiles, automotive and aviation parts) shipped in from all over the a more structural nature, for which an infrastructure project like world. Even today, Tangier is a sought-after location for just-in-time Tanger Med cannot really provide a solution. production: Goods manufactured here can be delivered to the main But in Ksar Es-Sghir, too, people know there is no going back consumer markets in Europe within just 24 – 48 hours, giving it a now. “Everyone wants to profit from Tanger Med as much as pos- huge advantage over manufacturing locations in the Far East. sible,” says Mourad. They are selling land, applying for jobs or hoping to land contracts with the firms that will soon be moving into Carmakers Setting Up Plants the industrial area. He becomes quite agitated: “Why should we These various locational benefits have been instrumental in Renault’s care about people stuck in the past who still dream about the old, joining forces with its Japanese sister company Nissan to set up a slower pace of life?” He much prefers working in the ultramodern factory in Tangier’s new industrial zone which, by 2010, will be as- port to smuggling DVDs, medicines and Spanish cheese past cus- sembling vehicles not only for the whole of the Maghreb but also toms. For people like Mourad in Ksar es-Sghir, there are many signs for export to Europe. Major plans are afoot in tourism too: Thousands that Tanger Med has ushered in new and better times. < more beds will become available along the coast from Tangier – an area that has so far remained relatively undeveloped. The authorities hope that this will create about 150,000 jobs in the Tangier region over the next 10 years. The various projects have given rise to a new feeling of optimism in Tangier and triggered an unprece- dented construction boom. “I sense a strong feeling of hope in the city,” says author and columnist Lotfi Akalay. “Since all these new projects don’t just exist on paper, but you can actually see them taking shape.” In his view, Tangier is undergoing far-reaching change – and for the good.

Credit Suisse Bulletin 3/08 Credit Suisse Business 27

Business News From the World of Credit Suisse

Overview 28_Chief Economist Bids Farewell 30_Expansion in India 31_Succession Seminar 32_Nanotechnology News 34_A History of Ship Finance

den, co-head of EEMEA (Eastern China and Hong Kong Still Europe, Middle East and Africa) Resilient to Inflation Credit Suisse Equities at Credit Suisse, said: Credit Suisse has raised the gross “Credit Suisse is committed to iden- domestic product (GDP) growth Adopts the tifying and delivering investment forecast for non-Japan Asia to 7.9 Carbon Principles opportunities in the region. Our BRIC percent from 7.7 percent for 2008, and MENA Conference provides largely due to an upward revision Furthering its commitment to a unique opportunity to compare the in China. In its recently released prolific growth of the corporate Emerging Markets Economics sustainable banking practices, sector in the MENA region with their Quarterly report, Credit Suisse Credit Suisse announced peers from the BRIC countries.” mb eco nomists warned about the rise in late June that it has adopted of inflation across the emerging the Carbon Principles. Devel- markets world, largely driven by oped in conjunction with Italy at Its Blooming Best mounting food prices. In China, leading power companies and Discovering a country through Dong Tao, Credit Suisse Chief environmental groups, this its gardens and parks can be an Economist for non-Japan Asia, industry initiative provides fi nan- agreeable experience, and the argues that economic growth has cial institutions with a frame- benefits are not strictly one-way, been better than the market work for environmental and because tourists can often make may have expected, and that GDP economic risk management as- a vital contribution to the expensive growth momentum will be sus- sociated with the construction upkeep of private gardens. To tained in spite of the credit crisis, co ordinate the interests of both high oil prices and the recent of certain US power plants. parties, Judith Wade founded an natural disaster. Credit Suisse has The Principles will be instru- as sociation in 1997 that she called revised its 2008 GDP growth mental in guiding Credit “I Grandi Giardini Italiani.” Its mem- forecast up from 9.7 percent to Suisse’s advisory and lending bership now comprises 70 of the 10.1 percent, reflecting better activities to power companies most beautiful historic gardens At Sea in Kiel and Monaco net trade. Tao also believes food and projects in the United in 13 of Italy’s regions. (Pictured The Muhrmann family-owned com- price inflation should decline States. As part of its enhanced here: the Centro Botanico Moutan pany recently acquired its superb, on a yearly basis over the next two environmental due diligence in Vitorchiano.) “Credit Suisse has new ocean-going yacht, UCA. The quarters, thanks to a rising statis- under the Carbon Princi ples, been a partner of Grandi Giardini 26-meter-long maxi racer is the tical base and better supply, but Credit Suisse will encourage since 2006,” says Franco Müller, largest high-tech regatta yacht to remains cautious on the inflation power clients to invest in de- head of Market Area Italy. “We be built from carbon fiber in Ger- outlook for next year. With head- mand reduction through energy are happy to support the idea of many. Sailing the North Sea on the line inflation softening, growth preserving historic gardens for UCA is a dream for any yachtsman risk moderating, Tao expects a peri- efficiency as well as cost- posterity. Gardens offer us an ideal and, thanks to its partnership with od of relatively tolerant economic effective renewable and low- platform for concerts and other Klaus Muhrmann, Credit Suisse policies in China – he called it the carbon distribution technol- events. The work of Grandi Giardini (Deutschland) is able to fulfill this Olympics honeymoon. Credit ogies. The bank will also work has proved to be extremely worth- dream for about a dozen of its Suisse has also increased its 2008 with power companies to assess while: Over 5 million people now corporate consultancy clients four GDP growth forecast for Hong the fi nancial, regulatory and visit its gardens every year. tg times a year. The three-day adven- Kong from 3.9 percent to 4.4 per- environmental risks associated www.grandigiardini.it ture starts at the Kiel yacht club. cent because of stronger than with greenhouse gas-emitting Sailing on the UCA at speeds of up expected trade and consumption fossil fuel generation. Announc- to 36 knots is a challenge nobody momentum. In India, Credit ed in February 2008, the Feel the Heat Conference ever forgets. Credit Suisse (Monaco) Suisse’s economists expect that Carbon Principles were devel- Credit Suisse hosted its fi rst con- has been a partner of the Monaco crude oil prices will drive higher oped by a group of leading ference dedicated to the BRIC Yacht Club for 15 years. This partner- inflation and slow down GDP (Brazil, Russia, India and China) ship focuses primarily on the growth. Oil at current or higher fi nancial institutions active in and MENA (Middle East and Credit Suisse Primo Cup sailing prices will also widen trade the US power sector in con- North Africa) countries, titled “BRIC regatta and the traditional Yacht- deficits and create a heavier fiscal junction with American Electric and MENA – Feel the Heat.” The men’s Dinner, which is normally at- burden for the government, they Power, CMS Energy, DTE conference, which took place on tended by Prince Albert. tg argue. mb Energy, NRG Energy, PSEG, June 10 –12, brought together www.uca5000.de www.credit-suisse.com/news/en/ Sempra Energy and Southern senior representatives of the lead- www.yacht-club-monaco.mc Company. ing com panies in Brazil, Russia, www.carbonprinciples.com India and China, and the Middle

Photos Grandi Giardini Grandi Giardini Photos | Suisse Credit East and North Africa. Guy Rig-

Credit Suisse Bulletin 3/08 28 Credit Suisse Business

Final Forecast Alois Bischofberger Looks Back at a Fulﬁ lling Career and Ahead With an Economic Forecast

At the end of June, Alois Bischofberger retired from Credit Suisse after having served as the bank’s Chief Economist for 22 years. In an interview with Bulletin, he looks back on his 35-year career with Credit Suisse, and for the last time gives us his forecasts for economic developments over the next few months.

Bulletin: Can you still remember arriving then followed in the late seventies by the sec- made it easier. We have to fi lter out the impor- for your first day’s work at SKA (as Credit ond oil crisis, combined with a huge increase tant data accurately from this great wealth of Suisse was then known) 35 years ago? in rates of infl ation. Paul Volcker, the newly information if we are to ultimately draw any Alois Bischofberger: Yes, very well. Back then appointed Chairman of the Federal Reserve reasonably accurate conclusions. I was working in Selnaustrasse, quite close Board in 1979, had to fi ght infl ation with a Looking back, what was your greatest to Paradeplatz, the headquarters in Zurich. very restrictive monetary policy and this error of judgment? It was there, on my fi rst day, that my boss in- proved ultimately successful, fortunately. Nothing sticks in the mind as being particu- troduced me to all my colleagues in the build- But short-term interest rates in the US rose larly crass. But clearly on many occasions my ing, including the editors of Bulletin. So, as to 20 percent during that period. Even in expectations were not fulfi lled. you can see, I had an affi liation with Bulletin Switzerland they were as high as 12 percent, Could you perhaps provide a more right from the word go. which obviously led to a significant slow- concrete example? But back then you wouldn’t have had down in the economy. For example, the huge rise in the price of a computer at your desk. Has the length or the severity of crude oil we are currently experiencing was Indeed not. It was still very mechanical back economic cycles undergone a change a great surprise to me. then, and we defi nitely had to do a lot of things in recent decades? 1989 must surely have been another manually. Yes, the swings were more marked in the very exciting period for you with the fall of And what kind of economic market 1970s, as they were too in the early 1980s. the Berlin Wall. How foreseeable was environment were you confronted with? Things have become rather smoother in recent the collapse of the Eastern bloc for you as It was the beginning of 1973, a fascinating era. years, both on the downside and on the an economist? The first major oil crisis was yet to blow up. upside. I think there are two reasons for this: It had become apparent earlier in the 1980s It was a period dominated by the transition to First, the fall in rates of infl ation since the that the collapse would come at some point, fl exible exchange rates. One notable result early 1980s, and second, globalization. In not least for economic reasons. Of course, of the major currencies fl oating against one today’s globalized world we benefi t from the doubts about the stability of the communist another was a huge appreciation of the Swiss fact that the development of different econo- system went back even further. But in the franc against the US dollar. So strong was mies and regions is not fully synchronized. 1980s there were an increasing number of the franc that the dollar rate fell from around So, for example, the current downturn in the signs that the Soviet Union in particular, with 4.30 francs to just over 2 francs within the US is being partially offset by strong eco- its huge expenditure on armaments, was in- space of a few years. nomic growth in the emerging nations. creasingly coming up against its economic The economy goes through cycles. You talked earlier of a more mechanical limits, or had even exceeded them. The poor How many peaks and troughs have you way of working when you started your condition of other Eastern bloc economies observed since you joined Credit Suisse? professional career. The modern system of then became increasingly apparent too. But There must have been four of them. communications means we are totally the speed at which events then fi nally snow- Are there any cyclical moments that inundated with information. How has the balled in 1989 took me by surprise at the time. are particularly etched in your memory? work of a bank economist changed? Are we now once again at a global I still remember very well the crisis that took The fl ood of data and particularly the speed turning point in terms of the economic hold in the mid-1970s. In Switzerland we ex- at which information spreads today is indeed balance of power? perienced a deep recession in 1975 and quite extraordinary. The new technology at I think so. We are currently confronted with 1976, in which gross domestic product fell our disposal has changed our work a great dramatic price pressures in the sphere of by 10 percent in just two years. This was deal, but I wouldn’t necessarily say that it has energy, as well as in industrial and agricul-

Credit Suisse Bulletin 3/08 Credit Suisse Business 29

tural commodities. This rise in prices is now increasingly feeding through into consumer prices. What’s more, commodity price levels are likely to remain at above-average levels when viewed in historical terms. This struc tu r al change will lead to a global redistribution of wealth and income. Countries that produce large quantities of commodities will be particular benefi ciaries in this respect. As a result, they will be able to accumulate capital that they can then make available to companies in Western countries. So the importance of a number of developing countries will increase significantly. But the task of central banks will also become more diffi cult, as they are faced with the double-edged sword of infl ationary pressures increasing on the one hand and growth trending downward on the other. The challenge for monetary policy is therefore to combat rising infl ation without stalling this already weakened economy. How well is Switzerland equipped to deal with these upheavals? Switzerland is one of those countries that can benefit from the rise in commodity and oil prices, because its industries offer products in the sphere of energy-saving and more effi- “Switzerland is one of those countries that can benefi t from the rise in commodity and oil prices,” reckons Alois Bischofberger, Chief Economist of Credit Suisse for 22 years. cient use of energy. These goods and services will enjoy increased levels of demand. Moreover, one of the consequences of rising prices is an increase in wealth in commodity- producing countries. We are seeing the emergence of a middle class with an interest in buying consumer goods. Here too, Switzer land is well posi- tioned, particularly in the luxury segment. Take our watchmaking industry, for example. This is currently going through an upbeat phase, not least thanks to the booming economies of developing countries. Will Switzerland as a financial center – and hence also the Swiss finance sector – gain in significance over the next Alois Bischofberger 10 years, or will it lose ground? Either way, the competition will become fi ercer. Now 64 years of age, Alois Bischofberger joined Credit Suisse in 1973 and New fi nancial centers such as Singapore will became the bank’s Chief Economist in 1986. In 1997, he was additionally certainly assume a more important role. This named economic advisor to the Executive Board before being appointed makes it all the more important that Switzer- Chief Economist of Credit Suisse Group in 2004. Bischofberger was land maintains its competitiveness as a fi nancial center and asserts itself more strongly in Treasurer of the University of Zurich’s Foundation for Academic Research an increasingly intense global competition. for 15 years until 2006. Furthermore, he was a member of many professional But I think the parameters remain favorable. organizations, including the International Conference of Commercial Bank Switzerland is a good base for fi nancial ser- Economists (ICCBE), the Council of Economists of the Conference Board vices, not least as a result of its experience over many decades and its good reputation and the Société Universitaire Européenne de Recherches Financières.

Photo: Stefan Walter Stefan Photo: in this business. Daniel Huber

Credit Suisse Bulletin 3/08 30 Credit Suisse Business

India – A Market of Increasing Importance Credit Suisse Strengthens Its Commitment in India

Credit Suisse is expanding its operations in India. As announced in Mumbai on May 22, the bank intends to be among the top three wealth managers in three years’ time. Commitment for India: Mickey Doshi (left) and Puneet Matta.

India’s population broke through the 1-billion with potential assets under management ex- Three-quarters of wealthy Indians are young mark on May 12, 2000. No other country is ceeding the 1,000-billion-dollar mark. A dis- entrepreneurs who are now increasingly growing at such a fast pace. But it is not just tinctive national characteristic is that the Indi- thinking about their fi nancial security and India’s demographic growth that is so im- ans invest most of their money in India itself. retirement following a fi rst, full decade of pressive – it’s also the pace at which its econ- economic expansion. omy is growing. And this is unlikely to change Offering Integrated Solutions Credit “A large number of business owners have in the future either. Suisse is playing an active role in shaping not focused on maintaining a strict separa- At the Asian Investment Conference orga- this process. After obtaining a portfolio man- tion between corporate capital and private nized in Hong Kong by Credit Suisse, Indian ager license for India from the Securities and wealth,” says Mickey Doshi.“Corporate profi ts fi nance minister Shri Palaniappan Chidam- Exchanges Board of India (SEBI) at the start fl owed straight into plans for the next phase baram said he was confident his country of 2008, it opened its wealth management of growth. As their wealth has grown, so too would achieve annual growth of 9 percent business in the country on May 22. has the need for entrepreneurs to get advice over the next fi ve to 10 years. The new operation is headed by Puneet on how to divest their individual assets, and Matta, who has worked in India’s banking how to safeguard their private assets and India Soon the World’s No. 3 Economy sector for the past 18 years. His goals are invest them for the next generation.” “India has the potential to be the world’s third ambitious: “We’re starting with around 20 largest economic power by 2050, behind employees, but pretty soon it will be 40. After Advice for Indian Expats Comparatively China and the US but well ahead of Japan, Mumbai, we will also be opening offi ces in few Indians – around 25 million – live abroad. Brazil and Russia,” says Mickey Doshi, Credit New Delhi and Bangalore. Three years from Although they live abroad, they have a strong Suisse Country Head in India. India attributes now, we intend to be among the top three affi nity with their home country – in business its continuing, above-average rate of growth wealth managers in India.” as well as in private terms. “In 2007 alone, not least to the fact that it is a country with How can he make that a reality? “Our big about 27 billion dollars were remitted back one of the youngest populations. strength is our integrated banking strategy,” to India by the non-resident Indian commu- “Over the next 20 years, India’s working- says Matta. “We benefi t from the fact that nity,” says Raj Sehgal, market leader for India age population of nearly 700 million will soar we’ve had a successful investment banking in Dubai. To cater for the needs of India’s ex- to over 950 million. India is both determined operation in India for more than 10 years now, pat population, Credit Suisse has installed and in a position to create the necessary and that an exceptionally large number of cli- specialized teams – in Dubai, London, Singa- jobs.” The number of high-net-worth individ- ents require integrated solutions. There is big pore and Zurich. Andreas Schiendorfer uals in India is surging at an even faster rate demand for products that also include the of 30 percent annually. provision of advice on capital-raising, stock According to research, the number of market fl otations and succession planning. households with fi nancial assets of over What we do is bring our worldwide network

1 million dollars will rise to 300,000 by 2012 – and expertise to the party.” Suisse Credit Photo:

Credit Suisse Bulletin 3/08 Credit Suisse Business 31

Investment and Family Business Program the challenge of developing a successful strategy, management structure and succes- Good Succession Planning Is the Foundation sion plan for their business. The seminar was for Continued Success led by an internationally respected expert in the area of family business management, In Latin America, 98 percent of businesses are family businesses. namely Professor Ernesto J. Poza from the Barely a third of these companies remain in the same family’s hands in Thunderbird School of Global Management. the next generation. The aim of Credit Suisse’s Investment & Family The issue of succession is a key factor for any Business Program is to address its clients’ need for mature business- successful family business – an area in which specifi c succession planning strategies. he sees enormous potential. Poza’s goal in the seminar was to change the way that the participants think about succession issues: “I want to make them aware that the challenges posed by succession and continuity in a family business are crucial and enormous,” he explains. “Just because the In the US and Latin America, family business- fi nancial strategies to deal with succession family members get on well together doesn’t es generate as much as three-quarters of the issues. By showing the participants a variety mean that the company is well-managed or gross domestic product (GDP) – representing of perspectives and giving them access to that its future competitiveness is assured. a crucial cornerstone of the economy. How- knowledge and information, Credit Suisse Another important aspect is the ability to ever, only 10 percent of these businesses sur- supports entrepreneurs in their attempts develop sustainable business-specifi c strat- vive beyond their fi fth year and of those that to build fi nancially sound and strategically egies, a culture of open communication, and survive the tough entrepreneurial years only mature businesses. the awareness that each business is unique,” 12 percent endure into the third generation. explained Poza at the seminar, held in the This year, for the second time, Credit The Challenges of Succession Partici- Credit Suisse Bocken Center near Zurich. Suisse addressed this issue and sent out in- pants were given the opportunity to fi nd out The participants were invited to see a vitations to its Investment & Family Business about current trends and forecasts in the successful example of succession planning. Program. In mid-May, a group of 24 current fi nancial markets and were provided with an They were taken on a tour of the BMW Sauber and future Latin American CEOs met in Swit- insight into Credit Suisse’s strategy by a Formula 1 premises – which also used to be zerland for three days. number of speakers. a family business – where the team principal, This program is the bank’s reaction to its But the main focus was on the two-day Mario Theissen, explained current develop- clients’ needs for mature business-specifi c seminar during which participants looked at ments in the team. Regula Gerber

Professor Ernesto J. Poza: “If the knowledge and entrepreneurial Wolfgang Rother in discussion with Mario Theissen (right), who spirit of a company can be transmitted across the generations, this has despite the rigors of the Formula One racing calendar made the time

Photos: Rainer WolfsbergerSuisse Rainer | Credit Photos: enormous value for a family business.” to participate in the succession planning seminar.

Credit Suisse Bulletin 3/08 32 Credit Suisse Business

Global Nanotechnology Conference Nanotechnology Provides Giant Potential On a Tiny Scale

At the atomic level, far beyond what a conventional microscope can observe, the properties of materials change. Scientists are exploiting these changes to produce stronger materials, more efﬁ cient energy and smarter medicines – this is nanotechnology.

Imagine a world where washing was a thing emerging technologies, as a purposeful tool ited, because it has been impossible to mon- of the past because cars were scratch-resis- or process to engineer matter on a scale be- itor and measure causes and effects at the tant and clothes were dirt-resistant, where tween 1 nms and 100 nms to achieve a mod- microlevel. Even electron microscopes are tools and instruments could be made of ifi ed or new property. At the nanolevel, some not up to task, as recognized by Feynman in structures 50 times stronger than carbon organic and inorganic materials are found to 1959. The dilemma was greatly reduced by steel, and where proteins could invade can- be harder, more conductive, more soluble the invention of the scanning tunneling micro- cerous or viral cells and trick them out of or more magnetic. A mere coating of these scope by IBM’s research laboratory in Swit- multiplying. This is a nano-enabled world, materials can then make those shirts that zerland in 1981. This instrument enables the and unlike science fi ction, many of its won- are easier to wash, cars harder to damage, user to infer the position of individual atoms derful applications are already in use. smarter medicines but also cleaner energy and molecules through the location of re- The market for nanotechnology is already and more effi cient IT systems. gions of high electron density. A high resolu- worth an estimated 95.2 billion dollars, action version, known as the atomic force cording to Credit Suisse, and with growth Nanotech Changes Life as We Know It microscope, was created fi ve years later. rates of over 30 percent for nanomaterials “There is no doubt that nanotechnology will Research scientists today are thus able and applications in IT, Credit Suisse believes signifi cantly change our lives,” says Stefano to see more of nanoparticles and their envi- the market will more than double to 221.4 Natella, head of equity research at Credit ronments. They even coat the particles in billion dollars by 2010. Suisse, echoing the words of US physicist, gold and silver to better detect their activities. If you haven’t seen nanotechnology com- Richard Feynman, who fi rst drew the public’s But plenty of other barriers remain. Take, for ing, that is understandable. If you haven’t attention to this science almost 50 years ago example, smart drugs which locate a tumor seen nanotechnology in action, that is under- (see box). and can then be zapped using an infrared standable. Nano refers to matter on almost In fact, nanomaterials have been chang- light. The aim is to target malignancies in the smallest scale. A single strand of human ing lives for at least nine centuries – some for the body far more accurately than general hair is about 80,000 nanometers in diameter the worse. Arguably the fi rst manufacturers treatments such as radiotherapy; a challenge and a single leaf of paper is about 100,000 of a nanomaterial were medieval Middle East- fi rst imagined by Nobel Prize winner Richard nanometers (nms) in thickness. If a nanopar- ern blacksmiths, who forged superior weap- Smalley over two decades ago. ticle was scaled up to the size of a hazelnut, ons for native militants out of an alloy known In a speech to the US Congress in 1986, then by the same ratio of expansion, a meter and feared by crusading Christians as Da- he predicted: “Twenty years from now, nano- would be the same diameter as the world. mascus steel. Evidence of carbon nanotubes technology will have given us specially engi- Particles at such infi nitesimal dimensions have been found in a Damascus steel sword neered drugs which are nanoscale cancer- are not merely impossible to see with the from the 17th century. (Nowadays such nano- seeking missiles, a molecular technology that naked eye; they can undergo defi nitive chang- tubes are used to coat weapons of a different specifi cally targets just the mutant cancer es in character. Gold, for instance, can be kind: ice hockey sticks.) cells in the human body and leaves every- red or blue in color and becomes catalytic. Tires also have been manufactured using thing else blissfully alone.” Carbon tubes become extremely tensile. the strength of fullerenes, an extended fam- The material of such missiles, or “nano- Such alterations in property are the basis ily of which nanotubes are one group, for bombs,” is again carbon nanotubes, as used for nanotechnology. It is defi ned by Lux Re- much of the last century. So nanotechnology in Damascus steel and ice hockey sticks. The search, a New York-based advisory fi rm on is not new. Its uses, however, have been lim- rationale of nanobombs is to target cancer-

Credit Suisse Bulletin 3/08 Credit Suisse Business 33

Left In the health care sector, Credit Suisse research analyst into pharmaceutical companies, Jeff Holford, sees the best areas for investment as: oral biologics, blood-brain barrier delivery and in-vitro diagnostics. Middle Giles Keating, head of Global Research, says the growth drivers for the nanotechnology sector are expectations of a higher quality of life, environmental concerns, high energy demand, and sustainable development. Right “There is no doubt that nanotechnology will signiﬁ cantly change our lives,” says Stefano Natella, head of Equity Research.

ous regions more accurately than general company today looks pretty much like a typi- Finally, in-vitro diagnostics allow hospital treatments such as radiotherapy. However, cal biotechnology company 10 years ago – medics to confi rm prognoses on various ail- arriving at the tumor is itself a challenge be- small, private and unprofi table.” Many, but not ments faster. Heart disease, prostrate cancer cause the body tends to discover foreign bod- all, will remain that way. and possibly Alzheimer’s disease can be iden- ies and engage them. In the health care sector, Holford sees tifi ed more accurately and more rapidly by Not just nanotechnology but also biotech- the best areas for investment as: oral biolog- introducing gold and silver nanocoated par- nology has already sought ways to avoid this ics, blood-brain barrier delivery and in-vitro ticles into patients’ blood samples then illumi- natural but unhelpful engagement. But the diagnostics. Oral biologics concerns the nating them to detect other substances. second challenge is what happens to the regular ingestion of medication. Nanotech- These areas are not the preserve of small nanoparticles or their carrying agents once nology looks to enable patients to swallow nanotech companies. All the major pharma- they have been zapped. The tumor’s growth more of their medicines rather than use awk- ceutical and chemical producers have a nano- may be retarded or reversed but the remains ward needles or drips. technology division. Heerlen-based, DSM of the bombs have to be absorbed or expelled has introduced a biodegradable alternative to safely from the body. The Big Business of Small Things Just as aluminum which it licenses to food manufac- Nanotechnology is grappling with these the gut prevents many medicines from enter- turers and brand owners for packaging crisps. very practical issues and by another, less ex- ing the bloodstream, so the contact area be- The new material is clear, enabling shoppers plosive, method has in part fulfi lled Smalley’s tween the blood and brain currently does not to see what they are buying, and eco-friendly, vision. Thousands of breast cancer patients allow 95 percent of medications for central- cutting the providers’ recycling tax. have already been administered drugs which nervous system infections, such as meningi- This packaging innovation contributed to if not quite missiles, fool tumors into consum- tis, through. By bonding drugs to nanoparti- the 62.8 billion dollars earned from nanotech- ing active agents disguised as the tumor’s cles and then coating them, this barrier may nology by all companies globally in 2005 – a favorite food. Trillions of nanoparticles are re- be overcome. lot of money from tiny particles. Brendan Maton leased into the bloodstream via injection which then bond themselves into albumin, one of the most common proteins in the body and a carrier of nutrients. The tumor then in- gests both the albumin and the anti-cancer 2008 Nanotech Conference agent as one. “In the year 2000, when they look back at this age, they will wonder These nano-enabled products are ap- why it was not until the year 1960 that anybody began seriously to move proved by the relevant drug authorities, in use in this direction.” So said Richard Feynman in the first popular speech and earning their proprietors millions of dol- predicting nanotechnology. Credit Suisse has been analyzing this science’s lars in sales. But as anyone in pharmaceutical research and development knows, translating commercial prospects well before 2000 and held its first Global bright ideas into viable commerce is risky. Nanotechnology Conference on June 17, 2008. Representatives from As Jeff Holford, a Credit Suisse research an- IBM, Swiss Re, Bayer, GSK, DSM and specialist nanotech companies alyst specialized in pharmaceutical compa- gave speeches at the event.

Photos: Credit Suisse Credit Photos: nies, puts it: “The ‘typical’ nanotechnology

Credit Suisse Bulletin 3/08 34 Credit Suisse Business

Financing of Ships – a Lucrative Business Global Trade Takes Place Almost Exclusively at Sea

The ﬁ nancing of commercial cargo vessels is a lucrative business for banks like Credit Suisse. The order books off shipyards all over the world are currently full, with ﬂ eet capacity increasing at double-digit rates. The demand for seaborne transportation is expected to remain high in the years to come.

Credit Suisse has 65 years of experience in ship ﬁ nance.

Almost 95 percent of the world’s trade travels ternationally renowned shipping lines among credit rating is added. Repayments are usu- by sea. Straightforward bank lending serves its clients. The majority of these shipping ally made in quarterly installments. The loans to fi nance three-quarters of the new ships lines are still in the hands of high-net-worth granted have to be repaid before the ship built. In 2006, shipowners ordered a record individuals. “Thanks to Credit Suisse’s glob- reaches an age of 15 years. 231.5 billion US dollars worth of new vessels, al structure, these clients derive great ben- according to the ship broker Clarkson PLC. efi t from the bank’s expertise in the areas Demand for New Container Vessels It is “After years of disappointing earnings, ship- of private banking, investment banking and estimated that about 90 percent of the world’s ping has been enjoying a real boom in the last asset management,” stresses Häfelfi nger. manufactured goods are transported via sea- fi ve years. And that keeps our clients happy “We refer our clients to the bank’s other units borne containers. The global container fl eet too,” says John Häfelfi nger, deputy head of whenever they express an interest in our capacity has been growing at double-digit Ship Finance at Credit Suisse. “Although products or services.” rates since the summer of 2005, with the transaction volume has increased signifi- global container ship order book currently cantly, the bank remains very conservative Focus on Commercial Cargo Vessels estimated at 6.4 million twenty-foot equiva- in terms of its parameters – something its In order to diminish risk and stay out of niche lent units (TEU) – the unit used to measure top-tier clientele both expects and values,” markets, Credit Suisse only fi nances loans container capacity. To get an idea of the size he adds. But what does Credit Suisse’s for commercial ocean-going vessels like con- of the order volume, the world’s largest con- Basel-based ship fi nance unit do exactly? tainer ships, crude oil and product tankers, tainer shipping company, Denmark’s A. P. bulk cargo ships, chemicals and gas carriers. Moller-Maersk, operates with a total capacity Shipping Operations Since 1943 Credit And this strategy works, as the ship fi nancing of around 1.9 million TEU. Suisse opened its ship fi nancing operation unit at Credit Suisse has not incurred any Existing orders are skewed toward larger back in 1943 under the name Schweizeri- credit losses for more than 2 0 years. A cargo container ships with a capacity of above sche Schiffshypothekenbank (Swiss Ship ship costs between 20 and 180 million dollars 4,000 TEU. Clarkson estimates that this Mortgage Bank). The unit, now named Credit depending on its size and age. Credit Suisse year’s ship deliveries will boost container Suisse Ship Finance, belongs to the 10 larg- offers shipowners loans for new vessels both capacity by about 1.2 million TEU and by an- est players in the ship-fi nancing sector in before and after delivery, usually with a 60 other 1.8 million TEU in 2009. “These ships terms of its exposure. About 600 vessels are to 70 percent coverage of their market value. will need to be fi nanced, which promises a currently fi nanced by the bank, with its larg- These loans are always secured and their broad range of business opportunities for est exposures being in Greece, Italy, Ger- price is normally based on the LIBOR rate our area,” says Meike Mättig, who is respon- many, Hong Kong, the United Kingdom and (London Interbank Offered Rate), to which a sible for execution and support for the Ship

Russia. Credit Suisse counts most of the in- certain margin correlated to the borrower’s Finance unit of Credit Suisse. Dorothée Enskog Photo:“ORION” BULKERSCo. KG & GmbH

Credit Suisse Bulletin 3/08 Economy Credit Suisse 35

Good to Know Financial Market Jargon

The fi nancial world abounds with metaphors of the sea. Many of these date back to the Waves and Ripples 1930s and one of the fi rst market analysts, Robert Rhea. For example, longer-term market Short-Term Market Movements movements are termed “tides” while the daily movement of the market is referred to as and Their Repercussions the “wave.” Investors who are involved in the market on a daily basis therefore observe its “daily waves.” Short-term market movements are known as “ripples”. Ripples may of course just be small movements of water on the surface, but they may equally imply something much more signifi cant. Just as a stone thrown into the water can cause outward movements, so too can individual events have far-reaching consequences. These consequences are referred to as a “ripple effect.” A current example is the subprime crisis. Events in the US have had global ripple effects. The current rise in the prices of consumer goods is likewise a ripple effect of higher commodity prices. jbo

“Whale Watching” is a well-known pastime of animal lovers with a sense of adventure. Shark Watchers In the same way, enthusiasts can now also engage in “shark watching.” However, this Companies That Monitor does not involve taking a boat cruise out to sea. The shark metaphor is widespread in the Purchase and Sale of Equities the fi nancial world. As well as “fi nancial sharks,” there are also “shark watchers.” These are companies that observe equity trading patterns. They follow the movements of their client’s stock in the market and analyze purchases and sales of this stock. The aim is to identify any party that is accumulating a substantial holding and so recognize a potentially undesirable takeover at an early stage. This gives their clients the breathing space to prepare the necessary defensive measures. The specifi c measures in question are known as “shark repellents.” So-called “safe harbor” strategies are one way in which these methods are employed. For example, company A, which is not fi nancially robust enough to take out the necessary loan, can do business with company B, which is on a better fi nancial footing. B therefore takes out the loan, passes it on to A, and can simultaneously benefi t from tax relief. Despite the good intention that lies behind shark repellents, these are not always successful, as they can lead to the weakening of the company. jbo

For some people, the word “fl ipper” conjures up images of a friendly dolphin who ap- Flippers peared in a children’s TV series in the 1970s. But the fl ippers of the fi nancial world are Investors Interested in Quick Profi ts not so lovable. Flippers are traders who want to turn a quick profi t. They often only hold stock for a brief period, say between 24 and 48 hours, or they trade in IPO stock in the run-up to a fl otation so as to make a profi t even in cases where the stock initially experiences trading problems. As a result of their “in-and-out” approach, fl ippers are very susceptible to short-term market movements. They can make a fortune on one day only to lose it on the next. Their strategy is the opposite of Warren Buffett’s. Instead of monitoring a stock over many years and then investing for the long term, they adopt a specula- tive approach with a view to making quick profi ts. Hollywood has recognized the entertainment value of fl ippers, which is why there has been a string of lucrative fi lms featuring their activities, but fl ippers in the real world tend to lose more money than they make. So in this sense they have something in common with our lovable dolphin from the TV series: They are quick, likely to surface wher- ever something interesting is going on, and despite visually spectacular performances often end up performing painful-looking belly fl ops. jbo Photos: Walter Bibikow, Getty Images | Yellow Dog Productions, Getty Images | Getty Images | Steven Puetzer, Prisma

Credit Suisse Bulletin 3/08 36 Economy Ocean Economics Riding the Waves of Economic Change The oceans sustain life; they wreak terrible destruction. They link us; they separate us. With the passage of time, these contrasts intensify. Today, there are 6.5 billion people in the world, and over 4 billion are barely at subsistence level. How can they take their share in the bounty of the Earth – energy, metals, food – without heating the world, melting the ice and unleashing the creeping waters of climate change? Is this a path to destruction, or can mankind control its destiny?

Roll on, thou deep and dark blue Ocean — roll!/ Ten thousand ﬂ eets sweep over thee in vain;/ Man marks the earth with ruin — his control/ Stops with the shore.

Lord Byron, Childe Harold’s Pilgrimage, Canto IV, st. 179 Atlantic Ocean | Indian Ocean | Pacific Ocean

Credit Suisse Bulletin 3/08 Economy Ocean Economics 37

Text: Giles Keating, head of Global Research, Zurich

Pacific Ocean As the greatest and deep- Southern Ocean The ice cap in the South- before they emerge, but Asia needs oil now. est of the oceans, the Pacific connects the ern Ocean, at 27 million cubic kilometers, There is another, immediate solution: High resurgent heart of the ancient world in Asia is melting at perhaps 152 cubic kilometers prices mean less consumption, though not with the New World in the Americas and annually as global warming depletes our pro- in fast-growing Asia where demand momen- Australia. Daily, thousands of tons of copper tective ozone, adding to sea levels, which tum is so strong, but in the richer countries from Chile and iron ore from Australia are are now rising some 3.3 millimeters per year where it is dampening. shipped to the fast-growing factories and according to some estimates. Already, drivers in the US have started cities of Asia. Textiles, electronics and now As politicians debate how to arrest this, cutting the number of miles they cover, for pharmaceuticals are flowing from Asia to the invisible hand of market forces may help the first time in nearly three decades. Much the shopping malls of North America. For a to find a solution. Three-quarters of the man- more can come, as ingenuity finds a way to decade, paper debt has been used to pay made carbon dioxide emissions causing the reverse the culture of profligacy built on a for it. Now, the era of easy credit is over and problem come from oil and other fossil fuels, lost era of cheap energy and resources. the US must increasingly pay for the goods and as their prices soar in response to the it buys with the goods it sells, rather than Asian boom, so does the incentive to find Atlantic Ocean The first transoceanic with paper. So it is exporting more than ever alternative, cleaner energies. cable was laid under the Atlantic Ocean in before, up almost one -fifth compared to just Nanotechnology is opening the way to a 1858. Now, 150 years later, this is the busi- one year ago. new generation of solar power to replace est intercontinental broadband route, with The US is sending back across the ocean today’s silicon-based ones, which even at hundreds of gigabits sent every second generators to power India and cosmetics for sunny sites, currently cost at least twice as through transatlantic cables between Europe the consumers of China. Exports from the much compared to typical peak-hour con- and the Americas, and hundreds more flow- US look set to surge for years to come, gen- ventional electricity. This cost differential ing to Asia. erating profits to fill the gap left by the dis- could reverse within less than a decade. The information revolution is still young mal consumerism at home. In order for trade Geothermal and wind power are also clean and faces many challenges – not least to to flow in both directions, there is need for but may have less potential; wave power reduce the energy that runs computers and ships, ports, warehouses and roads to the from the oceans themselves is exciting but servers – but as it grows, it can become the hinterlands. To build and fuel these ships, to embryonic; for nuclear, despite radical im- core of a low-energy economy. Why drive to make and power the electrical goods and provements in technology, the issue of the movie theater, when movies on demand the automobiles being traded across the waste remains. can be downloaded via broadband? ocean, and to feed the people who create For any of these technologies to seri- And why trash those unwanted gifts gath- these things, mankind needs more oil, more ously challenge oil, the key is to make elec- ering dust in your garage, wasting the en- copper and zinc and aluminum, more wheat tricity mobile, and this now seems in reach, ergy used to make them, when you can sell and corn and rice. with lithium-ion batteries likely to power the them to a new owner via online auction? first wave of mass-market electric cars with- Rather than visit your friends in the city yet Indian Ocean Round the shores of this in a couple of years. It will take decades to again, you could become part of a far-flung ocean and the adjacent seas lie much of the slow the destruction of the ice, but these circle available on the web. Or instead of oil and metals needed by Asia. The local new technologies have the potential to begin having those many cars in the driveway, you economies boom as demand for these com- to bring the problem under control over the could look to online car-sharing to allocate modities rises. People from the poorest re- next century or so. one from the neighborhood car pool, or that gions of Asia cross the waters to build the will team you up with others going the same glittering towers of the oil-rich Arabian Gulf, Arctic Ocean Under the cold waters and way in a shared taxi. students from the great universities of the the ice of the Arctic lie oil and other resourc- The information revolution will enable sub-continent follow to build their careers, es, at deep, dark and dangerous depths. all of us someday, with a simple control, to and engineers from afar flock to release the Existing oil fields seem likely to meet only a start our washing machines at midnight and shining minerals and energies of Africa. small part of the rising demand for oil – do use electricity from the most efficient gen- These are some of the near 200 million these previously unknown, unwanted, unaf- erator, in place of the oldest and least people living outside their home countries, fordable resources in the far north provide efficient one pressed into service at peak who are, in turn, a fraction of the number the answer? New technologies, and higher times. Rather than visiting the health clinic moving hundreds or thousands of miles prices, may help make them accessible at for routine checks, we will be able to pur- within their own countries to find jobs. This last, and claims have already been staked chase a blood pressure gauge that costs flow of people creates enormous needs, so- by people from Russia, from Scandinavia, just 10 dollars. Why have a builder cross cial, physical and financial. They require sys- from Canada. town to repair the roof when your multi- tems to desalinate water, trucks to build But are these new sources of supply – or functional domestic robot will do it? Some of roads and houses, and new technologies even those in less difficult waters like the this is here now, some lies ahead, some may that enable banks to offer low-cost money shallower seas off Brazil – really the answer? never appear, but the lesson of history is that transfers back across the oceans. Many years of dangerous endeavor lie ahead change is inevitable. <

Credit Suisse Bulletin 3/08 38 Economy Personal Perspective

“Indeed, 76 percent of the world’s ﬁ sh stocks that are tracked are either overexploited, fully exploited, or depleted. The world ﬁ shing catch was 19.3 million tons in 1950; by 2002, it had reached 134 million tons.”

A Species Under Siege

Text: Matthew Rees

In the pantheon of clichés meant to illustrate some big idea, one North Sea cod, “are now on the brink of commercial extinction.”4 has always stood out from the rest: “Give a man a fish and you feed A Stanford University researcher, Steve Palumbi, has put the him for a day. Teach a man to fish and you feed him for a lifetime.” issue in even starker terms: “Unless we fundamentally change the But with the size of the world’s fish stocks having plunged in recent way we manage all the ocean species together … then this cen- years, fishermen have put a dark twist on that once-inspiring idea: tury is the last century of wild seafood.” 5 “If you give a man a fish, you feed him. If you teach a man to fish, How is it that a species that’s existed for hundreds of millions of he will starve.” years has managed to come under siege in a mere matter of For centuries, the fisherman has occupied a hallowed place on decades? A web of interrelated factors tells the story. the world’s landscape, and his quest has been romanticized in Why Are Fish Facing Extinction? literature, most famously in Ernest Hemingway’s “The Old Man and the Sea.” But the modern version of that heroic, solitary tale was First, because of advances in technology – everything from satellite called “The Perfect Storm,” and it recounted how six professional navigation systems to more efficient netting to more powerful die- fishermen traveled 700 miles off the coast of the American state sel engines in fishing boats – it is easier to track down fish and of Massachusetts, in an elusive search for schools of swordfish, catch them. The result is that “fish don’t have a chance,” as one only to perish after getting caught in meteorological mayhem. fishermen puts it in “The Last Fish Tale,” an absorbing new book by Mark Kurlansky documenting the decline of the fish trade. The Future Looks Bleak for the Fishing Industry Second, a panoply of government subsidies, aimed at support- The grim reality of the fishing industry was captured in a report is ing fishing-related endeavors, are keeping fishermen from moving Organisation, a sleepy, Rome-based arm of the United Nations. into other professions. The net effect of the subsidies, which are “The maximum long-term potential of the world marine capture fish- estimated to total 30 billion dollars,6 is that there are too many fisheries has been reached.”1 ermen chasing too few fish. Indeed, 76 percent of the world’s fish stocks that are tracked Third, government regulations related to fishing are short-sighted are either overexploited, fully exploited, or depleted. The world fish- and riddled with loopholes big enough for whales to swim through. ing catch was 19.3 million tons in 1950; by 2002, it had reached Consider the European Union’s Common Fisheries Policy.7 It is a 134 million tons.2 During this period, the number of large preda- nearly-incomprehensible hodgepodge that sets different quotas for tory fish – sharks, tuna and marlins – has fallen by 90 percent.3 And different fish species for different times of the year for different according to the World Wildlife Fund, many fish stocks, such as areas of the sea. The species-specific quotas are often determined

Credit Suisse Bulletin 3/08 Economy Personal Perspective 39

less by concerns about conservation and more by political demands, An even bolder idea would be to leading governments to set their quotas much higher than what is auction off zones of the oceans recommended to conserve fish stocks. Thus the European Union’s and the seas – in other words, Court of Auditors concluded in a report last year that the policy was privatize them. Governments deeply flawed, as total fish catches were “unknown.” should like this option because it Consider just one failing: once the quotas have been set they would be a source of revenues are effectively unenforceable. Thus violations of the quotas, wheth- and would shift responsibility for er intentional or unintentional – how do you keep from catching dealing with fishing disputes away catfish when you are trying to catch cod? – are widespread. from them and on to the private Matthew Rees is a regular Fourth, fishermen who do comply with the quotas are frequently sector. columnist for Bulletin. forced into massive “discarding,” whereby they dump back into the Transforming fishing rights into The former speech writer for sea those fish they have netted but under the quota system are not private property would reduce, if the US President currently permitted to keep. Here’s how the situation is described in “The not eliminate, the distorted incen- freelances for a number of America’s most respected Last Fish Tale”: tives existing under the current publications. Quotas result in millions of pounds of dead fish being dumped system. “Exclusive ownership of overboard every year. Fishermen haul in the net. They call into the coastal fisheries would eliminate market on their cell phone. If the price of cod is low that day but the need to regulate the fishery,” the price of haddock is good, they will keep the haddock and dump according to Birgir Runolfsson, an the cod. Why use up your quota of a species on a day when the economist and fisheries expert at the University of Iceland. “The price is low? 8 Studies by the International Council for the Explora- private owners of the fishery would have incentive to look after the tion of the Seas show that the discard rates for cod and haddock maintenance of the coastal fish population. They would have the are 97 percent and 99 percent, respectively.9 authority to prevent overfishing in their area.”13 The fifth and most fundamental problem is one the director-gen- Similarly, fishermen would want to keep their fishing waters free eral of the Food and Agriculture Organisation, Jacques Diouf, pin- of pollution and would thus become an effective antipollution lobby. pointed shortly after taking office in 1994. There is a “fundamental The owners of the fishing rights also would have a clear interest in contradiction,” he said, “between the reality that the resources of keeping an eye on intruders, and would have the law on their side the oceans are finite and the prevailing rules that reward the impulse if anyone encroached on their fishing waters. to exploit them as much as possible in the short term.” Whether governments have the courage to take any of the necessary steps is questionable, as such steps will mean some short- The Tragedy of the Commons term retrenchment and will thus be unpopular with fishermen and Indeed, because most of the world’s countries treat fish and fishing the estimated millions of people employed in the global fishing waters as a common resource, there is no limit to the number of industry. But what these governments, and their fishermen, must fishermen who may enter the market, and no short-term incentive recognize is that in the long term, the current situation is unsustain- for these fishermen to respect measures that would limit what they able. Treating resources as public property guarantees their abuse, are allowed to catch. Public policy types will immediately recognize and in the case of fish this will continue as long as the incentive this as “the tragedy of the commons.” system punishes conservation and rewards plunder. < The one growth sector in the fishing industry is ideas for how to revive the industry. Given the stakes, it’s regrettable that so many of the ideas are off the mark. One proposed solution is the creation of a global fishing inspectorate – think Interpol for the high seas. But this idea is destined to fail. Fishermen will always find new ways to evade the rules, and it doesn’t address the deeper problem: Be- cause fish are mostly treated as a common resource, the incentive will always be to net as many as possible. As an eminent fishery scientist named Michael Graham observed all the way back in 1943, “Fisheries that are unlimited become unprofitable.”10 Putting an end to overfishing means changing the incentive structure. A massive rethink of the philosophy underpinning the global rules on fishing is needed, with a greater emphasis on market 1 ftp://ftp.fao.org/docrep/fao/007/y5852e/y5852e00.pdf (p. 3) 2 ftp://ftp.fao.org/docrep/ mechanisms and less reliance on the heavy hand of government. fao/007/y5852e/y5852e00.pdf (p. 2) 3 http://www.fisherieswatch.org/docs/261.pdf (p. 3) 4 Since 1986, New Zealand has utilized a system whereby quotas http://www.panda.org/about_wwf/where_we_work/europe/what_we_do/wwf_europe_ environment/initiatives/fisheries/index.cfm 5 http://www.sciencedaily.com/releas- on fish catch are tradable among fishermen.11 Under this system, if es/2006/11/061103074315.htm 6 http://www.oceana.org/fileadmin/oceana/uploads/dirty_ fishermen catch a species they don’t want, or if they exceed their fishing/for_amanda/Pauly_report_2nd_version.pdf 7 http://ec.europa.eu/fisheries/cfp_en. quota, they have the freedom to trade with other fishermen, thus htm 8 The Last Fish Tale, p. 148 9 http://eur-lex.europa.eu/LexUriServ/LexUriServ. reducing the incentive to discard unwanted fish. Of the fish stocks do?uri=COM:2002:0656:FIN:EN:PDF 10 The Last Fish Tale, p. 147 11 http://www.teara.govt. monitored by New Zealand’s government, some 80 percent have nz/EarthSeaAndSky/HarvestingTheSea/FishingIndustry/6/en 12 http://www.teara.govt.nz/ been found to be at or near target levels for sustainable harvest, EarthSeaAndSky/HarvestingTheSea/FishingIndustry/8/en 13 http://www.cato.org/pubs/ 12

Photo: Credit Suisse Credit Photo: and the total allowable catch for some fish has even increased. regulation/reg20n3f.html

Credit Suisse Bulletin 3/08 40 Economy Iceland Stormy Times for Iceland

GDP Krónur

Credit Suisse Bulletin 3/08 Economy Iceland 41

Iceland has experienced something of a rollercoaster journey in recent years. In 2005 and 2006 in particular, the island’s booming economy led to a dramatic surge not just in prosperity and consumer spending, but also in demand on the part of foreign investors for Icelandic stocks and bonds. The international mortgage crisis has brought a premature and painful end to the party.

Text: Sven Schubert, FX Research, and Elena Guglielmin, Credit Research, Zurich

Iceland is one of the richest nations on the cent, was driven by strong demand coupled factors also contributed to the boom in con- planet if one takes gross domestic product with an extremely heated labor market, with sumption. High levels of liquidity in the inter- (GDP) per capita as a yardstick. If the Human the unemployment rate falling below 4 per- national ﬁ nancial markets and the unbridled Development Report is to be believed, Iceland cent. Even the strong inflow of foreign labor appetite of international investors led to even has the world’s highest stand ard of living, proved unable to defuse the situation, as the strong demand for Icelandic stocks and ahead of Sweden and Norway. The country’s growth in numbers of employed likewise de- bonds. Higher-risk investments were par- bond ratings, be they government bonds or veloped dramatically. ticularly sought after, as these came with an corporate bonds, are on a par with those of its attractive risk premium. Green Light for Spending industrialized neighbors. Viewed in this light, In line with the boom in international there can be no doubt that Iceland is an indus- Strong rises in real estate prices – driven by stock markets, the local OMX ICEX 15 rose trialized nation. low mortgage rates – likewise supported by a juicy 500 percent between 2003 and Other conclusions might be drawn from spending fueled by borrowing against an- the outbreak of the subprime crisis. Thanks the fate of Icelandic investments in recent ticipated future asset gains. In addition to to the increasing wealth that this brought to years, however. Since the subprime crisis high levels of spending, investment also Icelanders with holdings in domestic equi- broke in July 2007, only the Turkmenistani enjoyed strong momentum. A number of ties, this development also proved conducive manat, the Guinean franc and the Sey- breathtaking investment projects in the alu- to stronger spending. chelles rupee have performed more dismally minum and energy sector were approved Privatization and the associated strong than the Icelandic krona. Since then, the by the government, despite criticism from expansion of the Icelandic banking sector krona has depreciated by a whopping 21 environmentalists. Furthermore, external also led to significantly improved access > percent against the dollar. The picture looks even worse when one considers that the dollar has itself lost significant value against Volatile Krona the majority of the world’s currencies – with The volatility of the Icelandic krona was over the past years greater than those of many emerging market currencies. Source: Bloomberg, Credit Suisse around 15 percent against the euro and the Swiss franc. Volatility in % Since the turn of the millennium, the Ice- 30 landic economy has undergone a rollercoaster journey. The average growth rate of around 25 Icelandic bank turmoil Turkey crisis Brazil crisis 4 percent annually may be high, but domes- Iceland rating downgrade tic demand has been extremely volatile, and 20 has experienced two phases of contraction 15 (2001 and 2007). The increased volatility is the result of a strong rise in macroeconomic 10 imbalances. The volatility of the exchange rate has been as extreme as anything, and in 5 the last few years has even been significantly higher than the currencies of many emerg- 0 ing markets. The Icelandic economic boom of 00 01 02 03 04 05 0607 08

2004/2005, which saw the country gener- Central Eastern Europe average Latin American average Icelandic Krona G10 average ate annual growth rates in excess of 7 per-

Credit Suisse Bulletin 3/08 42 Economy Iceland

Iceland’s Banks The unfavorable market conditions of the last gered first and foremost by macroeconomic 12 months have had an even greater negative impact on Iceland’s imbalances that make the currency highly banks than on their international counterparts. This is explained susceptible to external shocks. on the one hand by the overwhelming orientation of their structure The high balance of payments deficit, toward large client business, but also by pessimistic market currently standing at 15 percent, is being sentiment. The banking system in Iceland is characterized by its predominantly financed by so-called port- strong concentration: The assets of the three largest commercial folio investments (equity and bond inflows). banks – Kaupthing, Glitnir, and Landsbanki – together make up These are subject to significantly greater almost 90 percent of the overall market volume. Yet the market for volatility than direct investments. While banking services is saturated, and there is no evidence until now portfolio investments can be rapidly con- of any consolidation taking place. The business model of the large verted into cash and react relatively sensi- banks is based predominantly on large client business. Trading tively to developments in international and income has declined over the last two quarters against a backdrop Icelandic financial markets, net direct in- of diffi cult market conditions. That said, the underlying earnings from vestments (NDIs) have a strategic invest- the core business of the three banks continue to show solid growth, ment objective. For example, majority stakes while all institutions have widened their investment bases. The quality by foreign investors in Icelandic companies of investments is solid, risks from subprime business and complex and “investments from scratch” both fall into packages negligible. At Kaupthing in particular, expansion abroad this category. This makes NDIs not so read- has enhanced revenue diversifi cation, making the institution well ily convertible into cash, which is why they protected from market fl uctuations. Moreover, Iceland’s banks are react less sensitively to temporary changes characterized by high cost effi ciency and a robust capital base. in financial market conditions. Liquidity – the decisive factor in large client business – is good to However, the catalyst for a renewed de- excellent for the three largest banks. Despite their healthy overall cline on the part of the Icelandic krona since situation, Iceland’s banks are susceptible to nervous reactions the beginning of 2008 has its roots above from the markets, above all the fear that the government might not all in the turbulence prevailing in the Icelan- be able to bail out these institutions in an emergency, given their dic banking sector. Foreign banks are now dominant size in the domestic economy. The mood has slightly demanding a significant risk premium for improved recently, and at the same time Iceland’s government has loans to Icelandic banks, which has led to a started to react in a more forward-looking way to the imbalances shrinking of the interest rate differential in the domestic economy. between Iceland and abroad.

Making the Krona More Attractive

If the Icelandic krona is to be stabilized at its current level, further rate hikes could be to credit-financed spending for consumers. key interest rates by around 10 percent from necessary, perhaps even taking the key in- In particular, loans in foreign currency be- 2004 onward up to the current level of terest rate up to 20 percent. One positive came all the rage. Strong capital flows saw 15.5 percent, but the initial effect on credit aspect is the fact that Iceland’s central bank the krona appreciate by 27 percent between growth was limited, as mortgage lending has recently stocked up its foreign currency 2000 and 2005, leading to an improvement rates remained virtually constant over the reserves significantly. In addition, Scandi- in the financial situation of households with same period. This delay in the transmission navian central banks have provided Iceland’s foreign debt, something that in turn triggered mechanism is explained by the fact that central bank with lines of credit. This move a further rise in spending and an increase in mortgage rates are fixed in Iceland for sig- has certainly averted an even greater cor- real disposable income. nificantly longer periods than in many other rection to the krona. countries. In addition, the competition for However, it is the development of Ice- Heavy Impact of Subprime Crisis market share between private banks and the land’s banking sector that will be decisive In 2006 and 2007, Iceland’s economy government’s Housing Financing Fund kept for the recovery of the currency. The central showed signs of overheating, and inflation borrowing rates low. bank needs to further improve the liquidity rose to more than nine percent. In addition, Against a backdrop of excessive liquidity situation of the country’s banks. However, the economy saw an increase in macroeco- in the international financial markets in the we also see two other prerequisites for a nomic imbalances. The high level of spend- middle of the decade and high risk appetite sustainable appreciation of the Icelandic ing and the major investment projects, to- on the part of international investors, financ- krona: first, an end to the mortgage crisis gether with a low national savings ratio, led ing the balance of payments deficit initially that has so weighed on the financial mar- to a strong increase in imports and a grow- proved relatively simple. However, the sub- kets, and second, for Iceland’s economy ing balance of payments deficit that had to prime crisis changed Iceland’s circum- to be subject to a persistently restrictive be financed in the international financial stances greatly, putting the Icelandic krona monetary policy that will further reduce markets. At the end of 2006, the deficit had and the banking sector under severe pres- macroeconomic imbalances. This constel- reached a dramatic 25 percent of annual sure. The Icelandic krona has experienced lation is unlikely to come to pass before GDP. Iceland’s central bank reacted, raising a huge rise in volatility in recent years, trig- 2009 or 2010. <

Credit Suisse Bulletin 3/08 Bulletin plus – The Booklet in a Booklet On Classical Music

Classical music has played a key role in Credit Suisse’s sponsorship activities for about 25 years. In Switzerland, Credit Suisse works in partnership with the major orchestras, institutions and festivals, with a special emphasis on promoting young talent. Since 2006, this strategy has successfully been implemented on a global basis with the Salzburg Festival, the New York Philharmonic and the Bolshoi Theatre. “Bulletin plus – Classical Music” provides an overview of what’s happening on the classical music front for the summer of 2008. 44 Economy Infl ation Global Infl ation Is On the Rise You’ve probably noticed it: Filling your tank or buying heating oil now costs much more than it did a few months ago. In many countries, necessities, such as food, are becoming more costly. This is refl ected in infl ation numbers, which have globally been on the rise. This trend also comes at a cost.

Europe China +6% +22.1%

Text: Marcel Thieliant, Research Analyst, Zurich

Rising food and energy prices reflect devel- Inflation rates are significantly higher in tors, such as the rent of the store and the opments on world markets and are the two emerging markets than in the rest of the wage of its employees, and on wages of key decisive driving forces behind higher world, partly due to the fact that emerging factory workers if the food is processed. inflation at the moment. While oil prices have market consumers spend a higher share of Wages and rents play a bigger role for the increased seven-fold since 2001, world their income for food than consumers in de- prices of food in industrialized countries, and market prices for food have almost doubled veloped markets. Chinese food prices were retail food prices have thus risen less as during the same period. As a result, inflation up 22.1 percent year-on-year (YoY) in April, global prices increased. has accelerated globally, but particularly compared with only 6 percent in the euro Speculation has been cited as a reason strongly in emerging countries such as area. This can be explained by the fact that for the sharp rise in food prices; however, its China or Brazil. retail food prices also depend on other fac- mainly fundamental factors are driving the

Credit Suisse Bulletin 3/08 Economy Inﬂ ation 45

increases. On the demand side, consumers billion dollars on gasoline in the first quarter, have also experienced low and stable infla- in emerging markets are changing their diets which is about 30 percent above the amount tion over the last years. Many will therefore along with their growing wealth. Average spent one year earlier. As a bigger share of tend to consider the current high inflation consumption of meat, whose production is household disposable income is being spent rates as a temporary phenomenon that will a very grain- and water-intensive process, on energy, less money is available for other entail a temporary decline in real incomes, has risen rapidly in emerging countries . purchases and this development is thus but that could fade relatively quickly. Moreover, the partly politically supported, dampening private consumption in many in- Hike in Food Prices Poses a Threat rising production of biofuels is creating addi- dustrialized countries. Rising inflation also tional demand. reduces corporate earnings if companies Consumers in emerging markets, in con- On the supply side, yields for several are unable to pass on higher input costs. trast, have often experienced periods of crops have stagnated, or even fallen, in re- Especially in the US, where domestic de- high inflation in the recent past and are cent years, par tly affected by climate chang- mand is weakening, companies are finding therefore probably afraid that these will rees. As a consequence, supply has lagged it difficult to increase prices. turn. Food accounts for a significant share behind the developments on the demand Another risk is that high inflation leads to of the consumption basket of poor consum- side, and inventories have decreased . higher inﬂ ation expectations and thus higher ers in emerging markets, and the sharp in- wages. If consumers see that they have to crease in food prices can thus turn into an Food and Energy Prices Drive Inflation pay more to fill up their tank or enjoy their existential threat. It is therefore likely that Historically, domestic food prices have not favorite dish, they might think that prices will workers in emerging markets will demand always followed global price swings. This is continue to rise further. Why is that a prob- wage increases much more aggressively partly due to regulatory distortions, such as lem? Because it could lead to higher wages, than workers in industrialized countries. subsidies and tariffs, and the resulting insu- and again, higher prices as firms protect In industrialized countries, many compa- lation of national food prices from develop- their profit margins and thus in the most ex- nies have increased prices of their products ments on world markets. The recent strong treme case create a wage-price spiral. as they face higher input costs, but most increase in global food prices was, however, There are several reasons why the risk of were unable to pass on costs increases associated with a significant rise in food in- more persistent inflation is higher in emerg- completely as demand weakens. In many flation in most countries. ing markets. Wages are still low and often emerging markets, in contrast, consumption The increase in oil prices can also to a there is a lack of qualified labor. Workers in remains strong and many companies are great extent be explained by the still very industrialized countries, in contrast, still face working at their capacity limit. They have robust economic activity in many emerging the threat of international competition and therefore greater incentives and possibilities markets even as the US and other industrial- this should limit their wage demands. They to increase their prices. < ized countries slow. Strong demand from emerging countries despite sharply rising prices is partly due to the fact that many developing countries have tried to limit do- Emerging Markets Take the Brunt mestic prices with subsidies to shield their Higher food prices pose greater risks to emerging markets as the population economies from developments on interna- is poorer, and food accounts for a larger share of expenditures. tional energy markets. In China, for example, Source: World Bank, national sources, Credit Suisse gasoline prices have only doubled since 2000, while they have almost tripled in the Philippines US. However, as oil prices continue to rise, Vietnam* the fiscal burden of these measures is mounting. Indonesia raised domestic fuel Thailand* prices by 28.7 percent, and India is planning China to raise prices as well. Oil demand should weaken as consumers are facing prices Malaysia* closer to the world market instead of artifi- Indonesia cially low domestic prices; and this should help to contain demand growth and limit fur- South Africa ther price rises in the near term. Brazil On the other hand as with food, concerns about supply have increased recently. The Euro area International Energy Agency (IEA) has indi- India cated that it will revise down its long-term supply forecasts, and this has led to a sharp USA repricing of long-term price expectations in 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% recent weeks. Rising inflation has already  Weight of food in the CPI  Population below 1 dollar in % of reduced spending power of consumers. US total population (*below 2%) consumers have, for example, spent 109

Credit Suisse Bulletin 3/08 46 Economy Digital Defl ation More for the Money With Digital Defl ation As most commodity prices are on the rise, the cost of perhaps the most important commodity, information, is plummeting. This phenomenon is called digital defl ation, a development that is distinctive to defl ation technologies.

Text: Steven Soranno, research analyst, New York

A basic lesson of economics tells us prices preted, leading to mistargeted monetary price of computing (semiconductor) power gravitate towards marginal cost in competi- policy and higher economic “bubble risk.” declines by roughly 50 percent every 18 tive markets. There is no more transparent, Digital bits are to the economy what months and it has held strikingly valid. competitive economic platform than the nano particles are to physics. When matter However, the price of information storage Internet, and the marginal cost of digital shrinks in size below the “nano” threshold, and transfer/bandwidth is declining at a items is virtually zero. Markets that even the basic rules of physics change. Tradi- much faster pace. touch digitization often have their business tional economic law dictates that compa- Digital Disruption models upended and their traditional pricing nies can charge higher prices as products structures reinvented. Digital technologies improve, because consumers assign greater Let’s look at one recent example: The are permeating the economy with efficien- value to them. However, items touched by iPhone debuted in 2007 at 599 dollars. A cies that are difficult to quantify, requiring digitization typically decrease in price as substantially enhanced model followed in new approaches for a new paradigm. Tradi- they improve. One of the fundamental rules 2008 – at one-third of the price. Did Apple

tional inflation measures can be misinter- of technology, Moore’s Law, holds that the drastically misprice the initial iPhone? No. Apple Photo:

Credit Suisse Bulletin 3/08 Economy Digital Deﬂ ation 47

It essentially invented a new product cate- tia, rather than technological viability. We efficiency to the economic system (less gory with the initial device, selling it in the expect organizational inertia to inevitably waste, greater productivity and fewer dupli- telephone market but reinventing and es- yield to efficiency and competitive impera- cate purchases), enhancing total economic sentially creating the mobile data market. In tives, par ticularly as more of the “digital gen- value at lower prices. the new market, value is generated through eration” enter the workforce. Take the example of two items with the the services delivered over the digital net- same price, let’s say 10 dollars. One was Impacts of the Information Revolution work. Apple is seeking to spread the device purchased at a local store in the early 1990s, as cheaply as possible to many people all Before the Internet, branding was largely the other over the Internet today. The first over the world. Sell the high-margin razor determined by advertising on mass market item has 65 percent utility (or usefulness) to blades and give the low-margin razors away media, such as television, and controlling the consumer, with the remaining 35 percent for free. Gillette’s razor blades are Apple’s the points of end-market distribution, such representing inefficiency generated by only and Research in Motion’s corporate e-mail, as commanding the premium shelf space at having a few products available from which advertising, gaming, etc. The iPhone is just Wal-Mart. In the age of social networking to choose at the local stores and by the im- one example of digital disruption, in which and Amazon’s customer product reviews, age marketers creating a perceived useful- established industries are being reinvented consumers have ready access to informa- ness that was higher than the true useful- by use of digital technologies. Prices in tion about products’ true value, rather than ness. The other product has an 80 percent those industries are plummeting, and eco- relying on a “value image” marketers would usefulness factor, with less waste because nomic value generation is becoming vastly like to shape. In their own living rooms, con- the consumers had a large buffet of products more efficient. Declining prices does not sumers now have access to a far greater from which to choose and could easily read mean companies will become unprofitable. product choice buffet than they could have product reviews from prior purchasers on the In an information economy, output is di- imagined a decade ago. With declining value Internet. Traditional inflation measures see rectly linked to the rate at which information of stores’ traditional marketing tools, stores no cost differences between the two. But is shared, or transferred. Vastly increased must increasingly use price, particularly as product one effectively cost 1. 67 dollar per information transfer rates greatly enhance the Internet generation accumulates more unit of utility, and product 2 cost 1. 25 dollars idea generation, thought development and of the global wealth. In less than five min- per unit of utility, which is about 25 percent innovation, helping improve global economic utes, consumers can now do more effective less. Traditional inflation measures do not productivity. price comparison shopping than they could catch the underlying effects. While emerging market demand funda- in five days several years ago. This revolu- Digitization’s impact on the global eco- mentals are pressuring the existing global tion of information availability increases the nomic system is varied and multi-dimen- economic infrastructure, the global infra- power of the consumer versus the corpora- sional. As this system adapts to a funda- structure’s strengthening digital foundation tion, placing higher importance on consumer- mentally new paradigm, its impact on infla- is reducing underlying inflationary pressures. oriented factors such as price and delivered tion should become more apparent. Those For instance, digitization revolutionizes the value. These attributes also enable consum- who gain an understanding of it can develop education dilemma, helping spread educa- ers to purchase products with higher indian important advantage as the new para- tion to geographies that previously could not vidual usefulness, which adds even further digm evolves. < support a robust system. Flat screens and broadband connections that beam lessons from teachers in South Africa and the UK Price Comparison of Physical and Digitized Items into classrooms in Ethiopia are just one ex- Physical items that cost money are now available for free in their digitized version, ample. While emerging market development with greatly enhanced capabilities. Source: Credit Suisse raises global labor demand, pushing wages Physical Item That Costs Money Digitized Free Version up, an expanded global educational infra- Photo albums Photobucket structure helps increase supply. Increased Calendars iCal labor supply combined with higher organizational productivity (enabled by digitization) Movies/shows YouTube should help the global economy become Telephone Skype vastly more productive as labor supply/de- Mail/letters/stationery Yahoo! Mail mand equation comes back into balance. Pages Adobe Acrobat Telepresence technologies such as video/ Typewriters AbiWord virtual meetings are spreading rapidly, help- Microsoft Office Google Docs ing reduce travel costs (and carbon emis- Maps Google Maps sions) while increasing information transfer Shipping Amazon free shipping rates. Many Fortune 500 companies have Record players Microsoft Media Player begun virtual office initiatives, which even- Newspapers CNN Website tually seek to reduce overhead costs while Books pagebypagebooks.com increasing information sharing among em- Music Pandora.com ployees. The prime obstacle to these initia- Video games Candystand.com tives has typically been organizational iner-

Credit Suisse Bulletin 3/08 48 Economy Reading Up

Blogging Why should businesses, big or small, consider blogging as part of their com- for Business munications strategy? You’ll have to read “Blogging for Business” to get the full Everything You Need to Know story. The gist of it is that blogging is just another communications tool, such as and Why You Should Care print, audio or video. However, the point of starting a blog isn’t just to jump on the blogging bandwagon. It should be done with purpose, the authors stress. “The By Shel Holtz and best business blogs were implemented in support of some business goal. Deter- Ted Demopoulos Paperback mining the kind of blogs you might consider begins with a review of your goals and 247 pages issues in order to identify where your opportunities may lie. One kind of blog you ISBN -13 : 9 78 -1419 5 3 6 4 5 8 should never launch is the ‘let’s launch a blog’ blog. Any company blog should be viewed as a part of the company’s communication strategy.” Companies including Sun Microsystems, IBM and Boeing have made blogging part of their business communication strategy for several years. In May 2008, Jonathan Schwartz, CEO of Sun Microsystems, was asked why he “wastes” so much time on his blog. His answer on http://blogs.sun.com/jonathan was the following: “Because I believe in providing clarity surrounding our strategy and operations – and not just once a year in the annual report.” If you’re considering adding a blog to your own communication strategy, this book provides practical advice for understanding how blogs work, how to create, promote and monitor business blogs, and how to measure the results. With their almost conversational approach to writing, the authors have managed to make even the more technical aspects of the book understandable and interesting in order to propel even more companies into the blogosphere. mb

Blue Ocean Strategy Sail your business into new markets with less competition and greater profi tability, How to Create Uncontested with the help of the breakthrough book, “Blue Ocean Strategy.” It provides an or- Market Space and Make ganized framework for identifying and implementing out-of-the-box “blue ocean the Competition Irrelevant strategies” in all industries. Written by W. Chan Kim and Renée Mauborgne, the book is energized with fresh research about the impact of innovative ideas on old By W. Chan Kim and Renée Mauborgne industries. As companies shape their strategies and compete in a fi xed market, Hardcover gaining the advantage over others, a cutthroat competition emerges that bloodies 256 pages the waters, creating a “red ocean” marred by losses in market share, profi ts and ISBN-13: 978-1591396192 growth. The corporate quest should be to develop a blue ocean strategy.

© getAbstract. You’ll fi nd a fi ve- The compelling business examples alone are worth launching into this book. page summary of this book on Managers can easily navigate the rules and principles right to the authors’ key www.getabstract.com. strategic advice, and fi nd detailed examples of how innovators created their own blue ocean strategy. This work is essential to any strategist or entrepreneur who wants to move out of intensively competitive shark-infested waters and into the relative tranquility of the open blue ocean. © getAbstract

Way of the Turtle This trading-room memoir harks back to a group of novices that experts recruited The Secret Methods That in the 1980s and – to fulfi ll a bet – trained to be traders. The training worked, Turned Ordinary People Into according to the most successful student in the group, author Curtis M. Faith. Legendary Traders His memoir of this experience promises what any capitalist would love to possess: the secret to making money in volatile markets. Alas, Faith tells us, there actually By Curtis M. Faith Hardcover is no secret. 288 pages What successful traders do is analyze markets to fi nd an edge, then work hard ISBN-13: 9780071486644 at remaining disciplined enough to pursue the edge they found, even when their hearts and guts try to overrule their brains. That’s the catch: stamina. In spite of © getAbstract. You’ll fi nd a fi ve- page summary of this book on constant references to Donchian channels and Sharpe ratios, Faith assures read- www.getabstract.com. ers that trading isn’t a matter of using secret formulas and waving magic wands, but rather is a matter of applying time-tested wisdom. This trader’s tome is intrigu- ing because it lets you inside the mind of someone who made 30 million dollars, thus it’s no wonder that he tends toward being self-congratulatory, though his an- ecdotes are entertaining. This book is recommended to those who want to learn more about how the experts try to beat the odds. © getAbstract

Credit Suisse Bulletin 3/08 Credit Suisse Sponsorship 49

Sponsorship Information From the World of Credit Suisse

Overview 50_Partnership With London’s National Gallery 52_Swiss Summer of Art Beckons 53_Art & Entrepreneurship 54_Relive Live at Sunset

tions for the U16 and U18 categories – with five qualifying tour- Credit Suisse naments and a final tournament at the end of October – have been Music in the running under the Credit Suisse Mountains Junior Tour banner since 2006. “Competition experience is enor- The summer of 2008 has mously important. By enabling boys and girls to perform under produced some cultural pressure right from an early stage, surprises. The Estival Jazz in the Credit Suisse Junior Tour Ticino celebrated a notable makes a major contribution to 30th birthday, while Graziella promoting young talent,” said Contratto became the Promoting Young Film Sandra Caviezel, head of Sports Another Play-Off Finish in first woman to conduct at the Talents Under the leadership of Sponsorship at Credit Suisse Crans-Montana? September Festival d’Opéra Avenches. director Karl Spoerri, the fourth Private Banking, at the discus- 4–7 once again sees the Omega And – fortunately for culture Zurich Film Festival will be held sions to mark Swiss Golf Day at European Masters in Crans- fans – the summer is still from September 25 through the Breitenloo Golf Club. Special Montana. The tee-off list had not far from over. At the Davos October 5. This time, 24 movies em phasis is also given to sup- yet been finalized as we went Festival – also supported by in the “Best Film,” “Best Docu- porting players as they make the to print, but there can be no doubt Credit Suisse (indeed going mentary Film” and “Best Debut” progression from amateur to that there will be another high- categories will be battling it professional status. That is the caliber line-up in Switzerland’s back as far as 1986) – out for the “Golden Eye” along aim of the Credit Suisse Chal- most important golf tournament. numerous top young talents with director and promotion lenge, which has been held at the It may prove to be just as exciting from the world of classical prizes worth 200,000 Swiss Wylihof Golf Club since 2006. tg as in 2007, when Australian music will assemble from francs in total. Some things are Brett Rumford just managed to July 26 through August 9. It’s still in the planning, such as win the title in the play-off against a unique festival, providing who will succeed Albert S. Ruddy Will Sir Robert Charles Win Englishman Philip Archer. Bradley an opportunity to hear upcom- as the new chairman of the jury. in Bad Ragaz? The European Dredge of Wales came in third ing talents in an intimate Who will follow in the footsteps tour of senior professional golf- just one stroke behind them. tg setting. Many of whom – by of Stephen Frears (2006) ers would be unthinkable without www.omegaeuropeanmasters.com the way – go on to perform on and Oliver Stone (2007) and pick the Bad Ragaz PGA Seniors the world’s biggest stages. up the “A Tribute to” accolade? Open. Battling it out for the title The steady rise in attendance This year also marks the first from August 8–10 will be all Historic Win Kindles Hopes “Golden Icon Award” for actors or the winners of recent years: Carl At the start of this year’s Formula figures, combined with the movie-makers. schi Mason (England; 2007 winner), One season, few would have be- fact that many first-timers www.zurichﬁ lmfestival.org Juan Quiros (Spain; 2006 win- lieved that the aim of BMW Motor become repeat visitors, says ner), Terry Gale (Australia, 2005 Racing Director Mario Theissen – a lot about the exceptional winner), and Horacio Carbonetti a maiden win for the BMW Sauber quality of this festival. It’s Promoting Young Golf (Argentina, 2003 and 2004 Team – was a realistic one. where sophistication and in- Talent Credit Suisse has been winner). Two stars from different But it’s been a case of one podium formality go hand in hand, supporting Swiss golf for many generations are also among the finish after another. And the and musical tradition comes years: the Swiss Golf Foundation top favorites: 51-year-old Italian amazing one-two win by Robert alive: All these reasons make (SGF) since 1993, Association Ryder Cup hero Costantino Kubica and Nick Heidfeld on a trip to Davos an attractive Suisse de Golf (ASG) since 1999, Rocca, who came second last June 8 at Montreal’s Circuit Gilles musical diversion. Since and Swiss PGA – the umbrella year, along with 72-year-old New Villeneuve has finally convinced 2007, the Davos Festival has organization for Swiss golf profes- Zealander Sir Robert Charles, the doubters. The victory also sionals – since 2005. All ASG who this year sensationally made meant that Kubica temporarily also been under new artis- golf clubs benefit from the promo- the cut on the regular tour in the took Hamilton’s position at the top tic direction. But the director tion of young talent in a myriad New Zealand Open. tg of the drivers’ leaderboard. isn’t exactly an unknown: of ways. At the Credit Suisse Could BMW Sauber actually be in It’s none other than Junior Golf Academies, young the running for the World Cham- Graziella Contratto. nm people can receive intensive train- pionship title? schi ing from professional instructors www.credit-suisse.com/f1. at two courses for three-and-a- half days free of charge. What’s

Photos: Niklaus Spoerri, remote.ch | Olivier Maire, Photopress more, the young talent competi-

Credit Suisse Bulletin 3/08 50 Credit Suisse Sponsorship

Historical Partnership Supporting the Art of Discovery: Credit Suisse Joins Forces With the National Gallery

In May, Credit Suisse and the National Gallery formed a major partnership – the ﬁ rst of its kind for the Gallery. The partnership will provide vital funding for a landmark exhibition each year for the next three years, beginning with “Radical Light: Italy’s Divisionist Painters,” which opened on June 18. Nicholas Penny, director of the Gallery, shares his insights on the deal and the exhibition.

Bulletin: Why is this partnership with Credit What other aspects of this relationship What would you say are the benefits Suisse important to the National Gallery? are important to the Gallery? for Credit Suisse? Nicholas Penny: To begin, I think this type of I think the biggest benefi t for us in the long- I often ask myself that. (laughs) It’s one of partnership is quite unusual among British term will be learning more from Credit Suisse those relationships where the recipient is museums. This is a very desirable collabora- about gaining a global perspective on things. eternally dazzled. But the truth is that they tion for a museum or gallery because it means We really don’t have that and we can learn do have some advantages. Obviously, the you don’t have to be constantly worrying about how to better work with other institu- name is given quite a lot of extra light by be- about your support. It gives us so much more tions, especially in Asia, which is important ing on much of the publicity for the Gallery. freedom, which is very important in creative because more visitors from China and India And, the National Gallery is also a good name industries. And, much of a director’s time is are coming to London. Credit Suisse has to be associated with. spent looking for support, and can cut experience, as they supported the New York When Credit Suisse entertain people in tremendously into the time you could actu- Philharmonic in touring Asia in February this the Gallery, which is a benefi t of the partner- ally be devoting to planning exhibitions and year. I’m not thinking of sending half of the ship, then they are telling them how closely controlling quality. Gallery to China, but I’m thinking more about associated they are with us, and they are say- Who made the first step? partnerships with institutions in Asia. ing: “We have made a major contribution to Actually, we approached Credit Suisse be- The National Gallery receives support the cultural life of your country.” I know that cause they had already sponsored the exhibi- from the government, so why is corporate Credit Suisse is very careful with community tion, “Raphael: From Urbino to Rome” in 2004. sponsorship so important? relations in London, which shows that they It seemed appropriate to approach them on The truth about the National Gallery is that it belong and that they have some sense of this exhibition about Italian Divisionism as has always been a public private partnership. commitment to the long-term well-being of we knew that Credit Suisse is a partner of There was a private public deal struck from the communities in where they are based. the Kunsthaus Zurich, where the exhibition the very start. It was private individuals who Let’s turn to the “Radical Light” exhibit. will be shown later in the year. They said to believed in the need of a national gallery, be- How would you describe it? us: “Let’s forget this particular exhibition for ing aware of the Louvre and the great suc- It’s a great exhibition because it’s about a type the moment. We are interested in fi nding a cess of the Musée Napoléon. The National of art that is almost completely unknown. Art gallery with which we can be in a partner- Gallery was a concession by parliament to historians know about Divisionism, but many ship.” We were a bit taken aback, and of a small pressure group of individuals who people who have studied the history of art in course very pleased indeed to hear this. As donated their works of art. That was in 1824. Britain have never seen much of this stuff. part of this three - year deal, Credit Suisse will The collection grew through purchases and However, it’s not one of those exhibitions that sponsor a series of exhibitions and the fi rst donations and in 1831 was moved to the cur- is going to be a sure fi re success because it is, in fact, “Radical Light.” rent building in Trafalgar Square. It’s impor- isn’t well-known. It has an element of discov- The partnership doesn’t stop at tant to note the Gallery is run through trust- ery about it, and I believe that although the exhibitions, does it? ees, and there is no direct interference by paintings are rather melancholic, haunting and The principal purpose is sponsorship of exhi- government. Another important fact that spooky, they are also very powerful. This is bitions and also to support our well-estab- many people don’t know is that about a third serious art that people will have to invest some lished education program. Credit Suisse will of the contents of the gallery were acquired emotion into. The risk is that we are showing provide special educational projects for by gift or bequest. In fact, if you concentrate this in an age where people are looking for schools and community organizations they al- on the works of just some of the greatest easy gratifi cation. ready support. The deal also includes an im- painters, the ratio is even higher. If it isn’t that easy to digest, why do portant aspect of our general public outreach When did the Gallery begin to seek cor- this exhibition? and that is our late night opening, which we porate sponsorship? On a certain level, exhibitions should be about will do on Friday nights. This is an essential It was in 1991, when the Sainsbury Wing giving you something new. That discovery part of our offer, as it attracts a different, opened, giving us a fairly large space to show can be showing you a new side of an artist younger type of public to the Gallery. bigger exhibitions. everyone already knows and loves, or show-

Credit Suisse Bulletin 3/08 Credit Suisse Sponsorship 51

ing people aspects of art they didn’t know. That is part of our mission. If the Gallery were just about showing paintings people know and love, we wouldn’t have a lot of the paintings that people know and love today. For example, many of the paintings the Gallery bought in the 19th century were of minority interest and didn’t meet popular taste. People often forget this aspect when they think about the creation of major collections. Can you explain a bit more about the Divisionism movement? Is it a movement? It’s a movement. How does one deﬁ ne a movement in painting? The most obvious type of movement is when a group of artists actually agree that they all belong to the same group and agree to call themselves something. There are also more loosely associated groups of artists whose names are often given to them by critics. The Impressionists are such an example. With the Divisionists it was the same. They mostly knew each other and they shared ideas and images. People will immediately see that these paintings have a lot in common. One of the most obvious is the application of the paint in a variety of dots and strokes, related to French pointillism. The works of the National Gallery end in the early 20th century, so this is a really good exhibition as it occupies some of that disput- ed terrain, where you don’t know whether the art is important because it looks forward to futurism and modernism, or because it’s a

lery London culmination of lots of different types of realist paintings and paintings of nature. And given the name of the exhibition, I expect light is also an important element. I should have said from the beginning, that their great common interest is the depiction of light. The movement also sprang from research into optics and the physics of light.

It is often light that almost hurts, such as very Above “Morning,” by Vittore Grubicy de Dragon (1851–1920) is on loan from the Galleria d‘Arte bright sunlight; but also the light of dawn Moderna in Milan for the “Radical Light” exhibition. More than 60 paintings will be on display. when things are difﬁ cult to distinguish. It’s Below left The National Gallery in London’s Trafalgar Square. Below right Director Nicholas never about easy light. Some of the paintings Penny has high hopes for the education department of the Gallery. Penny took up his post in March of this year. have quite a disturbing optical effect, almost as if they are looking at you, rather than you looking at them. What are your plans for the museum? For the moment I’m trying to concentrate on stopping things from happening that shouldn’t. Radical Light: Italy’s Divisionist Painters I have many plans for the Gallery. As I am a Sainsbury Wing, June 18 – Sept. 7, 2008: rather serious scholar, or a scholarly curator Daily from 10 a.m. – 6 p.m., who has become a director, I’m very keen on on Wednesdays from 10 a.m. – 9 p.m. developing our educational work in order to www.nationalgallery.org.uk become a center for higher and further study The exhibition is organized by the National

Photos: Galleria d’Arte Moderna, Milano(Gam © Comune 1718) di Milano. All rights reserved | Alexander Sauer on | The National Gal the subject of art history. Michèle Bodmer Gallery, London, and the Kunsthaus Zurich.

Credit Suisse Bulletin 3/08 52 Credit Suisse Sponsorship

Summer in Switzerland’s Art Museums Magical Worlds of Color and Shadow

The coolness and stillness inside the museums are good enough reasons to go in this hot summer. Another is to discover the “Secret of Switzerland.” Whether you decide to visit the “Enigma Helvetia” exhibition in Lugano or choose an encounter with Ferdinand Hodler in Berne, with Balthus in Martigny or with Segantini in St. Moritz, a whole range of exciting works await you.

According to Ferdinand Hodler, a work of art makes public a newly compiled order of things and is beautiful by virtue of the idea of the whole that it unveils. He went on: “The whole magical world of color and shadow is derived from light.” Even for those who think they know Hodler fairly well, a visit to the exhibition “Fer- dinand Hodler – a symbolist vision” at the Kunstmuseum in Berne will make you see his standard-setting portfolio in a completely new light and encourage you to appreciate his magical world all the more. Ferdinand Hodler is one of the most un- derrated Swiss artists. Among the general public, his image is still reduced to little more than that of a pugnacious patriot as seen by the intellectual resistance of the inter-war period. This exhibition, which runs until August 10, helps to underscore Hodler’s very individual and important contribution to European symbolism. Among the 150 works on show, the most notable are the symbolist masterpieces from the Kunstmuseum in Berne, which have been restored with the support of Léonard Gianadda, director of the Pierre Gianadda Foundation in Martigny.

Above Hodler. “Der Tag.” First version, 1899, oil on canvas. (Kunstmuseum, Berne) A Whole Spectrum of Works on Display Below left Balthus. “La Toilette de Cathy,” 1933, oil on canvas. (Pompidou Centre, Paris) This latter collection makes Valais, too, a Below right Giovanni Segantini, “Mittag in den Alpen,” 1891, oil on canvas. (Segantini Museum) worthwhile destination for art lovers: The Pierre Gianadda Foundation is marking the multifaceted approach to help visitors gain The museum opened in St. Moritz on Septem- 100th birthday of the French-Polish artist as much insight as possible into “the art, cus- ber 28, 1908, exactly nine years to the day Balthus, who died in 2001, with a retrospec- toms, and myths of modern Switzerland.” after Segantini’s death. 2008 marks the mu- tive in his honor. The whole spectrum of his The Segantini Museum is celebrating seum’s 100th anniversary. Andreas Schiendorfer work is on display until November 23, includ- the artist’s 150th birthday with a special ing portraits and landscapes. exhibition, running until September 14, en- Credit Suisse has supported the Museo d’Arte of the City of Lugano since 1992, the Pierre “Enigma Helvetia” is the ﬁ rst exhibition titled “Segantini’s Maid: Muse and Model.” Gianadda Foundation in Martigny since 1996 produced jointly by the municipal and can- The exhibition centers around the Segantini and the Kunstmuseum in Berne since 2005. tonal museums of art in Lugano. It offers an family’s nanny Barbara Uffer (1873–1935), The Segantini exhibition is being partly funded

overview of art in Switzerland and uses a who features in many of the artist’s works. by the Credit Suisse Jubilee Foundation. Photos: Peter Lauri Photographie, Bern | Jean-Claude Planchet | Fredy Lochau, Foto Flury, Pontresina

Credit Suisse Bulletin 3/08 Credit Suisse Sponsorship 53

Art & Entrepreneurship Art for a Good Cause

Credit Suisse launched its Art & Entre- preneurship exhibition, featuring a new generation of 19 artists from around the globe, in March 2008. The artwork will be auctioned off – half of the proceeds will go to the nonproﬁ t organization “Room to Read,” the rest to the artists.

Credit Suisse welcomed more than 100 guests to a gala event on June 23 at the Chelsea Art Museum to celebrate the unveiling of the “Art & Entrepreneurship” exhibition in New York. The exhibition showcased more than 40 works from 19 artists, who had the task of translating the fundamentals of entrepreneurship into works of art. After its offi cial launch in Dubai, New York was the second major city to house the exhibition on its tour. It will move on to Berlin, Moscow, Geneva, Milan and London, where the artwork will be auctioned at Phillips de Pury & Company in November. Half of the proceeds will go to the artists; the rest to “Room to Read,” a non- profi t organization that provides educational access in developing countries. Participating artists focused on fi ve core values of entrepreneurship, defi ned through a Credit Suisse client survey: Vision, knowledge, network, family and social responsibility. The results range from video installa- tions to sculpture, mixed media art projects, oil paintings, watercolors and photography and refl ect the confl uence of art and entrepreneurship on a global scale. Above, from left to right Walter B. Kielholz with Carmen Mehta, Karlheinz Muhr and Zarin Mehta, “It was exciting to see how a committed executive director of the New York Philharmonic. Below Curator Michelle Nicol interviews artist Benjamin Sherry about his artwork titled “Self-Portrait at Zabrisky Point,” generation of young artists dealt with the 2007, Death Valley, California. brief, especially since critical thinking is not just the preserve of so-called autonomous zones; it is also possible and encouraged city’s prosperity and dynamism – entrepre- have to do as an artist and as an entrepreneur within the framework of a defi ned exhibition neurs and artists.” Anthony DeChellis, head alike,” said Pretorius. project,” said the curator Michelle Nicol. of Private Banking Americas, co-hosted the Private Banking USA hosted more events event. “The exhibit’s focus on entrepreneur- during the week to provide clients and guests Honoring Creativity in the Arts Credit ship and innovation perfectly refl ects the from Credit Suisse’s Young Investors Pro- Suisse Chairman Walter B. Kielholz said at ethos and DNA of Credit Suisse. It is exciting gram insight into the value of collecting and the gala, “It comes as no surprise that the tour to see how these artists interpret entrepre- investing in the arts. Phil Leary runs through New York, the global fi nancial neurship in their work,” he explained. capital and an international city known for its Four of the artists, including André Preto- More information is available at: rich cultural heritage and affi nity for the arts. rius, attended the gala. “In response to entre- https://artandentrepreneurship.credit-suisse. In choosing New York, we pay homage to preneurial values, I created a painting about com/index.php

Photos: Katharine Andriotis those who are the driving force behind the seizing the moment. That is something you www.roomtoread.org

Credit Suisse Bulletin 3/08 54 Credit Suisse Sponsorship

Live at Sunset Masthead Stars Shine Above the City of Zurich Publisher Credit Suisse The Live at Sunset concert series this summer not only offered an attractive all- P.O. Box 2 star program, but also took place at a new venue. The stage was set from CH-8070 Zurich telephone +41 44 333 11 11 July 9–20 in the hills above the city of Zurich at the famous Hotel Dolder’s 6,000- fax +41 44 332 55 55

square-meter outdoor ice rink complex, surrounded by a wooded countryside. Editors Daniel Huber (editor-in-chief) (dhu), Michèle Bodmer (English project lead), Dorothée Enskog (de), Regula Gerber (rg), Mandana Razavi (mar), Andreas Schiendorfer (schi)

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Contributors to this issue Marcus Balogh (ba), Joy Bolli (jbo), Ute Eberle, Christian Etzensperger, Peter Hossli, Giles Keating, Phil Leary, Michael Krobath (mk), Brendan Maton, Claude Maurer, Anja Papp, Ingo Petz, Matthew Rees, Sven Schubert, Urs Schwarz, Rob Scott, Steven Soranno, Beat Stauffer, Cornelia Stauffer, Marcel Thieliant, Andreas Thomann (ath), Andreas Walker

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Editorial committee René Buholzer (head of Public Policy), Monika Dunant (head Mick Hucknall, of Simply Red fame, decided to do something different and take a sojourn from of Communications Private Banking), Urs P. Gauch (head of the band to produce “Tribute To Bobby.” This collection of soul classics was originally recorded Corporate Clients Switzerland), Fritz Gutbrodt (head of Chairman’s Ofﬁ ce), Angelika Jahn (Investment Services & by the legendary Bobby “Blue” Bland, a vocalist who inﬂ uenced Hucknall’s singing style. Products), Hubert Lienhard (Asset Management Distribution Services), Andrés Luther (head of Group Communications), Charles Naylor (head of Corporate Communications), This summer’s concert series took place on star Kris Kristofferson, the Australian pop- Fritz Stahel (Credit Suisse Economic Research), Christian the thawed Dolder ice rink complex, close to rock band Crowded House, the jazz singer Vonesch (head of Private & Business Banking Aarau)

the newly reopened fi ve-star Hotel Dolder, as Diana Krall and the unstoppable Seal. Mick 114 th year of publication Zurich’s landmark Swiss National Museum Hucknall played R & B and soul classics by (4 issues per year in English and 5 issues per year in German, French and Italian). is undergoing renovations. The museum has Bobby “Blue” Bland, while the Jan Garbarek Reprinting of texts permitted with acknowledgement of source been home to the series since 1996, at the Group performed music which can be classi- (“Credit Suisse Bulletin”). time when Credit Suisse became its main fi ed somewhere in between jazz and world sponsor. Spacious lounges, bars and restau- music. Al Jarreau heated things up with his This publication is for information purposes only. It does not rants ensured that the legendary Live at Sun- new Love Songs album, while Spanish heart- constitute an offer and is not a recommendation by Credit Suisse to buy or sell securities. Indications of past performance set ambiance remained intact. throb Juanes worked his magic on the crowd. are no guarantee of a positive performance in the future. The analysis and conclusions contained in this publication were The musical spectrum ranged from rock The classical night presented the inimitable established by Credit Suisse and may already have been used for to jazz, country, blues and classical. Most of voices of Erkan Aki and Ruben Drole, accom- trans actions by Credit Suisse Group companies prior to being made known to clients of Credit Suisse. The opinions expressed the performers were international stars who panied by the Württemberg Philharmonic in this document are those of Credit Suisse at the time have made history in their own musical genre. Orchestra. Local musicians were also in the of going to press. (We reserve the right to make amendments.) Credit Suisse is a Swiss bank. The fi rst evening was no exception, with a lineup, with the Swiss rock group Züri West performance by powerful soul diva Diana who wowed their home public. Michèle Bodmer

Ross. Other performers included Nashville www.liveatsunset.ch Photo: Getty Images | Cédric Widmer

Credit Suisse Bulletin 3/08 Credit Suisse in Society 55

In Society Credit Suisse is convinced that corporate responsibility toward the environment and society at large is a key factor for economic success.

Overview 56_Science Festival 58_Children’s Storefront 59_Love Ride 60_Dragon Awards 61_News International

Doing something for the environment and personal health: In June, around 1,000 Credit Suisse employees participated in the Swiss-wide “bike to work” campaign by making all or part of their journey to work by bicycle. Kimchi Mazzetti-Nguyen in Geneva was one of those who took part. There’s no reason not to continue with the campaign on a voluntary basis. After all, the really sunny days are only just starting and the summer is ideal for cycling.

Credit Suisse Bulletin 3/08 56 Credit Suisse in Society Climate Change In Search of Radical Solutions Scientists and town planners attending the World Science Summit in New York, an event supported by Credit Suisse, demanded radical measures to counter the devastating consequences of climate change.

Text: Peter Hossli

Physicist Steven Chu, director of the Law- growth in his country was “not sustainable.” University. “Unfortunately, Brazil is already rence Berkeley National Laboratory, doesn’t If his country did not act quickly, the eco- taken.” Since 80 percent of the world’s ar- mince words: “If we fail to reverse climate nomic boom would cause irreparable dam- able land is already under cultivation, he change by 2050, then food production in age. This was doubtless one reason why wants to grow cabbage, potatoes, grapes the US will fall by 20 percent.” His conclu- the Chinese government has tasked British and wheat in the middle of our cities. He sion is based on the assumption that there engineering company Arup with building a reckons that by 2030, 80 percent of people will be too little snow on the mountains to model ecocity – known as Dongtan – on an will be living in cities. “And food should be provide California with the water it needs for island near Shanghai. Arup director Peter grown where people live,” says Despommier. irrigation. “America will starve.” Head presented the project and explained “This isn’t just possible, it’s essential. Nature There is no doubt, according to Nobel why every town and city in the world should can only recover if we leave it alone.” Laureate Chu, that forests will wither and take a lead from Dongtan. “100 years ago Space to Live and Work – Space to Farm coasts will be inundated. “A climate catas- there were eight hectares of land for every trophe can only be avoided with the help human being,” he said. “Now it’s two hect- For the past eight years he has been working of ground-breaking technology.” He was ares, but we behave as if this shift had with his students on the quirky concept of the first speaker in the discussion entitled never happened.” vertical farming. The idea is that glass sky- “Radical Science for a Warming Planet” at Head wants to complete the first phase scrapers would provide living and working the World Science Summit in New York at by 2010. Initially, 7,000 people will move to space and also act as enormous greenhous- the end of May. He illustrated the sense of Dongtan, where they will lead carbon-neutral es. He wants to use urban waste water to urgency among researchers by noting that lives. The city could then grow to accommo- irrigate the plants. Solar cells along the sky- many respected scientists are working non- date half a million people over the decades. scrapers would provide energy for the verti- stop on revolutionary ideas. It is located beside the sea, which means that cal farmyards. He hopes to construct the materials will be delivered by ship. Electric- first of these towers in Incheon near Seoul. Research Into Synthetic Plants ity in Dongtan will be generated by wind tur- It would be used to produce rice and straw- Chu showed how revolutionary solar cells bines and from biomass. The materials used berries as well as poultry and shrimps. could be produced with the help of nano- to build the houses will also be eco-friendly. The consensus in the debate was that the technology. Then he talked about geneti- Water will be recycled. There will be a superb driving force behind revolutionary projects is cally modified grasses which produce much public transport system, including cycle paths primarily the private sector and not the state. more complex sugars than conventional and footpaths. All cars will use fuel cells or “Investors have realized that they can use plants like corn and sugar cane and hence electri city. According to Head, this will make radical ideas to save the earth and also make more valuable biofuels. He reported on the city much quieter, which in turn will im- money,” said Head. efforts to develop synthetic plants which prove its inhabitants’ quality of life. Most of “Wouldn’t the climate problem solve itself,” produce energy via photosynthesis. In con- the food for the inhabitants of Dongtan is to asked a member of the audience, “if the clusion, Chu showed a photograph of the be grown in the immediate vicinity. price of a barrel of oil reached 250 dollars?” Earth taken from the Moon. “Isn’t the blue However, that’s not close enough for Dick- “That’s not going to be enough,” said Chu planet beautiful?” he asked. “It’s unique and son Despommier. “We need an area the size and reminded the audience of the oil shock irreplaceable.” of Brazil if we are going to feed the additional in the 1970s. As soon as prices fell, any This is a view shared by Zhou Shengxian, 3 billion people who will be alive in 2050,” sense of urgency was lost. “We’re in a crisis. China’s minister for Environmental Protec- said the professor of Public Health in Envi- But human beings as a species are good at

tion. He noted that the current rapid rate of ronmental Health Sciences at Columbia overcoming crises.” < Kurz Charly Photos:

Credit Suisse Bulletin 3/08 Credit Suisse in Society Climate Change 57

Peter Head is a director of Arup, the British engineering group. He is developing the Dongtan ecocity in China.

“The Future Is Green”

Bulletin: The idea of building a green model city from scratch seems realistic, but how do you make existing cities green? Peter Head: You need partnerships between the private and public sectors. The aim of these partnerships must be to reduce greenhouse gas emissions. We have created models in which towns and regions with 100,000 to 200,000 inhabitants can be made green over a period of 30 years. How exactly? The primary need is for improved public transport and zones for cyclists and pedestrians. Food production must be located in or near the cities. The building density of cities should be increased, so that more space becomes available for parks. The dream of a model city has been around for decades. Projects in Brazil, Mexico and Australia led to lifeless artiﬁ cial towns. How will you prevent that? Planned cities often lack authenticity. It’s vital to understand the culture, history and natural environment of a location and to integrate these into the planning process. This will produce a culturally dynamic city that grows organically. As a rule, it is the market that decides whether a city thrives or fails. The market can’t be planned. The plan of a model city must take the commercial value of the land into account. We are Above The World Science Summit, which is supported by Credit Suisse, was held at the end only creating a framework that will enable the of May in the venerable halls of Columbia University in New York. Below The eminent panel private sector to build in an environmentally discussing “Radical Science for a Warming Planet:” Steven Chu, director of the Lawrence friendly way. Efficient use of resources will be Berkeley National Laboratory; Peter Head, director of Arup, the British engineering group, Professor Dickson Despommier, Columbia University; Andy Karsner, Assistant Secretary the driver of economic growth in the future. The for Energy; Walter Isaacson, president and CEO of the Aspen Institute. future is green. Initiatives for greener towns and cities have emerged in Europe, Asia and the US. Why is this happening now? Investors have recognized the value of environmental protection as an investment opportunity. Many leading businesspeople see it as good business. In the past, people talked about corporate responsibility. Nowadays, it is the environment that has become a really tough business. hoss

Credit Suisse Bulletin 3/08 58 Credit Suisse in Society Volunteering

An Unconventional Harlem School The Children’s Storefront The Children’s Storefront, a tuition-free private school in New York City’s East Harlem district, is committed to providing its students with a solid education. The school’s 3.6-million-dollar annual operating budget is raised almost entirely through private contributions, and Credit Suisse is a major donor.

Text: Dorothée Enskog

The Children’s Storefront was originally set 430 hours of their time for the Children’s participating in an art project with kinder- up as a drop-in center for Harlem children Storefront, mainly in the form of tutoring. garten children for a local nursing home. back in 1966 by the poet Ned O’Gorman. The school’s mission is not only to pre- Bankers Making a Difference Since then, it has developed into an inde- pare children academically for their adult pendent school, serving students from pre- Twice a month, a handful of junior invest- lives, but also to provide the social and emo- school through to 8th grade. The Harlem ment bankers and Managing Director Eileen tional support they need for further educa- neighborhood in which the school is located Urban will go to the school to tutor children. tion in partnership with families and com- is problem-ridden on a number of fronts, “Four or five of us spend a couple of hours munity members. “We want to empower with a median income of 16,600 dollars helping second, third and fourth graders each child to reach his or her potential, by and the highest concentration of shelters with any subject they are involved in, typi- providing our students with an opportunity and drug treatment facilities of the entire cally mathematics and reading. I think the for an excellent education. We combine Borough of Manhattan. Along with the reg- junior bankers involved in the project have a the open admission policy of the US public ular, diverse curriculum, the school also ball, because the children are so engaging school system with a rigorous academic offers an After School & Enrichment Pro- and interested in us,” Urban explained. “On curriculum of a private school. This approach gram to support the academic development the other hand, the young bankers are has proved to be extremely successful,” said of the students and keep them safe during thrilled to see the impact they have.” Kathy Egmont, head of the Children’s Store- after-school hours and during the summer Another volunteer is Managing Director front. Some 93 percent of Storefront grad- break when some of them are unsupervised George Weiksner, who spends more than uates complete high school and almost 75 and vulnerable to negative influences. 100 hours a year as a board member percent go on to study at college. These About 170 students are enrolled in this of the school, on career counselling, tutoring figures are far above the area’s average school year, and along with their regular students and other activities. “Not only is it high school graduation rate of 33 percent. classes, such as math, history and English, very rewarding,” he said. “Education is also “The costs are high when individuals do they can take part in a broad range of extra- the most important way for inner city chil- not complete high school, as the unemploy- curricular activities including gospel choir, dren to overcome the many disadvantages ment rate for those without a diploma is art, running and African dance. To manage they face. I encourage others to take advan- two and a half times higher than for those all these activities, the school’s 40 staff tage of this opportunity to give something with a bachelor’s degree,” said Rob Shafir, relies on the support of 70 enthusiastic back to their communities.” CEO of Credit Suisse’s Americas region at volunteers who help out in the classrooms The Children’s Storefront is the charity the school’s annual spring gala, held on May or in the librar y, as well as behind the scenes of choice of Credit Suisse’s Investment 19 in New York. “An investment in Children’s in fundraising and administration. Tutoring Banking division in New York. “We also raise Storefront therefore definitely pays off,” and homework help is also offered, and it is money for the school at our Christmas party,” Shafir told the 500 supporters of the school here that the engagement of Credit Suisse’s Urban said. Other projects in the pipeline attending the gala. Credit Suisse served as employees can be felt. Last year, more than include hosting a book drive, providing honoree of the event and this year pledged 110 of the bank’s employees volunteered Christ mas gifts for the school’s students or a gift of 250,000 dollars to the school. <

Credit Suisse Bulletin 3/08 Credit Suisse in Society Volunteering 59

Suisse are encouraged to volunteer one day a year to assist in a project run by one of the Born to Be Mild bank’s partner organizations, and Credit Suisse pays them for that day. Devote one day a year to a good cause? “Of course”, has been the response of many Credit Suisse employees In the Name of Love in Switzerland who have rolled up their sleeves to become Love Ride Switzerland, which was held in involved as volunteers with charitable organizations. Dübendorf near Zurich on May 4, is an annual event, modeled after the US fundraiser of the same name, where bikers come together to generate donations for charities Text: Urs Schwarz which support children with a variety of muscular-related medical conditions. Opportuni- People who benefit from society often want The Swiss Red Cross is also one of the part- ties to assist with this event were snapped to give something back, and contribute to ners, as is the Mountain Forest Project (Berg- up in short order by the bank’s employees, the further success of the community in waldprojekt) which, as its name implies, including Marcel Huly. “I decided to volunteer which they live or work. The Swiss have tra- strives to prevent the destruction of alpine because I’ve got the open road in my blood,” ditionally been keen to volunteer. Be it help- forests. Procap, Plusport, and Love Ride says the junior banker, who helped direct the ing out in the community as part of an as- Switzerland are all initiatives that work with traffic created by the 10’000 motorcycles sociation or with the local administration, the disabled, while the Hope for Those in involved in the Love Ride. they devote their time to a good cause. With- Need foundation (Hoffnung für Menschen in Credit Suisse volunteers will also take out the efforts of volunteers, a number of Not) focuses on helping individuals living in part in slowUp, where a 30-kilometer stretch charitable organizations in the country would poverty, and also coordinates Soup Day with of street is made car-free for a day for cy- have to close their doors and the seams of Schweizer Tafeln. clists and in-line skaters. Volunteers of the a cohesive society would begin to tear. The Young Enterprise Switzerland orga- event, organized by Procap, accompany a nization has yet another objective – to teach disabled individual in a wheelchair along the Acquiring a Taste for Helping Out young people about finance and economics route. Fourteen slowUps will take place Though volunteer work is entrenched in in order to better prepare them for the chal- across Switzerland this year; the first was Swiss society, corporate volunteering is still lenging job market. In addition to supporting on April 27, where Giulia Cosentino, junior in its infancy. In 2006, Credit Suisse first these ofﬁ cial partner organizations, the busi- advisor for private clients, was a volunteer turned its attention to this topic. On the ini- ness regions in Switzerland also support on in-line skates who rolled with a wheel- tiative of Hanspeter Kurzmeyer, head of some of their own, local volunteering activ- chair-bound companion. She says the expe- Private Clients Switzerland, the bank and ities. Within the Corporate Volunteering in rience enabled her to see the world from a its employees became involved in Soup Day, Switzerland initiative, employees of Credit new perspective. < a campaign run by the charity Schweizer Tafeln, which helps to combat poverty in Switzerland by collecting surplus food and distributing it via various social institutions to those in need. The success of this event gave employees and the bank a taste for embracing corporate volunteering. As part of its worldwide Corporate Citizen- ship Initiative, Credit Suisse also officially launched Corporate Volunteering in Switzer- land in April 2008. In Switzerland, the bank is working with seven non-proﬁ t organizations that are involved in community development and education. “The objec tives of these organizations are fully in line with ours,” explains Fritz Gutbrodt, head of the Chairman’s Office at Credit Suisse. “Volunteering is an important cornerstone of our corporate culture,” underscores Ulrich Körner, CEO Credit Suisse Switzerland. “Its value can’t be emphasized highly enough, as it promotes not only social and specialist skills, but also contributes to the reputation Marcel Huly (right) and biker Max got to know each other at the Love

Photo: Urs Schwarz Urs Photo: of our company.” Ride Switzerland, an event designed to raise funds for charity.

Credit Suisse Bulletin 3/08 60 Credit Suisse in Society Winning Charities Into the Dragon’s Den With a 50,000-pound donation at stake for the winning cause, there was no shortage of applicants for Credit Suisse’s ﬁ rst charity Dragon’s Den competition. Five ﬁ nalists submitted their charities for judgment, and only one received the full purse.

Text: Ian Lewis

“Credit Suisse is keen to get involved with persuasively put to the Dragons by Atif Ali, for the charity. They developed their own not- charitable endeavors, but we don’t want to an analyst at Credit Suisse in London. for-proﬁ t organization, CV Boosters, which, shove them down the throats of our staff. thanks to the donation of time and skills by A Winning Concept We want to give them more power over the volunteers working in London’s financial in- process,” says Russell Chambers, Chief Ex- Since its creation in 1995, the charity has stitutions, can offer workshops and advice ecutive Officer of Credit Suisse in the UK established 455 schools across Pakistan, to those seeking a career in business on how and Ireland. From that thinking was born the catering for about 55,000 students. Gender to write better job applications, and spruce first Dragon’s Den Employee Grant Compe- diversity is a key component, with 50-per- up interview presentations. People using CV tition and Volunteer Awards, a charity event cent female enrollment and a 3,000 strong Boosters pay for the services and the prof- based on the popular UK television show. female faculty. “The extra 50,000 pounds its then go to TCF in Pakistan. On the BBC’s Dragon’s Den, budding en- will help finance a number of new schools,” “What was attractive about Atif’s project trepreneurs pitch their business ideas to a Ali told the Dragons. The worthiness of the was this ‘double bottom line,’” says Berns, panel of potential investors who choose cause was not in doubt, but what really who was a Dragon and the event’s organizer. which ones to plough their cash into after a caught the Dragons’ attention was the work Fellow Dragon Leigh-Pemberton described rigorous and often intimidating interrogation. of Ali and a group of friends in developing a CV Boosters as “a very imaginatively con- The twists in the version held at the Credit highly innovative approach to raising money ceived way of raising money.” < Suisse London headquarters on March 28 were that those being grilled were UK-based Credit Suisse employees, the concepts they were pitching were the charitable causes with which they were involved, and the panel of Dragons comprised a formidable lineup of in-house experts. James Leigh-Pember- ton (chairman of Europe, Middle East and Africa, EMEA Investment Banking), Mark Seligman (senior advisor), Ian Marsh (head of One Bank Delivery), Bruce Ling (chief of staff for EMEA) and Bella Berns (head of EMEA Philanthropy) formed the panel. While their cross- examination was far less acerbic than that meted out by their TV counterparts, their questions were probing as there was a lot at stake. The winning presentation from those made by the five finalists attracted a 50,000-pound donation to the relevant charity, while the runners-up won smaller, but still substantial amounts. Following the Q&A session, presided over by Chambers, the panel retired to discuss their verdict. After a tense wait for the con- testants, they returned with a unanimous decision. The winner was The Citizens Foun- dation (TCF), a charity founded by three Pakistani businessmen, which builds schools

and improves the availability of education to Above left Atif Ali, winner of the 50,000 pounds for the TCF charity. Above right The other

the poor of Pakistan. TCF’s case had been four finalists listen to Ali’s pitch. Below Ali clearly has the interest of the “Dragon” panel. Photos: Rogan Macdonald | Credit Suisse

Credit Suisse Bulletin 3/08 Credit Suisse in Society News 61

News in Brief

Raising Funds for Disaster Relief Thousands “Bike to Work” in June Credit Suisse employees in various regions “I spend about half an hour every day doing may from time to time leave their business sports,” says Kimchi Mazzetti-Nguyen, a attire at home and instead come to work Credit Suisse employee based in Geneva. in jeans. However, there is one condition “That’s why I’m biking to work. It takes me attached: The jeans wearers must pledge about 40 minutes to get from home to work. to make donations to a charity. The money Bicyling, rather than taking a car or even a raised by employees on May 23 when the train is normal to me – after all, in my home last Jeans Day was held, went for aid and relief efforts in China and country of Vietnam, the bike is the primary means of transport.” Myanmar. On May 12, an earthquake with a magnitude of 7.9 on the Mazzetti-Nguyen bikes to work every day, rain or shine, which Richter Scale shook the northwestern Sichuan Province in China. makes her an exception to the average commuter in Switzerland. The earthquake, the worst the country has suffered in 30 years, left To get more people to combine their commute with exercise and 80,000 people dead or missing and more than fi ve million people do their part for the environment, Credit Suisse supported a “Bike homeless. Some 10 days earlier, on May 2, a cyclone had hit South- to Work” campaign in June. Nearly 1,000 staff who took part in the east Asia. Cyclone Nargis caused widespread devastation in Myan- campaign covered their journey to work – or a part of it – by bicycle. mar, leaving more than 130,000 people dead or missing. They were thus able to make a real contribution to the reduction in Credit Suisse’s Asia Pacifi c employees alone managed to raise greenhouse gas emissions, while simultaneously boosting their close to 500,000 francs through the May 23 Jeans Day fundraiser. fi tness. Coordinator Otti Bisang from Credit Suisse Public Policy – Another 200,000 francs were pledged by the bank’s employees Sustainability Affairs stated that many participants have decided through other channels. The Disaster Relief Fund of the Credit to prolong the campaign voluntarily. schi Suisse Foundation strengthened the employees’ aid effort by con- tributing twice the amount donated, bringing the total amount donated to more than 2 million francs. In addition, two immediate Giving Back Awards Honor Volunteers corporate donations of 500,000 francs each were made for emer- On April 30, the Credit Suisse Americas gency relief projects in both Myanmar and China. The total amount Foundation hosted the third annual Giving of donated funds hence exceeds 3 million francs. Back Awards, an event that honors the thou- “The extra ordinary effort and gracious support demonstrated by sands of Credit Suisse employees who vol- the Credit Suisse employees is highly respectable,” says Janine unteer with community organizations through- Händel, head of the Disaster Relief Fund. In Myanmar, the collect- out the year. “The Giving Back Awards is the ed money went to the emergency programs of the World Food occasion where Credit Suisse says thank Programme, Médecins Sans Frontières Switzerland, and CARE, a you to all of its employees who have made outstanding efforts in leading humanitarian organization fi ghting global poverty. In China, their communities,” said Eric Eckholdt, executive director of the the money raised will go to school reconstruction projects with Foundation at the event. “This event also gives everyone the oppor- partners still to be selected. Reports indicate that many schools tunity to see the breadth of all the volunteering work that we do.” have been damaged or destroyed by the earthquake. Credit Suisse The event was attended by nearly 500 employees in New York, feels that its contribution to the reconstruction effort would be best and viewed by employees across the Americas via video-confer- put into school projects. The bank is already involved in this fi eld. ence. Robert Shafi r, CEO of the Asset Management business and Since 1999 it has fi nanced the construction of more than 25 schools CEO of the America’s region for Credit Suisse, opened the event. in rural China through its regional philanthropy programs. de In his opening remarks he stressed the bank’s culture of giving back in the communities in which it operates, and also the need for ac- knowledging the time and effort employees devote to the organiza- Top CEOs Address Climate Change tions Credit Suisse supports in the region. “It is important that we On June 20, 2008, a report with detailed post-2012 climate change recognize and reward the individuals who help to build that spirit recommendations directed to G8 leaders was delivered to Japan’s within the bank,” he said. Prime Minister Yasuo Fukuda, who will host the G8’s annual sum- Awards were given for outstanding efforts in the following cat- mit in Hokkaido, Japan, in July. The “CEO Climate Policy Recom- egories: Most Valuable Volunteer, Branch Offi ce of the Year, Depart- mendations to G8 Leaders” are endorsed by the CEOs of 100 multi- ment/Division of the Year, Fundraiser of the Year, Innovator of the nationals, including Brady Dougan, CEO of Credit Suisse. This Year, Leadership, Mini-Grant of the Year, Champion of the Year, group of CEOs, many from the world’s largest companies, has Rookie of the Year, and Unsung Heroes. This annual event is sup- called for a new, more “environmentally effective and economically ported by Credit Suisse Americas Foundation. The trustees of the effi cient” long-term policy framework to succeed the Kyoto Accord. Foundation presented Giving Back Awards to the many individuals The recommendations address the need for strong leadership from and teams who demonstrated excellence over the past year. mb all governments, particularly those of the major economies. mb

Fotos: Credit Suisse | Cedric Widmer www.weforum.org/initiatives

Credit Suisse Bulletin 3/08

Leader Koﬁ Annan 63

A Life Devoted to Understanding

Interview: Mandana Razavi It has been almost 19 months since Koﬁ Annan handed over the role of Secretary-General of the United Nations to his successor. The man who became known as the “world’s moral conscience” continues to work on behalf of the weakest citizens of the globe – and is mobilizing the strongest to achieve his aims.

Bulletin: When your period in ofﬁ ce as The Forum came into being last countries. For example, in a number of coun- Secretary-General of the United Nations October. Where do things go from here? tries we are seeing long and severe periods (UN) came to an end, you turned The first annual meeting of the Global Hu- of drought that are, in turn, having fatal re- toward new projects: Together with the manitarian Forum took place on June 24 –25. percussions for agricultural productivity. The Swiss Foreign Ministry and the city of In our first year, we resolved to focus on the consequence of this is a dramatic increase Geneva you founded the Global Humani- link between global climate change and the in malnourishment and disease. tarian Forum. How did that come about? precarious humanitarian situation found in You are referring to the phenomenon Kofi Annan: We took a look at the humani- the poorest countries of the world, and to of chain reaction? tarian situation around the world, and asked use our combined power to seek solutions. Precisely. In a number of regions, the desert ourselves the fundamental question of Even today, it is astonishing how many is expanding at a rate of more than seven how, as a society, we could best tackle the people still believe that climate change is kilometers every year. It is absolutely vital humani tarian issues and problems that con- something we will not have to face up to that we take measures – simultaneously at front us. We wanted to approach this burn- until the distant future. They appear to view different levels – as quickly as possible to ing issue in a systematic way so as to really the worrying developments in the global en- bring these dangerous developments under change things, and to create something sus- vironment as an abstract problem. Although control and alleviate the burden that these tainable. This is what finally led us to the many people are aware that it is important countries are enduring. The people of these idea of setting up a forum that would deal to drastically reduce global greenhouse countries are the world’s poorest, the most with the humanitarian questions and prob- gas emissions if we are to avoid the threat vulnerable, and those with the fewest re- lems of our age at a global level. of environmental catastrophe, there is too sources. We must urgently find a way to We set out to convince as many experts much ignorance of the fact that climate support them, to help them adjust to the and opinion leaders as possible from very change is taking place right now, and that change in environmental conditions. different areas – such as universities, gov- our environment is already very strongly How drastic have the repercussions of ernments, the private economy, the military, affected by it. climate actually become? aid organizations, think-tanks, and non- The critical thing here is to recognize the We are continually seeing and hearing how governmental organizations – of the value urgency of the problem, particularly as cli- drastic the situation has become in a number of our project, so that we could get them mate change has a very direct impact on the of countries: For example, the residents of

Photo:Smith, Larry epa, Keystone W. round a single table. life of mankind – especially in developing countless cities situated close to sea >

Credit Suisse Bulletin 3/08 64 Leader Koﬁ Annan

level live in perpetual fear of flooding. The ness organizations if they are really to get President of the Maldives, who took part in their businesses up and running. Fortunately, one of our seminars in Geneva, explained more and more companies are becoming to us how the inhabitants of the Maldives involved in microfinance. Whichever way the have for millennia seen the ocean as their private sector wants to get involved, the key “mighty friend” and source of life. thing is to ensure that the roads we follow This local attitude has undergone a fun- are sustainable ones. Only those measures damental shift in the last few years. The and changes that have been planned with ocean has now become their enemy, as sustainability in mind will not be washed the continually rising sea level has come away the next day. to threaten their entire existence. They are Many large companies have signed forced to take immediate measures to pro- the Global Compact in recent years, tect themselves against impending environ- a pact between businesses and the UN mental catastrophe. that aims to shape globalization in a more What role can the private sector play in social and environmental way. Does improving the situation? the almost 10-year-old pact still reach far During his 10-year period as UN The private sector obviously has an impor- enough in your view? Secretary-General, Koﬁ Annan de- ployed his diplomatic skills to impres- tant role to play. I would stress, however, There’s no doubt that the aim and intentions sive effect in various crisis situations. that we are only trying to persuade people of the Global Compact represented a good He worked tirelessly to gain Iraq’s to join projects for which we believe there start. We launched the Global Compact in compliance with Security Council are genuine prospects of success. Where Davos in 1999. Almost 4,000 companies resolutions and supported the transi- the private sector is concerned, we are ex- from all around the world have now signed tion to civilian rule in Nigeria. Following pecting the development of further innova- it. That’s surely an impressive achievement. the declaration of independence tions through the investment of both exper- However, when I look at the environmental by East Timor and the subsequent tise and funding in green technologies. situation from today’s standpoint, I think excesses and acts of terror on the part It is my own personal conviction that even more should be done. of Indonesian militants in September those who put their expertise, their creativ- Can you provide some examples? 1999, he mandated a UN delegation ity, and their money into this sphere of busi- We should all be collaborating more closely with the task of providing a transitional ness will reap rewards in the long term. if we are to reduce greenhouse gas emis- administration and the goal of helping East Timor to found an independent I believe that the process of “greening the sions further. There is an urgent need for state. Annan also successfully put world” could turn out to be as critical for more changes in many areas, such as infra- the issue of HIV/Aids high on the UN society as the industrial revolution was in structure and transport. That said, we also agenda – before his efforts, the its day. There will be a major paradigm shift need to find a way that will allow the poorer UN had failed to discuss this problem in this area. Many creative minds and avant- countries to handle these changes too – adequately. Another example of garde companies are currently focusing on because all the urgent changes that are his achievements was the launch of this issue, and I am firmly convinced that needed to reduce greenhouse gases will the Global Compact, which aims they are on the right track. swallow up a huge amount of money. to confront the challenges of globa- And apart from the hoped-for We need to work as quickly as possible lization in the spheres of human rights, innovations from the world of business? to find new financing opportunities, as we working standards, and the environ- There are, of course, other ways in which are talking about big bucks here. But you ment. Annan’s tenure as UN Secretary- the private sector can support us. For ex- have to look at it like this: The bigger the General ended on December 31, 2006. His activities since then have ample, they could look for ways of offering challenge, the greater the potential for included acting as chief intermediary farmers risk insurance that would cover man’s creativity and power of innovation to in the Kenyan crisis, and pursuing them in the event of crop failure. Or they prove itself. ongoing initiatives in the humanitarian could make funding available to people who You are also Chairman of the Alliance sphere with the Global Humanitarian would normally have no access to such for a Green Revolution in Africa (AGRA), Forum and the Alliance for a Green capital, nor anyone to turn to for advice on working to bring about improvements Revolution in Africa. He is married to finance or management. in the continent of your birth. What were the Swedish human rights attorney The private sector can make a further the drivers of this project? Nane Annan (née Lagergren) and has important contribution by supporting and This project was driven by the great con- two children from his ﬁ rst marriage. promoting the establishment of small- and cern over the low productivity of African medium-sized companies in developing farmers, together with the anxiety over the countries. I mean support not only in the general lack of food in Africa. This led me financial sense, but also in the sense of pro- to commission the InterAcademy Council – viding local people with advice in financial an amalgamation of various leading scienti- matters and negotiating contracts. Micro- fic institutions and academies from around businesses in particular are dependent on the world – to undertake a study around

the know-how and expertise of major busi- five years ago. Luedecke Mathias Photo:

Credit Suisse Bulletin 3/08 Leader Koﬁ Annan 65

Their remit was to investigate the situation in African agriculture, to identify exactly In the Service of Humanity where the problems lie and in what areas The man who played a historical role in managing global crisis gained his there is potential for improvement, in order understanding of other cultures and his ability to mediate at an early age. for us to be able to achieve productivity increases in agriculture and thus support The United Nations had not even been zerland, where he spent a further year study- farmers as quickly as possible. The Inter- founded when Kofi A. Annan, the eldest son ing at Geneva University’s Graduate Institute Academy duly delivered a very impressive of a large and affluent family in Ghana, en- of International Studies. and in-depth report. We have sent this tered the world on April 8, 1938. The orga- Like many of his fellow students, he ap- report to many different business leaders nization that would come to shape his pro- plied for a job at the United Nations. In 19 62, and influential figures throughout Africa. fessional life so significantly was only formed he duly received a post with the World And what has the response been? seven years later, in San Francisco. Kofi Health Organization (WHO), albeit only on The report has awoken great interest and Atta Annan (literally translated, this name a fixed-term basis at the start. This then led has gotten the ball rolling. This finally led means “son born on a Friday” [Kofi] and to Annan being offered a subsequent posi- to our creating AGRA around two years ago, “twin” [ Atta]), spent the majority of his child- tion with the WHO, initially as an administra- with founding members including organiza- hood in Kumasi, a provincial capital set in- tion and budget officer. After three years tions like the Bill & Melinda Gates Founda- land from Ghana’s Gold Coast. Annan’s working for the WHO he was drawn back to tion and the Rockefeller Foundation. father was a respected businessman and Africa. Annan left Geneva and moved to The big idea behind AGRA was for us to local politician whose work frequently led Ethiopia, where he obtained a post as Per- help small farmers – because it is the small to Kofi and his siblings having to change sonnel Officer with the UN Economic Com- farmers who are the main food providers schools. The children were confronted with mission. He then worked with the UN Emer- in Africa. We want to ensure that all farm- very different cultures right from the start: gency Force in Ismailia, Egypt, before return- ers – men and women – have everything African customs and mores were taught at ing to Geneva to the Office of the UN High they need to be able to work their land home, but Ghana itself was still under British Commission for Refugees. This lead to the productively. I deliberately refer to women colonial rule at the time. This ensured that position of Head of Personnel of the United farmers here too because they are so often values such as tolerance, adaptability, and Nations Emergency Force in Cairo. In 1975, the ones who work in the fields. an understanding of other cultures were Annan left the UN for two years to return Given the difﬁ cult situation Africa is acquired by Kofi Annan at an early age. finally to his homeland, where he became still in, the goals being set appear At age 16, he was sent to an elite board- Director of Tourism. ambitious. What are you doing at AGRA ing school near the Ghanaian city of Cape He would not stay long in Ghana. He to meet your goals? Coast, where his skills as a speaker and returned to work for the UN as Assistant In practical terms, we are trying to provide mediator were noticed for the first time. Secretary-General in a number of different farmers with better quality seeds so that Annan’s time at boarding school ended in positions. In 1993, Annan was appointed by they can produce higher yields. Most impor- 1957, the year in which Ghana gained its the then UN Secretary-General, Boutros tant of all is for the seed varieties to be par- independence. He returned to his home city Boutros-Ghali, to the post of Under-Secre- ticularly resistant to pests. and studied economic science at the Ku- tary-General for Peacekeeping. In 1995, he In addition, we need to look for ways in masi College of Science and Technology. was sent to Zagreb as the Secretary-Gen- which we can improve local soil quality. The With Ghana now independent, Annan felt eral’s Special Represen tative. His achieve- soil in Africa has been subject to great at- the urge – like his father before him – to ments in connection with the organization trition and degradation by the climate and become involved in politics and thereby of various responses to crises in Somalia, the unrelenting heat. If we can find a solu- contribute to the development of the new Rwanda, and the former Yugoslavia gained tion here, this would also help to increase country. Annan joined the student council Annan widespread recognition on the inter- agricultural yields significantly. Of course, and at one student congress, this charis- national diplomatic circuit. a further key issue is to ensure a reliable matic young man attracted the attention In 1996, Annan was chosen by the UN water supply. of an American representative of the Ford Security Council as the first black African We are also working to find solutions for Foundation, who advised him to apply to the to hold the post of Secretary-General. In his the storage of food supplies. Together with US for a study grant. 10-year tenure as Secretary-General, he Africa, we would like to work on all aspects Annan duly gained a place at Macalester contributed significantly to the resolution of of the value creation chain that improve the College in St. Paul, Minnesota, and left a wide range of difficult political situations. link to the market. And if we can achieve his homeland in Africa to continue his stud- Annan was honored with the Nobel Peace that, we hope to be able to double or even ies in economics on another continent. At Prize in 2001 for his numer ous services to triple African food capacity in the next five Macalester College he practiced sport avidly humanity. On December 31, 2006, Annan years or so. < and often took part in debating competitions. handed over his office to Ban Ki - moon, who Already back then he would give moving up until then had been Foreign Minister for speeches on the divide between the rich and South Korea. Driven by his deep personal

Kofi Annan was a guest speaker the poor, even winning a natio nal competi- convictions, Kofi Annan has continued to at the Credit Suisse Salon event held tion. In 1961, he left Minnesota with a bach- devote himself to the poorest citizens of the in Zurich on April 23. elor’s degree and followed a friend to Swit- world ever since. mar

Credit Suisse Bulletin 3/08 66 At a Click www.credit-suisse.com/infocus

@propos

My California Connection [email protected]

Malibu is where I met my best friend. We were We watched as the wave fi rst crashed over her, A lot of people may argue that e-mail has killed a couple of junior editors, just a year or two out and as she then vanished beneath the churning true communication, though I would whole- of university, working on magazines for a pub- sea. From our boards, we worriedly watched, heart edly disagree. For my pal and me, it’s our lishing house located a mere 10 -minute walk waiting for her head to pop out of the froth as primary means of bridging the almost 9,400 from the beach. The pay was poor, the hours the strongest of our group caught the next kilometers that separate us. Thanks to e-mail, were long, but we young writers knew just how wave in hopes of fi nding her ashore. we “talk” at least two or three times a week. to make the most of working at this prime, After what seemed like minutes, she wash- When I get to work in the morning, I look for- coastline location. In the summer, a group of ed up on the sand looking a bit battered, but ward to fi nding one of her long-winded, hilari- us spent our lunch hour riding waves on body- surprised us all when, following a coughing fi t, ous rants about life in Fresno in my inbox. That boards at Zuma Beach or Point Dune. she got up laughing like a loon, shook the sand e-mail – that link to the past, to my native Cali- One day, a new girl began working at the out of her swimsuit, reclaimed her board, and fornia and to my dearest friend – puts me in a publishing house and bravely decided to join ran back into the water to join us. That was the good mood for the rest of the day. And I hope our web-footed group. Without hesitation, she moment our friendship was sealed. Eleven that my much wittier responses which she will grabbed a board and paddled out with the rest years later, it’s still holding strong. Now here’s read with her morning coffee have the same of us. Despite her best efforts she obviously the weird part: I’ve been living in Zurich for effect. So, put your fi ngers to the ready and was no water nymph. She fought valiantly to eight of those years. E-mail is the tie that binds send your good friends and family an elec tronic catch a wave, until one inevitably caught her. us between my annual sojourns to California. letter today. You won’t regret it.

credit-suisse.com/infocus

The motorsports pioneer answers Online Forum With Peter Sauber questions from Bulletin readers

Circuit racing has been banned in Switzerland for over 50 years. The six podium fi nishes in all, and in 2001 the team even fi nished an country also has no automobile industry. So it has to be regarded as outstanding fourth in the constructors’ championship. The issue of something of a miracle that on June 8 two Formula One vehicles made succession was also handled smoothly: In the form of BMW, a global in Switzerland celebrated a one-two fi nish in the most prestigious racing corporation with a well-known tradition in motorsports took on the series in the world. At the Canadian Grand Prix, Robert Kubica of Poland leadership role. gained the BMW Sauber F1.08 team’s fi rst ever Formula One victory. The cars continued to be built in Hinwil, near Zurich, which is also And thanks to his teammate Nick Heidfeld, who crossed the fi nishing where the modern wind tunnel is located. The engines and transmission, line in second place, the team was able to celebrate a double success. on the other hand, were now produced in Munich. With the greater fi nan- This historic victory is above all down to one man: Peter Sauber. It cial resources also came the big success: In the space of only two sea- was in 1993 that the motorsports pioneer fi rst entered the world of sons, the cars from Hinwil have managed to catch up with the top teams. Formula One with a team that he had founded as early as 1970. The That is good news not only for the numerous fans, but also for Credit move could be likened to jumping into a pool of sharks, as over recent Suisse, which has been offi cial partner of the team since 2001. ath years most of the small private teams have sooner or later capitulated to the cash-rich giants of the auto industry. Not so Peter Sauber, whose Bulletin readers have the unique opportunity to put their questions to Peter Sauber in our online forum. The answers will appear on the racing team acquitted itself well over a period of 13 years and established Internet with a time delay, and you will be notifi ed by e-mail as soon as one of the most effi cient teams in modern Formula One, right in the the reply to your question is posted online. The forum starts on middle of the idyllic Zurich Oberland. The folk from Hinwil performed August 4 and will run until August 14.

feats of giant-killing on more than one occasion. Sauber drivers achieved For more information, see www.credit-suisse.com/f1. Photos: Cédric Widmer | Martina Meier, Eva-Maria Züllig

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