Lebanon should learn from Egypt's economic development

BEIRUT

Lebanon's prime minister says his country should learn from the government of Egypt how to stimulate economic growth, reform laws and combat corruption.

Lebanon's economy is struggling with soaring debts, rising unemployment and slow growth. The government of Prime Minister Saad Hariri is debating an austerity budget and key reforms with the aim of unlocking billions of dollars in pledged foreign assistance. Protests have criticized the planned measures.

Hariri spoke at a Beirut forum Thursday attended by Egyptian and Arab officials.

The government of Egyptian President Abdel-Fattah el-Sissi has implemented structural reforms since 2014 that pushed the economy of the Arab world's largest country toward some of its highest growth rates in years. But the reforms have been coupled with an intense crackdown on dissent and major price hikes.

Lebanese Prime Minister Saad Hariri, left, spoke during the opening session of the Arab Economic Forum in Beirut, Lebanon, Thursday, May 2, 2019. The forum is taking place amid an economic crisis in Lebanon, which is suffering from slow growth, a high budget deficit and massive debt.

Lebanon should learn from Egypt's economic development

Lebanon should learn from Egypt’s economic development

BEIRUT

Lebanon's prime minister says his country should learn from the government of Egypt how to stimulate economic growth, reform laws and combat corruption.

Lebanon's economy is struggling with soaring debts, rising unemployment and slow growth. The government of Prime Minister Saad Hariri is debating an austerity budget and key reforms with the aim of unlocking billions of dollars in pledged foreign assistance. Protests have criticized the planned measures.

Hariri spoke at a Beirut forum Thursday attended by Egyptian and Arab officials.

The government of Egyptian President Abdel-Fattah el-Sissi has implemented structural reforms since 2014 that pushed the economy of the Arab world's largest country toward some of its highest growth rates in years. But the reforms have been coupled with an intense crackdown on dissent and major price hikes.

Lebanese Prime Minister Saad Hariri, left, speaks during the opening session of the Arab Economic Forum in Beirut, Lebanon, Thursday, May 2, 2019. The forum is taking place amid an economic crisis in Lebanon, which is suffering from slow growth, a high budget deficit and massive debt. BILAL HUSSEIN AP PHOTO

Should your health care plan be more future-focused?

The pace of health care cost inflation has remained moderate over the past year or so, and employers are trying to keep it that way. In response, many businesses aren’t seeking immediate cost-cutting measures or asking employees to shoulder more of the burden. Rather, they’re looking to “future-focused” health care plan features to encourage healthful behaviors.

This was a major finding of the 2018 National Survey of Employer-Sponsored Health Plans, an annual study issued by Mercer.

Virtual care

Among the future-focused strategies highlighted by the survey are telemedicine services. Also known as virtual care, the services streamline delivery of health care services by gathering medical data and offering interaction with health care professionals remotely via apps and the phone.

One of the promises of virtual care services is that patients will be more willing to seek medical attention when it can be delivered conveniently, and this inherent efficiency will lead to better health outcomes and reduced costs. But the study found that, though telemedicine services are widely offered, utilization rates remain low.

Specifically, the proportion of large employers (those with at least 500 employees) incorporating telemedicine into their health benefits — 80% — was up substantially from 71% in the previous year’s survey (2017) and just 18% in 2014. But utilization was only 8% of eligible employees in 2018, though that rate is up slightly from 7% the previous year.

Other trending enhancements

Here are some additional future-focused health plan design features and their prevalence among the 2,409 employers that participated in the survey:

• Targeted support for people with chronic conditions, including diabetes and cancer: 56%.
• Expert medical opinion services, which allow employees to get an assessment from a highly qualified specialist on a given medical issue: 51%.
• “Enhanced care management” featuring medical personnel who provide support throughout the entire care episode and help resolve claim issues: 36%.
• Access to “centers of excellence” for complex surgeries and other medical needs, including transplants (25%), bariatric care (14%) and oncology (10%).

These strategies “may take more time to reduce medical costs than greater employee cost-sharing, but in the process they change how plans manage care, how providers are reimbursed, and even how people behave,” according to the report.

Overall, promoting a “culture of health” was found to be a high priority for many employers. Typical tactics to achieve this goal include providing healthy food choices in cafeterias and meetings, banning smoking on the work campus, and building on-site fitness facilities. They also involve offering resources to support “financial health” and “a range of technology-based resources to engage employees in caring for their health and fitness.”

Improved experience

The design of your company’s health care plan can evolve over time to, as feasible, take advantage of features that will likely improve the experience for everyone. We can help you identify all costs associated with your plan and assess which plan design would best suit your business.

© 2019

Plug in tax savings for electric vehicles

While the number of plug-in electric vehicles (EVs) is still small compared with other cars on the road, it’s growing — especially in certain parts of the country. If you’re interested in purchasing an electric or hybrid vehicle, you may be eligible for a federal income tax credit of up to $7,500. (Depending on where you live, there may also be state tax breaks and other incentives.)

However, the federal tax credit is subject to a complex phaseout rule that may reduce or eliminate the tax break based on how many sales are made by a given manufacturer. The vehicles of two manufacturers have already begun to be phased out, which means they now qualify for only a partial tax credit.

Tax credit basics

You can claim the federal tax credit for buying a qualifying new (not used) plug-in EV. The credit can be worth up to $7,500. There are no income restrictions, so even wealthy people can qualify.

A qualifying vehicle can be either fully electric or a plug-in electric-gasoline hybrid. In addition, the vehicle must be purchased rather than leased, because the credit for a leased vehicle belongs to the manufacturer.

The credit equals $2,500 for a vehicle powered by a four-kilowatt-hour battery, with an additional $417 for each kilowatt hour of battery capacity beyond four hours. The maximum credit is $7,500. Buyers of qualifying vehicles can rely on the manufacturer’s or distributor’s certification of the allowable credit amount.

How the phaseout rule works

The credit begins phasing out for a manufacturer over four calendar quarters once it sells more than 200,000 qualifying vehicles for use in the United States. The IRS recently announced that GM had sold more than 200,000 qualifying vehicles through the fourth quarter of 2018. So, the phaseout rule has been triggered for GM vehicles, as of April 1, 2019. The credit for GM vehicles purchased between April 1, 2019, and September 30, 2019, is reduced to 50% of the otherwise allowable amount. For GM vehicles purchased between October 1, 2019, and March 31, 2020, the credit is reduced to 25% of the otherwise allowable amount. No credit will be allowed for GM vehicles purchased after March 31, 2020.

The IRS previously announced that Tesla had sold more than 200,000 qualifying vehicles through the third quarter of 2018. So, the phaseout rule was triggered for Tesla vehicles, effective as of January 1, 2019. The credit for Tesla vehicles purchased between January 1, 2019, and June 30, 2019, is reduced to 50% of the otherwise allowable amount. For Tesla vehicles purchased between July 1, 2019, and December 31, 2019, the credit is reduced to 25% of the otherwise allowable amount. No credit will be allowed for Tesla vehicles purchased after December 31, 2019.

Powering forward

Despite the phaseout kicking in for GM and Tesla vehicles, there are still many other EVs on the market if you’re interested in purchasing one. For an index of manufacturers and credit amounts, visit this IRS Web page: https://bit.ly/2vqC8vM. Contact us if you want more information about the tax breaks that may be available for these vehicles.

© 2019

A Fleet of Tankers Is Hoarding Oil for a Gathering Storm

The world’s biggest offshore oil supermarket is stocking up for anti-pollution rules that Goldman Sachs Group Inc. predicts will upend energy markets.

The Strait of Malacca off Singapore and Malaysia is not only a waterway linking supply from the Middle East, Africa and the U.S. to Asia, but has also been used in the past decade to store millions of barrels of oil for future sales. Now, with new ship-emission regulations taking effect in 2020, traders are using the channel to hoard fuels for which demand will boom.

Some of the top trading houses are beginning to gather a fleet of tankers to receive, store and resell products such as low-sulfur fuel oil, diesel and light-cycle oil in what would effectively be a mini supply and distribution hub out at sea. That’s ahead of Jan. 1, when International Maritime Organization rules will require ships worldwide to stop burning dirty fuel and use relatively cleaner supply.

“In the coming months, we could see a flexible, low-cost floating tank farm in the Strait of Malacca,” said Anoop Singh, an analyst at shipbroker Braemar ACM. “We expect to see a whole fleet of tankers off Singapore and Malaysia taking part in a low-sulfur oil blending play that will also be found off other major ports such as Fujairah and Rotterdam.”

At least five vessels are currently anchored near Singapore with low-sulfur fuel oil and other blending components as of April 19, according to data intelligence firm Kpler SAS. They consist of long-range tankers, very large crude carriers and floating storage and offloading vessels that can each hold about 700,000 to 2 million barrels. Charterers include Japan’s Mitsui & Co.and Germany’s Uniper SE, shipbrokers and traders said.

Trader Rush

More will probably join them as other traders get in on the action. Five supertankers have been hired by Vitol Group, Gunvor Group Ltd., Litasco SA and Trafigura Group for storage off Singapore, according to Asian shipbrokers, who asked not to be identified as the information is confidential. The companies booked the vessels for time-charters of up to three months beginning this quarter.

Press officers for Vitol, Gunvor, Litasco and Trafigura declined to comment. Mitsui couldn’t immediately comment. A spokeswoman at Uniper confirmed that the company is using floating oil storage as part of its operations in the region.

It’s unlikely the tankers will be taking part in a so-called contango play -- a strategy that’s commonplace when weak market conditions and cheap crude cargoes prompt traders to store shipments for future sales at higher prices. That’s because futures for Brent, West Texas Intermediate and Dubai oil are now in backwardation, when near-term contracts are costlier than those for later. Brent’s six-month timespread was at $2.95 a barrel in backwardation at 11:39 a.m. in London.

Instead, it’s more likely that VLCCs Good News, New Tinos, DF Commodore, Ridgebury Progress and Cosbright Lake will be used to hold low-sulfur oil blendstocks, according to shipbrokers and traders. They are currently moored or anchored off Singapore and the west coast of Malaysia, according to Bloomberg ship-tracking data.

“Oil traders are hoarding low-sulfur oil components in the hope that prices of compliant fuels will blow out in six to nine months’ time when new IMO rules kick in,” said Nevyn Nah, the head of east of Suez products at industry consultant Energy Aspects Ltd.

Come Jan. 1, the global shipping fleet will need to stop being powered by fuel with 3 percent or higher sulfur content -- the current industry norm -- in favor of cleaner fuel. While they can also install pollution-reducing kits, a long waiting list for the specialized equipment known as scrubbers means tanker operators are set to use a lot more oil that has sulfur content of 0.5 percent or lower.

The new regulations will prove a big challenge for both the shipping and refining industries, and roil returns from turning crude into petroleum, Goldman Sachs said in an April 25 note detailing themes that will dominate commodity markets in coming months. The rules will provide support to distillates such as diesel, which will “abruptly” become the tanker fuel of choice, according to the bank.

To meet demand, some vessels that were previously used by traders for supplying ships or power plants will now probably be used to store low-sulfur blending components. Mitsui, for example, is expected to use Energy Star for 0.5 percent sulfur fuel that’s compliant with new IMO standards, ship-tracking firm Vortexa Ltd. said in an April 12 note, moving away from handling oil for Japan’s utility market.

Investors remain optimistic about alternatives despite ongoing market volatility

The report is based on responses from nearly 450 institutional allocators in attendance at Context Summits Miami 2019.

Ron Biscardi (pictured), co-founder and CEO of Context Capital Partners, says: “Despite the doom and gloom headlines around the industry, our survey highlights that investors are not pulling back from hedge funds, but rather taking a more sophisticated approach to how they allocate capital. This helps explain that despite the industry experiencing USD34.6 billion in net outflows in 2018, hedge fund managers who attended Context Summits Miami 2019 experienced USD7 billion in inflows during the same time period. We are quite confident strong demand for alternative investments will continue, particularly in investment strategies that are uncorrelated with traditional markets.”  

The majority (63 per cent) of allocators believe the market in 2019 will perform better than in 2018, when the S&P 500 dropped by 6.24 per cent.

Allocators continued to show consistent support for emerging managers, with 57 per cent saying they favour new managers, defined as those with less than a three-year track record or less than USD300 million in assets under management, over more established managers. That figure tracks closely to the 60 per cent of investors who had the same sentiment in 2018 and is a number that has remained remarkably steady over the past few years.

While investors varied widely in how strongly ESG issues factored into their investment process, more than half of allocators (58 per cent) said that they looked at ESG issues when evaluating strategies. By comparison, when asked in 2018, 51 per cent of allocators indicated an intention to increase allocations to these funds and 38 per cent said they already consider ESG or responsible investor factors as part of their investment strategy. This slight increase suggests that investors have placed a greater value on ESG and look at it as more than just a checking-the-box exercise.

When ranking what topics keep them up at night, allocators agreed geopolitical risks worry them the most, followed by market volatility and the threat of trade wars. In contrast, allocators were less immediately concerned about climate change and the threat of military conflict.
 
“With risk’s to the global economy in the headlines every day, investors are keenly aware of the potential threats to their portfolios and are actively attempting to mitigate those risks by allocating to niche and innovative alternative strategies,” adds John Culbertson, President and CIO of Context Capital Partners. “Whether it’s offering a unique approach to managing the risks of a trade war or constructing a portfolio that is more robust than traditional allocation strategies, the alternative investment industry is set up to offer investors a path to navigate market volatility and uncertainty.”