1. FT writes about Vienna's co-housing model,
Vienna has several innovative affordable housing schemes aimed at different social groups. The co-housing model is popular with middle-class families who have some capital but can’t afford to buy and want to bring up their kids in the city. To make sure the property is never sold on the private market, residents of Gleis 21 do not own their flats. Instead, they own shares in the building company they formed. Their monthly “rent” is their share of the mortgage repayment. At the start, each member of the co-housing group must pay €580 per sq m as a deposit (some flats are bigger than others). If they sell, they get that money back plus a bit more depending on how long they have lived there and how much money they have put in to pay off the loan...Denmark was the first European country to adopt this co-housing model in the late 1960s and early 1970s. Most of the communities were formed by families with young children who wanted to share the burden of childcare. Since then, it has evolved to include single parents, empty nesters and older people. From the 1980s onwards, the Danish government has supported co-housing groups with low-interest government loans... Most co-housing groups draw up their own rules on how to live together and how to share responsibility but this does mean being prepared to sit through long meetings with your fellow residents as you talk through difficult issues.
It highlights the example of Gleis 21
Gleis 21 is an award-winning, intergenerational co-housing project in Vienna that the residents own, operate and manage collectively. Plant-filled terraces encircle the four-storey building, built almost entirely from wood apart from four central concrete pillars. Unlike a 1970s commune, residents have their own separate apartments as well as access to the communal spaces on the 700 sq m rooftop. There are 38 units in all, including a two-bedroom guest apartment that can be booked for visiting friends and family. The residents, who range in age from 27 to 72, came up with the concept, raised the money and oversaw the construction of the building. The core group was formed in 2015. By 2017, they had the architect’s plans and the funding in place. The building was completed in 2019 and they all moved in shortly before lockdown. The total cost of the project was almost €10mn. The group found €2mn themselves, the rest came from the bank in the form of a 30-year mortgage and they also received subsidies and a loan from City Hall... All the residents have their own flat in the building and for this they pay an average of €600 a month.
2. The Economist has a long read on the state of scientific research in India.
At 31%, a larger proportion of its graduates studied stem subjects than in America (20%) or even Israel (27%). But many students graduate with a poor education because of inadequate facilities, mediocre teaching and outdated curriculums, and many of the most talented go abroad... Last year India became the largest source of overseas graduate students in America, ahead of China. Including undergraduates, Indians now make up a quarter of all foreign university students in America. Of the roughly 2.5m immigrant stem workers in that country, 29% are Indian. In AI, India is the source of 8% of the world’s top researchers; the proportion who work in India itself rounds to zero.
India's R&D problem is predominantly a problem of corporate India's failure.
3. Manufacturing's share of Indian GDP has continued to decline, even with all the efforts to support it.
Faced with headwinds in manufacturing, some countries are falling back on their natural resources to drive growth by attracting industries that use those resources.
Governments in Latin America are keen. So are the Democratic Republic of Congo and Zimbabwe. But it is Indonesia that is leading the way, and doing so with striking heavy-handedness. Since 2020 the country has banned exports of bauxite and nickel, of which it produces 7% and 22% of global supply. Officials hope that by keeping a tight grip they can get refiners to move to the country. They then want to repeat the trick, persuading each stage of the supply chain to follow, until Indonesian workers are making everything from battery components to wind turbines.Officials are also offering carrots, in the form of both cash and facilities. Indonesia is in the midst of an infrastructure boom: spending between 2020 to 2024 ought to reach $400bn, over 50% more a year than in 2014. This includes funding for at least 27 multibillion-dollar industrial parks, including the Kalimantan Park, constructed on 13,000 hectares of former Bornean rainforest at a cost of $129bn. Other countries are also offering sweeteners. Firms that want to install solar panels in Brazil will receive subsidies to also build them there. Bolivia nationalised its lithium industry, but its new state-owned conglomerates will be permitted to enter into joint ventures with Chinese companies.
4. Section 144 of the Companies Act in India bans accountancy firms from offering non-audit services to their audit clients. To skirt around this the big Four firms have created their Indian audit entities - BSR& Company (KPMG), Deloitte Haskins & Sells, SRBC & Company (EY), Price Waterhouse Chartered Accountants.
But a recent report by the National Financial Reporting Agency who's in charge of regulating accounting and audit firms found that these firms were still closely tied to their non-audit parent and there were other serious conflicts of interest.
The NFRA, when examining these big accountancy firms, their portfolio of businesses, and their relations with a larger group of businesses, noted this principle of independence might have been violated. The regulator’s concern is that if an accounting firm or a company in the accountant’s network earns income from consulting with a firm in other capacities, then its incentives for independence as an auditor are misaligned... The grey area is what happens immediately before and after an accountancy firm becomes an official auditor to some client, and whether other companies in their network group can offer such non-audit services instead... In the case of BSR, for example, the NFRA has specifically said that its claims to being an entity separate from those parts of the KPMG India network do not stand up to scrutiny. The regulator’s observations and some of the auditors’ reactions suggest there is scope for improving regulatory and legal clarity.
5. New Infrastructure Investment Trust (InvIT) transaction in the highways sector
KKR-backed Highways Infrastructure Trust (HIT) will acquire 12 road projects from PNC Infratech and PNC Infra Holdings at an enterprise value of Rs 9,005.7 crore. This will be one of the biggest acquisitions in the road and highways sector... The road portfolio comprises 11 hybrid annuity concessions from the National Highways Authority of India (NHAI) and one toll road concession from the Uttar Pradesh State Highways Authority (UPSHA)... The total projects represent about 3,800 lane kilometres in Rajasthan, Uttar Pradesh, Madhya Pradesh, and Karnataka... Of the 12 projects, 10 are currently operational and rest are under-construction, and will be acquired after operations begin.
6. The Bain & Company's annual report on private equity sees India emerging as the leader in Asia Pacific. The main investment areas were provider and related services, contract research organisations (CROs), contract development and manufacturing organisations (CDMOs), biopharma, and healthcare information technology. Biopharma and related services make up the largest share. Some graphics.
Global PE activity in healthcare is largely a US and Europe phenomenon, with Asia-Pacific being a small share. And health care itself is a tiny share of the overall PE market.
The reports attributes this rise to three factors - greater expenditure on private and public healthcare, booming pharma manufacturing and services, and an evolving healthcare technology ecosystem.
In 2023 India is expected to host 22 deals, a slight decline from 26 in 2022, and the deal value is expected to be $4.6 bn below $4.7 bn in 2022.
7. MS Sahoo has an excellent educative oped that provides a different perspective to look at the performance of the IBC. He argues that traditional assessments inflate claims and liabilities and overlook realisations.
For such appraisers, recovery tends to overlook realisations from equity holdings post-resolution, the reversal of avoidance transactions, and the insolvency resolution of guarantors. Additionally, the claims include written-off non-performing assets (NPAs) and penal interest on such NPA, encompassing both loans and guarantees against those loans. This results in a distorted recovery rate of 32 per cent against claims, a figure at odds with the World Bank’s estimate of recovery of 72 per cent from the IBC process... It makes sense to link realisation of creditors to the tangible assets on the ground rather than their claims, as the market offers a value for the assets a company has, and not what it owes to creditors. The IBC process is realising a remarkable 169 per cent of the value of the assets of companies. Any alternative option would at best realise 100 per cent minus the cost of such realisation. The excess realisation of 69 per cent is a bonus from the IBC for creditors while rescuing viable companies for the economy...
The metric and methodology for appraising the IBC should align with its objective, which is the resolution of stress. The primary parameter for assessment should be whether the IBC is resolving stress irrespective of the mode of resolution. On this critical parameter, the answer is an unequivocal “yes”. Out of the 7,000 stressed companies that entered the IBC process, 5,000 have successfully exited, while the remaining 2,000 are in different stages. The secondary parameters are the efficiency and efficacy of such resolution. The IBC envisages two efficiency parameters, namely, resolutions to be time-bound and to maximise the value of stressed assets. The performance on these efficiency parameters is less encouraging. During April-September 2023, 127 resolution processes concluded, taking an average of 867 days for completion, compared to the intended 180 days. Similarly, the resolution plans are realising only 86 per cent of the fair value of the companies, suggesting a gap in achieving the desired value maximisation. An efficacy parameter is the quality of resolution. A recent Indian Institute of Management (Ahmedabad) study finds it to be good. Post-resolution, the companies have witnessed significant improvements: Turnover increased by 76 per cent, profitability ratios converged with benchmarks, and market capitalisation tripled.
8. This is quite a stunning graphic which shows that the share of affordable housing loans in the total number of housing loans given out by banks has fallen spectacularly from 71.5% in April 2007 to 28.5% in November 2023!
The affordable housing loans are the priority sector loans - upto Rs 35 lakh in million plus cities and Rs 25 lakh elsewhere, with overall cost not exceeding Rs 45 lakh and Rs 30 lakh respectively. Banks make up 80% of all home loans, and housing finance companies the rest. The report also informs that over a period of five years, close to four-fifths of incremental outstanding homes loans are non-priority.
9. Very good interview of Joseph S Nye. At 86 years, he's old enough and seen enough to take the longer-view, and his views should come as a reminder to be worried, even alarmed, at global developments without being excessively so. He gives examples of threats to democracy in the US in the 1930s and to Harvard in late 1960s. On US and China, he says,
Nye gives five reasons why the US will not necessarily be eclipsed by China: geography and friendly neighbours; domestic energy supplies; the dollar-based financial system; demographics; and tech leadership... he argues that China, despite 20 years of investing in Confucius Institutes to promote its perspectives, lags behind on soft power too... “Why is China unpopular in its own region? Because it is seen as a threat. It’s very difficult to develop soft power in New Delhi by establishing a Confucius Institute if your troops are killing Indian troops on the Himalayan border. “From a strategic point, it’s equally mistaken to underestimate and overestimate your opponent. And right now what’s popular in Washington is overestimation [of China].” He identifies not with the hawks (who, he argues, overestimate the Chinese threat), or the doves (who underestimate it), but as an “owl”. War between China and the US is not probable, he argues.
This is actually so true of high table decision making. Wish more people said this.
Under Clinton, he chaired the National Intelligence Council, and was “surprised to find how much of [the president’s daily brief] I could have learnt by reading The Economist, the Financial Times, or the Washington Post”.
10. Climate change or not, economics and politics will out. FT writes about the surge of LNG terminal construction in the US Gulf Coast
The US became the world’s largest LNG exporter in 2023. Its seven existing terminals can produce as much as 86mn tonnes a year, according to the Energy Information Administration — enough to satisfy the combined gas needs of Germany and France. Five more projects under development will add another 73mn tonnes a year and the energy department is reviewing proposals for at least another 16.
The US should understand that developing countries far stronger, even existential considerations, in their fight to scale up climate change investments.
Reinforcing this point, it emerged this week that Hertz will sell 20000 Tesla EVs, or a third of all EVs in its fleet, and replace it with petrol vehicles since damage costs for EVs were much greater.
11. Simon Kuper has a counter-intuitive take that electric cars are not likely the future but e-bikes, e-mopeds, and e-scooters.
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