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AMAZON BOOKS
Changing the Industry

Issue 72 December 2011

FUSION POWER MALE SCENTS

Are We Getting Closer? Classics That Linger

Georges Kern
emirates.com

Time is the Brand

E v Er y r ol E x i s m a d E for g r E atnE s s . thE Cosmog r a ph day ton a , i n t r o d u C E d i n 19 6 3 , w a s d E s i g n E d t o m E E t t h E d E m a n d s o f pr ofE s s ion a l r aCEC a r d r i v Er s a nd quiCk ly E a r nEd it s iConiC status. with its patEntEd Chronograph mEChanism and bEzEl with ta C h o m E t r i C s C a l E , i t a l l o w s d r i v E r s to p E r f EC t ly m E a s u r E E l a p s E d C i r C u i t t i m E a n d C a l C u l at E av E r a g E s p E E d .

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Face the future with peace of mind.

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ABU DHABI - BAHRAIN - BASEL - BEIRUT - DOHA - DUBAI - GENEVA - HONG KONG - LAUSANNE - LUGANO - MONTEVIDEO - NASSAU - SINGAPORE - ZURICH

This issue
December 2011

Portfolio

Exclusive to Emirates First Class and Business Class

11

Cover Story 34 The Evolution of Allure

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

Features
42 Flipkart Moves Fast in India
Online sales in India have held great promise but failed to deliver in the past. That is now changing, with flipkart.com leading the charge.

58 Germany Dims Its Nuclear Power

The accident at Japans Fukushima nuclear plant caused Germany to permanently shut down eight of the countrys oldest reactors and plans to retire the remaining nine by 2022. But sceptics argue that the decision was premature.

46 Food: A Temperamental Star

Why does the food on your plate never look as good as in the TV ad? Thats because theres a huge advertising industry behind it.

64 Profit vs. Risk

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

52 Amazon Takes On Publishing

Amazon.com has taught readers that they do not need bookstores. Now it is encouraging writers to cast aside their publishers.

46

42

52

12

Portfolio
69

Exclusive to Emirates First Class and Business Class

Essentials
69 Slow Boat Through Russia
A cruise along the historic Volga-Baltic Waterway not only takes in St Petersburg and Moscow but also all the history and scenery along the route.

74 Yves Saint Laurent

A massive retrospective exhibition covering famed

74

French fashion designer Yves Saint Laurents entire body of work is on show until January in Madrid.

80 The Art of Appraisal

Knowing how much your collection is worth is essential for insurance purposes or when you want to sell. But make sure you get the right appraiser, otherwise it can be an expensive mistake.

84 Fusion Power: Is It Getting Any Closer?

84
For decades, scientists have been predicting that one day the same process that powers the sun will give us virtually unlimited cheap, clean electricity. But the technical obstacles remain huge.

88 That Man Smells Familiar

Men are far more brand loyal than women, which is why classic mens fragrances are still on the shelves. And now there is even a retro movement afoot.

92 Northeast Passage Dream Revived

Departments
17 Notebook
World business in a nutshell.

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

23 Observer
Spotting and analysing business trends.

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

30 Column: Suzanne Goldenberg

Cleaning Up the Himalayas

Published for Emirates by

Editor-in-Chief Obaid Humaid Al Tayer Group Editor & Managing Partner Ian Fairservice Group Senior Editor Gina Johnson Senior Editor Guido Duken Editorial Assistant Hilda DSouza Art Director Tarak Parekh Designer Charlie Banalo Junior Designer Roui Francisco Senior Production Manager S Sunil Kumar Production Manager C Sudhakar Senior Advertisement Manager Jaya Balakrishnan Email: jaya@motivate.ae General Manager Group Sales Anthony Milne Email: anthony@motivate.ae Business Development Manager Nicola Hudson Advertisement Manager Rameshwar Nepali
INTERNATIONAL MEDIA REPRESENTATIVES AUSTRALIA/NEW ZEALAND Okeeffe Media; Tel + 61 89 447 2734, okeeffekev@bigpond.com.au BENELUX M.P.S. Benelux; Tel +322 720 9799, francesco.sutton@ mps-adv.com chINA Publicitas Advertising; Tel +86 10 5879 5885 FRANcE Intermedia Europe Ltd; Tel +33 15 534 9550, administration@intermedia.europe.com gERMANy IMV Internationale Medien Vermarktung GmbH; Tel +49 8151 550 8959, w.jaeger@imv-media.com hONg KONg/MALAySIA/ThAILAND Sonney Media Networks; Tel +852 27 230 373, hemant@sonneymedia.com INDIA Media Star; Tel +91 22 4220 2103, ravi@mediastar.co.in ITALy IMM Italia; Tel +39 023 653 4433, lucia.colucci@fastwebnet.it JAPAN Tandem Inc.; Tel + 81 3 3541 4166, all@tandem-inc.com NEThERLANDS GIO Media; Tel +31 6 2223 8420, giovanni@giomedia.nl SOUTh AFRIcA Ndure; Tel: +27 84 701 2479, dale@ndure.co.za SPAIN IMM International; Tel +331 40 1300 30, n.devos@imm-international.com TURKEy Media Ltd.; Tel +90 212 275 51 52, mediamarketingtr@medialtd.com.tr UK Spafax Inflight Media; Tel +44 207 906 2001, nhopkins@spafax.com USA Totem Brand Stories; Tel +212 896 3846, brigitte.baron@totembrandstories.com

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

PO Box 2331, Dubai, UAE. Telephone: (+971 4) 2824060, fax:(+971 4) 2824436, e-mail: emirates@motivate.ae

Printed by Emirates Printing Press, Dubai, UAE

Portfolio

April 1819. Franois Constantin takes responsibility for the worldwide business expansion of Vacheron Constantin. During a business trip to Italy, this visionary man coined the phrase which would become the company motto in a letter addressed to the manufacture: do better if possible, and that is always possible .

True to this motto and to the spirit that forged its history, Vacheron Constantin still remains committed to pushing the boundaries of watchmaking in order to provide its clients with the highest standards of technology, aesthetics and finish.

Patrimony Contemporaine Hallmark of Geneva, Pink gold case, Hand-wound mechanical movement
Rf. 81180/000R-9159

www.vacheron - constantin.com

Distributor:

Exclusive Agent:

Mall of the Emirates, 1st Floor, Sheikh Zayed Road, Dubai Tel: 04 222 1222

Boutique

DAMAS CUSTOMER SERVICE: 04 427 0336

Emirates Towers 04 330 3262 - Burj Al Arab 04 348 4816 Saks Burjuman 04 351 1980

UAE: Abu Dhabi, Al Fardan Jewellery, Al Fardan Tower, Tel 02 674 5000 Dubai, Al Fardan Jewels and Precious Stones

www.billionairecouture.com - Tel. +39 02 77701411

London

Las Vegas

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Advertisement Feature

BUSINESS NEWS IN BRIEF

Notebook

17

China Ready for Foreign Shares

The Shanghai STock exchange said its basically ready to let foreign issuers sell stock, paving the way for companies from HSBC Holdings to CocaCola to list in the worlds second-biggest equity market. Trading should start as soon as possible when the time is ripe, Xu Ming, executive vice president in charge of the international stocks board, said in an 11 November interview at the exchange. There is no set timetable but the exchange has finished work on technological and regulatory requirements. The trading of foreign equities will mark the biggest change for Chinas stock market in more than five years and add impetus to Shanghais drive to become a global financial centre by 2020. It will also broaden options for the nations 85 million individual investors who are restricted from buying shares abroad by
December 2011

Chinas capital controls. Foreign firms could benefit from listing in China through higher valuations and it will give them access to Chinese currency to fund their expansion in the worlds second-biggest economy. China is also seeking to revive investor interest in an equities market that has slumped the past two years as the government raised interest rates and imposed curbs on property transactions to Overseas companies are barred from selling stock in China, though are allowed to do so in Hong Kong. The Shanghai stock exchange has already been contacted by foreign companies in the finance, telecommunications, consumer goods and manufacturing industries. Xu said the exchange is looking for companies that already have operations in China,

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

an earnings history and strong corporate governance. China has the worlds second-biggest stock market with a combined market value of $3.6 trillion for the Shanghai and Shenzhen bourses as of November 2011. The US is the largest with a market value of $15.2 trillion. n

getty images

tame inflation and prevent asset bubbles.

getty images

18

Notebook
Numbers Game billion, thats how much venture capital was invested in start-up companies during 12 months, according to Dow Jones Venture source. the total climbed 29 per cent as funds raised by consumer internet companies more than doubled from a year earlier. the online ventures including search, entertainment and social media raised $1.3 billion.

$8.4

Tokyo Office Rents Drop

Tokyos record-low office rents may post further declines in the next six months as landlords compete to fill space with supply expected to reach the highest since 2006.
getty images

New office space will rise 12 per cent to 1.54 million square metres in Tokyo next year, matching the level in 2006, according to a survey by Mori Building Co. JP Tower, a 38-storey office tower located in the citys main business district, will be completed in the spring, while the 27-storey Marunouchi Eiraku Building will be built by January. Tokyos office vacancy rate

$6.3

billion is the whopping credit line readily available to HNa group, a Chinese financier in aviation, shipping and hotels, if it chooses to support acquisitions in europe and the Us. the company aims to boost its overseas assets from 10 to 40 per cent within the next five years with investments in ge seaCo, spains HN hotel chain and a turkish air-cargo carrier in the pipeline. billion is the sum that British drug maker glaxo-smithKline will pay the Us government as settlement for the multiple civil and criminal investigations into the pharmaceutical firms marketing practices. the settlement is the largest in a federal case against a pharmaceutical company, surpassing the previous record of $2.3 billion paid by Pfizer in 2009.

plunge in Japan-based Olympus Corps shares sees its stock price hit the lowest since 1995 after revelations that its senior management admitted to have covered up investment losses by using Us$687 million paid to advisers on the 2008 takeover of gyrus group and other investments in the 1990s.

29%

The World
In Figures
the blue and white Chinese porcelain was formerly owned by swiss tycoons, the Zuellig brothers.

rose to 8.8 per cent in October, the first increase in seven months, while rents slid to a record low of 17,011 yen ($219) per tsubo. The citys office vacancy reached its alltime low of 2.5 per cent in November 2007, which drove the average rent to a new high the following year. A tsubo, a standard measure of property area in Japan, is 3.3 square metres.

$525
billion savings plan recently announced by the French government will be accrued by way of tax increases and spending cuts spread over five years. the big package of budget savings will help further slash its public deficit and aid countering fears of France getting dragged into the eurozone debt crises. million, a world record price for any item of ming porcelain, was reached at a sothebys Hong Kong auction. Purchased by an anonymous telephone bidder,

$3

$89

billion is set to be spent on energy projects in the oil rich meNa region from next year to 2016 as per the arab Petroleum investment Corp. saudi arabia tops the list by committing investments of $141 billion, followed by the Uae with $76 billion.

$21.6

Portfolio

ReUteRs

million is the record price for Roy Lichtensteins 1961 comicstyle painting of a man looking through a peephole sold at Christies international at a New york auction recently. the sale is one of 13 records set at an auction of contemporary art by Christies and a world auction record for the pop artist.

$43.2

Notebook
Dubais sunny OutlOOk
Dubais ever-expanding tourism industry has posted impressive results. Dubai hotels hosted 6.64 million guests in the first three quarters of 2011, up by 11 per cent compared with the corresponding period last year. the guest nights rose by 26 per cent to reach 23.68 million, while the average length of stay increased by 14 per cent during the same period. Revenues of hotels and hotel apartments increased by 19 per cent to cross $2.98 billion, with the share in revenues of hotels increasing by 20 per cent and that of hotel apartments by 13 per cent. the total revenues of hotels and hotel apartments during the first half of 2011 was over $2.19 billion, an increase of 18 per cent over the corresponding period last year. Of this, about $1.9 billion came from the hotels and $290 million from the hotel apartments. the number of hotels and hotel apartments increase of one per cent to reach the number of 573.
getty images

19

also recorded a modest

Sasol Investment Spree

Sasol senior group executive Lean Strauss said the company remained committed to its South African roots. Using noble metals to activate the catalyst, the catalyst manufacturing process has been described as the heart of the technology that makes its gas-to-liquids (GTL) process possible (converting gas to petrol). Before the commissioning of the new plant in Sasolburg, cobalt catalyst had been supplied from Sasols manufacturing partner, BASF, from the worlds first large scale cobalt catalyst manufacturing facility in De Meern, near Utrecht in the Netherlands.
ReUteRs

Construction on the Sasolburg plant, based

A Sasol GTL plant in Mozambique, southern Africa.

on the design philosophy of the second plant in De Meern, began in February 2009 and its completion means Sasol now has its own 100 per cent held facility. Sasol has been actively seeking to grow the number of GTL plants it operates globally and while the SA plant will initially be supplying its existing GTL sites in Qatar, Nigeria and Uzbekistan, it would later become a supplier to new plants as they were added.

Sasol, the worlds largest producer of fuel from coal, is looking at spending an additional $5.06 billion in the southern African region over the next three to four years. This is after spending a total of $5.44 billion in the region over the past few years. Speaking at the inauguration of Sasol Synfuels Internationals $126 million cobalt catalyst plant in Sasolburg, South Africa,
December 2011

20

Notebook
DUBAI eVeNt Name: INDIAN PROPERTY SHOW WeBsite: INDIANPROPERTYSHOW.COM Date: 15-17 DECEMBER, 2011 VeNUe: AIRPORT EXPO
Real estate in India currently has an astounding growth rate of 10 per cent per annum, which is why theres been a huge demand for property shows from Non-Resident Indians in the UAE. Unitech Ltd, Hiranandani Group and Godrej Properties are some of the real estate juggernauts amongst the 60 plus exhibitors at this ninth edition of the Indian Property show. Connecting buyers with developers at a prime time the show intends to tap into the growing niche at the luxury end of the market by introducing an exciting new plan Property Dhamaka! That earns buyers rewarding and profitable deals from participating developers by way of discounts, amazing holiday packages for families and free property registration. In addition, theres plenty of opportunity to acquire a general knowhow of the different investment options, financing sources and legal guidelines for buying property in India.

eVeNt Name: Middle East Industrial Gas Conference 2011 WeBsite: gasworld.com/conferences/middle-east-2011 Date: 5-7 December, 2011 VeNUe: Jumeirah Beach Hotel
The Middle Eastern Industrial gas community alongside international producers, distributors and end users converge at Dubais Jumeirah Beach Hotel for three days sharing perspective on this years theme Balancing growth and investment. The theme focuses on identifying drivers for growth in the region, current and future gas markets and gas supply options.

DUBAI

United Arab Emirates

eVeNt Name: World of Scada WeBsite: iirme.com/SCADA Date: 12-15 December, 2011 VeNUe: Mvenpick Hotel, JBR
The MENA regions leading SCADA conference presents a unique platform for diverse companies including telecom, water and transport to network and exchange valuable information and insights into the operations of SCADA systems.

eVeNt Name: Gulf Traffic WeBsite: gulftraffic.com Date: 12-14 December, 2011 VeNUe: Dubai International Convention & Exhibition Centre
As part of the UNs Decade of Action Road Safety 2011-2020, the Gulf Traffic conference is the largest event in the Middle East that covers road safety and ITS. Increasing road safety and reducing traffic congestion are some of the key issues addressed by global speakers at the two-day conference.

eVeNt Name: Future Concrete 2011 WeBsite: futureconcrete.com Date: 12-14 December, 2011 VeNUe: Ritz Carlton, DIFC
More than 30 international experts will share insights on advanced construction materials, innovative practises and smart construction. The conference will feature the first Environmental Construction Exhibition that highlights products and technologies designed to make the construction industry environment friendly.
Portfolio

We perfect this watch by hand. Even the parts that you cant see.

Although you will probably never actually see most of the levers, wheels, and springs in the SAXONIA DUAL TIME calibre, Langes master watchmakers meticulously perfect them by hand. Aficionados will appreciate the fact that

not all of these lavishly finished parts are concealed. Fortunately, the sapphirecrystal back reveals the fascinating interaction of quite a few of them. Treat yourself to a close-up look. For instance at Ahmed Seddiqi & Sons in Dubai.

The SAXONIA DUAL TIME. Exclusively at:

Observer
BUSINESS NEWS IN BRIEF

23

Reinventing Post Offices

Due to decreasing mail volumes, European postal services had to adapt to the digital world in order to survive, reports Elisabeth Rosenthal.
The DeuTsche PosT office across from the train station in Dsseldorf, Germany, offers DVDs, umbrellas, phone cards and toys with the processing of mail appearing nearly an afterthought. And the facility housing it is not a post office at all. Deutsche Post occupies a corner space in a bank. With mail volumes decreasing one to two per cent annually in many countries, European postal services from Germany to Sweden to Switzerland have reinvented
2011 New York Times News service

shopkeeper or even a centrally located homeowner is given a sign and deputised as a part-time postmaster. At the same time, many European postal services have developed a host of electronic services that are increasingly making traditional post offices and mailboxes obsolete. Bills and catalogues can go first to digital mailboxes run by the post office on customers computers, and the customers can tell the post office what they want it to print and deliver. And while Americans are asked to send in suggestions for what celebrity should grace the next stamp, Germans can buy virtual postage from their cellphones. Deutsche Post has expanded package delivery networks to profit from the uptick in online shopping and has also progressively expanded its offerings into completely new areas, like running online marketplaces for freelance writers similar to eBay. Instead of watching its business be

on paper mail. We realised that being a national postal provider was an endangered business, that we had to redefine the role of postal providers in a digital world, said Clemens Beckmann, executive vice president of innovation of the German post offices mail division. With the US Postal Service facing insolvency, it is looking toward Europe for new operating models, even though US legislation currently precludes adapting some of those innovations. After selling off all but 24 of 29,000 post office buildings in the past 15 years, the German postal service is now housed mostly within other business partners, including banks, convenience stores and even private homes. In rural areas, a

themselves over the past decade as multifaceted delivery and information companies tailored to the virtual age. Though Deutsche Post by law still delivers to every address six days a week, it has jettisoned tens of thousands of buildings, 100,000 positions and its traditional focus
December 2011

24

Observer
eroded by more aggressive marketplace competitors, as has happened in the United States, Deutsche Post completed its purchase of the logistics company DHL in 2002, meaning many Americans have been customers of the German post office. European postal services vary widely in their degree of adaptation to the digital age. But the United States Postal Service (USPS) is probably the best example of a pure monopoly that has seen the least change, said John Payne, the chief executive of Zumbox, a Los Angeles-based startup that offers virtual mailboxes for personal computers in the United States on a private basis and that has sold the program to foreign postal services. Payne has empathy for the failing postal service and for all the regulation it must abide to, including not being able to close an outpost solely for operating at a deficit. He said: They live under legislative restrictions on what businesses they can enter and are expressly prevented from entering business unless its related to physical mail. To close a projected $9 billion budget gap, the USPS has proposed eliminating 3,700 of its 36,000 post offices and is selling off historic buildings that have anchored towns across America. The 1,579-square-metre neoclassical landmark post office in downtown Greenwich, Connecticut, was recently sold to a developer. Meanwhile, the post office will move to a former pet supply store. European postal services started to think about new business models in the 1990s, when the European Commission opened up postal monopolies to competition and liberalised regulation. But the subsequent changes have come in response to declining mail volumes and, to a lesser extent, pressure to reduce greenhouse gas emissions. While Deutsche Post was an owner of 29,000 post offices in 1990, it is now AfTer DeuTsche Post closed the post office in the village of Dorn-Assenheim seven years ago, it hired Renate Weitz, a retiree, to dispense postal services from her house each morning though it now has plans to close that branch as well. In Schmitten (population 10,000), Jens Kinkel took over postal tasks at his stationery store. I run the post office to get more customers, Kinkel said. Most buy stamps and grab a paper as well. Dr Julia Neu, a professor of sociology at the Niederrhein University of Applied Sciences, said the loss of post offices had been particularly painful for older people in the former East Germany, where they doubled as meeting places. A lack of post offices is mostly dealt with by people helping each other by sharing cars or dropping off mail for the ones who arent mobile, she said. But overall, advocates say the expansion into virtual services has improved customer satisfaction, saved money and helped reduce carbon emissions. Virtual mailboxes can receive, store and organise years of bills, sparing digital customers the need to check one by one
Renate Weitz, a retiree, dispenses postal services from her home in the German village of Dorn-Assenheim.

largely a tenant, with tens of thousands of counters lodged in other businesses. Outsourcing has allowed it to trim staff.

the websites of credit card companies and cellphone providers. While this free service was slow to catch on in Sweden, membership has spiked in the past year, said Anders Asberg, head of product and market development for the Swedish post office. For actual packages, Deutsche Post customers can choose to pick up items at automated banks of lockers in places like train stations; the locker number and opening code are sent to their cellphones. Posten, the Swedish post office, allows vacationers to transmit cellphone photographs that Posten prints as postcards and delivers as physical mail. Surprisingly, perhaps, new postal models have not meant the end of direct marketing (aka junk mail), a lucrative business though executives say such promotional material will be increasingly likely to arrive via computers and cellphones. PostNord an umbrella company that includes both the Danish and Swedish postal services now even helps smaller companies develop direct marketing campaigns through its Advertising Planner, which boasts: Its just as natural for PostNord to ensure that your offer reaches the right customer at the right time via satellite and cyberspace as via a traditional postman. n
Portfolio

Creating watches for 200 years

chaumet.com

26

Observer
O N E 2 W AT C H
TExT: HildA dsOuzA

Oz Carbon Trading
It has been an uphill struggle, but Australian Prime Minister Julia Gillards Clean Energy Futures plan is set to become law on July 2012, setting a cost of A$23 ($23.80) on each metric tonne of greenhouse-gas emissions linked to climate change. The carbon levy is fixed until 2015, when Australia begins a so-called cap-and-trade system to let the market set the price as emitters buy and sell permits. Australias emissions market is forecast to be as large as the one planned in California and the second biggest after Europes. Miners, energy producers, utilities and others bound by the new law also have the option of importing emissions credits from lessdeveloped countries via the United Nations Clean Development Mechanism. UN offset, known as Certified Emission Reductions, have been trading in the US$9 range on the ICE Futures Europe exchange in London. Thats less than half of Australias fixed price in 2012. That means Australian companies could get a good buy if they are willing to move early. Australia, which burns coal to produce about 80 per cent of its electricity, voted to put a price on carbon to help the country cut emissions by five per cent as of 2020.

Virginia M Rometty
International Business Machines Corporation (IBM), the worlds largest computer-service provider, has selected its senior vice president, Virginia M Rometty, as its new chief executive officer effective from 2 January. Rometty, 54, will become the first female chief executive to lead the New York-based company in its 100-year history. She will replace Samuel Palmisano who will continue as chairman from early next year. Rometty, a graduate from Northwestern University with a degree in computer science, joined IBM in 1981 as systems engineer and steadily progressed to the top of IBM Global Services. Serving as the divisions strategy leader in 2003, she oversaw the successful integration of PriceWaterhouseCoopers Consulting after IBM bought the consulting firm for $3.5 billion. As senior vice president and group executive for sales, marketing and strategy in 2009, she spearheaded the companys push into emerging markets such as China, India and Brazil. In this position she was responsible for IBMs worldwide results, which exceeded $99 billion in 2010 and drove the companys shares to the highest level since it went public in 1915. IBMs five-year plan, which was initiated by the outgoing Palmisano, aims to enhance revenues by $20 billion by expanding in markets such as cloud computing and analytics. This is likely to flow smoothly with Rometty as chief and working closely with Palmisano, as shes well versed in strategy is invaluable.

Portfolio

reuters

and her experience in sales, service and acquisition

Magnifique French Inspired Design

Fro m Pa ris t o D ub ai, from L ond on t o Ne w York , fro m Munich t o Beijing L iv e a m agnifique life a ro und t he worl d.

www. s o f i te l . co m

Dubai

Munich

beijing

Pa r i s

28

Observer

Indias Solar Boom

India expects to have 10 gigawatts of solar power capacity by 2017, more than double what it initially targeted, as the industry ramps up quicker than predicted. The Ministry of New and Renewable Energy plans to award permits for as much as 10,000 megawatts of grid-connected solar plants by 2017, up from its initial target of 4,000 megawatts, Bharat Bhargava, a director at the ministry, said at a conference in the southern city of Hyderabad. Its also doubling its target for off-grid solar plants to 2,000 megawatts. Asias third-largest energy consumer provides a bright spot for solar panel makers facing plunging margins and slowing growth. Developers of projects that generate electricity from the sun in Europe, the worlds largest solar market, are unable to get bank financing to start new plants, leading demand for panels to fall 10 per cent short of expectations this year. Interest from solar power developers exceeded the amount of available capacity on offer by more than seven times for Indias next auction of permits, Bhargava said. The ministry has received 218 plants are scheduled to be finished by January 2013.
reuters

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

Mitsubishi Buys $5.39 Billion Stake

Mitsubishi, Japans largest trading company, has agreed to pay $5.39 billion for a stake in Anglo Americans Chilean copper unit in the Asian nations biggest mining acquisition. Anglo sold 24.5 per cent of Anglo American Sur SA to Mitsubishi. The deal may stymie Chiles state-owned producer Codelco from taking up its option to buy a 49 per cent stake in the operation. Buying the stake in the unit, valued at $22 billion based on Mitsubishis offer, will almost double the Tokyobased companys copper output as supply of the metal used in wires and pipes drops. Rio Tinto Group, the worlds second-largest mining company, expects global copper demand to rise more than 40 per cent by 2020. Mitsubishis investment will give it a share in Anglos undeveloped Los Sulfatos and San Enrique Monolito assets, which Anglo says are world-class.

AsiA-PAcific TrAde Accord

12 months, a deal that could create a model for expanded trade with more Asian countries. The current talks involve Australia, Chile, Peru and Singapore, all of which already have separate free-trade
GettY IMAGes

agreements with the US, as well as Malaysia, New Zealand, Vietnam and Brunei. Two-way trade between the US and those eight nations totalled $171 billion last year, compared with $457 billion with China. President Obama said taken together, the eight member economies would be Americas fifth largest trading partner.
Portfolio

President Barack Obama has received a commitment by eight other nations to join the US in forging an Asia-Pacific trade accord. Officials agreed on a blueprint that will lead to drawing up a formal TransPacific Partnership in the next

Observer

29

Top 10
TOp 10 GlObAl FiNANCiAl CENTrEs (According to the 10th Global Financial Centre Index)
RANK 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. CITY London New York Hong Kong Singapore Shanghai Tokyo Chicago Zurich San Francisco Toronto GFCI 10 RATING 774 773 770 735 724 695 692 686 681 680
SOURCE: ZYEN.COM

The World

Citigroup Sells EMI in Parts

WOrlds 10 MOsT ExpENsivE COuNTriEs FOr CONsTruCTiON (As per the EC Harris report)
Rank 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 2011 Switzerland Denmark Sweden Ireland France Australia Germany Austria Belgium Canada 2010 Switzerland Denmark Finland Australia Ireland Sweden Canada Bahrain New Zealand Singapore

GettY IMAGes

Citigroup agreed to sell EMI Groups recorded music and publishing businesses in separate transactions for a combined $4.1 billion. The breakup of London-based EMI, the 114-yearold music company that owns Abbey Road Studios, sells Beatles albums and publishes songs written by the late Amy Winehouse, ends a nine-month bidding war. Citigroup, the New York-based lender, seized EMI in February after investor Guy Hands fell out of compliance with loan covenants. Vivendis Universal Music Group will buy EMIs record labels, home to Katy Perry and Coldplay, for $1.9 billion, and a Sony-led group that includes billionaire David Geffen will pay $2.2 billion for the publishing unit. The auction had a surprise ending, with the two winning bids outstripping rivals who had been in the lead for much of the process. Warner Music Group, owned by billionaire Len Blavatnik, offered $1.5 billion to $1.6 billion for EMIs recorded arm, according to sources. Sony was vying with BMG Rights Management GmbH, the music company controlled by KKR & Co., which had bid $1.8 billion to $2 billion for publishing.

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

WOrlds TOp rANkiNG NATiONs sHOWiNG HiGHEsT dEGrEE OF ECONOMiC FrEEdOM (2011 Index of Economic Freedom)
Rank 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Country Hong Kong Singapore Australia New Zealand Switzerland Canada Ireland Denmark United States Bahrain Freedom score 89.7 89.2 82.5 82.3 81.9 80.8 78.7 78.6 77.8 77.7 Change from previous 0.0 +1.1 -0.1 +0.2 +0.8 +0.4 -2.6 +0.7 -0.2 +1.4

SOURCE: HERITAGE.ORG/INDEx/RANKING

December 2011

GettY IMAGes

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Commentary

Suzanne GoldenberG

Cleaning Up the Himalayas

The people who seT ouT To climb Everest spend months dreaming about reaching the summit. They pay $65,000 in fees to the Nepali government, they train, trek for days, endure extreme discomfort, even danger. So it should be a simple thing to get them to pick up after themselves. Apparently not. Nearly 60 years after Edmund Hillary conquered Everest, and 30 years after climbing turned commercial, the region is still struggling to deal with mass tourism. By the standards of the 70s, when the main climbing routes were littered with
geTTY iMageS

equipment in the hope that they will carry down everything they brought. Repeat visitors to Everest see a difference. Its visibly and spectacularly better, says Jan Morava, an electrical engineer from the Toronto area who was attempting the summit with his brother and a climber from the UAE. There were piles of rubbish in base camp before. BuT conservaTion groups say the deposit is small compared with the other expenses associated with an ascent on Everest. They also argue the Sagarmatha Pollution Control Committee lacks the resources to keep up with all the groups climbing Everest and to make sure that they do indeed carry all their equipment Its difficult to tread lightly in the high-altitude environment, especially in areas this remote. The first expeditions to Everest were monumental in scale. The 1953 attempt, which brought success to Hillary, set off from Kathmandu with 1,200 porters for their equipment, according to Kancha Sherpa, the last surviving member of the team that made it to base camp. Even Hillary admitted to leaving equipment behind, and more than 2,500 people have made it to the summit since his day. The heavy traffic left its mark. People were careless. They would take a rubbish bag but they would still leave stuff behind, said Tshering Tenzing Sherpa, an official of the Sagarmatha Pollution Control Committee, the NGO charged with overseeing the Everest cleanup. Modern expeditions are much more conscious of their footprint. Groups must pay a $4,000 (2,500) deposit on their back down to Kathmandu. The committee says it brought back 25 tonnes of rubbish from Everest last spring including 12,000kg of paper and plastic. But conservationists argue that waste disposal is haphazard. There are rubbish dumps with heaps of tuna cans and plastic bottles only a few minutes walk away from villages on the trekking trail. And, says Tshering, there is plenty more detritus of the past still out there rubbish discarded by climbers years and even decades ago, preserved in ice and snow. Just above the ice falls at crampon point you can see cans from 10, 20, 30 years ago or even older, Tshering says. Theres a lot of old rubbish out there. Other high peaks less famous than Everest are even dirtier, notes Tshering. And with climate change, snow and ice on mountaintops is melting, exposing even more rubbish. We are in a garbage race, he says. n
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discarded tents and food packets, Everest is a lot cleaner, with just a smattering of plastic bottles and sweet wrappers on the rocky plateau that is base camp. But a Nepali environmental coalition is pressing the government in Kathmandu to adopt a new management plan to safeguard the Himalayas in the age of mass tourism and to make amends for the environmental sins of the past. Everybody talks about waste in the mountains but nobody talks about proper solutions, says Phinjo Sherpa, director of Eco Himal. Cleaning up Everest every once in a while does not help. The main thing is management, waste management. The group has lodged a plan with the government that calls for tougher penalties against litterbugs at Everest and the surrounding areas. They are also pushing for the installation of portable toilets at base camp and investment in waste treatment facilities
guardian 2011

which currently do not exist in the region with proposals for five incinerators and sewage treatment plants.

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The Evolution of Allure

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

December 2011

Profile

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Profile

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

The first watches with a digital hours and minutes display were created here, almost implausibly, way back in 1885. One of the worlds first known wristwatches left Schaffhausen destined for the market in the 1890s. Just a few years later, the fascinating history of the company reveals that the lauded psychiatrist and founder of Analytical Psychology, Carl Gustav Jung, became a co-owner of IWC through marriage in 1903. Unique from the outset, IWC watches were created when Florentine Ariosto Jones selected this small, idyllic city in Switzerland as the base to develop and manufacture high-quality Swiss watches for the American market. The company had a successful beginning and Jones flourished in his venture until adversarial circumstances and fluctuating financial markets forced the sale of IWC to the Rauschenbach family in 1880. This initial change of ownership and all subsequent inheritors has not stunted the Americans original vision though, and the company has always stood on a solid foundation. However, at the turn of

the present century, IWC was in need of some rejuvenation. The injection of flair required to elevate the company came in the form of current CEO, Georges Kern. Although quick to acknowledge the intrinsic, historical weight of the brand, Kern nevertheless knew he had to shake things up. At that time 10 years back, IWC was a very regional-oriented company. Well known in Austria, Switzerland and Germany, and very well established, but dusty and old. A good brand, not a destroyed brand at all turning around a destroyed brand is always more difficult than developing a dusty brand but what we have managed to do over the years is to take a solid regional brand and make it truly global. The son of renowned European jeweller Ren Kern, Georges Kern was born in Dsseldorf in 1965 and grew up in both Germany and France before moving to Switzerland to attend the University of St Gallen. After graduation, Kern decided to stay in Switzerland and found work at Jakob Suchard. Four years later he secured his first position in the watch industry when he joined TAG Heuer a role that would provide valuable experience as the company underwent rapid and expansive growth. When Kern sensed that TAG

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

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Heuer was to be acquired he set his sights on joining the Richemont Group. Nicolas Hayek, head of the Swatch Group, arranged for Kern to be contacted by Franco Cologni at Richemont and Kern made it into the Richemont Group and was appointed CEO of IWC two years later at the relatively young age of 36. Kern recalls how he secured the premier position with humility, in consideration of IWCs current global status. Well nobody else wanted to do it and, joking apart, when Richemont acquired Jaeger LeCoutre and A. Lange & Shne back in 2001, the priority was on those brands. IWC was just in the package. The reality is that I was one of the few people at Richemont who could speak French, English and German and I was looking for more responsibility. I guess looking at the position of IWC today, they would never give me the job again considering the size of the company. But at the time the company was not in the focus and so they said Okay, let the guy take care of it. Now we are one of most successful brands in the group. So how exactly did he take care of it? What were the strategies, the creative ideas and the plans to implement them? Well we had the right product, the right advertising, the right communication and the right distribution. We had the support and we changed the strategy, reworking the existing products. Maintaining fidelity with the companys six different lines of watches was crucial. As Kern elaborates, We have not launched one single product which is totally new. Everything we have, be it the Pilot, the Portuguese or the Portofino, had been there as part of IWC. What we have done is bring them up to speed in a contemporary way. I dont think we need to change that. We can grow with what we have. Kern is clearly in his element when discussing the mechanics of brand building. He adjusts the cuffs on his colourful lime green shirt and his eyes sparkle as he extolls on the subject.
December 2011

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

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

Clearly as sharp intellectually as he is sartorially, Kern has a forensic knowledge of the modern watch industry and knows what he must do to maintain the growth of the company. We didnt have boutiques or marketing tools when we were developing, and many products were not in the portfolio, but you evolve. The brand evolves or

you die, this is Charles Darwin, you have to always adapt. Todays management and challenges are totally different than from 10 years back. You have to manage growth. The pressure when you have a substantial size in the context of a big group is different. Ten years ago the question was what shall I do, how do I build the brand? Today you have to

Profile

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Profile

Renowned photographer Peter Lindbergh shot an impressive cast of IWC brand ambassadors in the Italian town of Portofino. The resulting photographic exhibition was unveiled with the launch of the Portofino watch collection earlier this year. Clockwise from top left: Oscar-winning Australian actress Cate Blanchett; renowned American actor Kevin Spacey; Japanese actor Hiroyuki Sanada with 80s supermodel Elle Mcpherson.

deliver all the financial results. If we want to become a classic brand and you only have a few classic brands in the world you have to act in a different way. To become a global brand you have to make it evolve. It is with this brand evolution in mind and with a focus on creating the essential myth around IWC that Kern approached the recent revamping of the Portofino line. Kern knew that he had to produce something special. Over the last 250 years everything has been invented in watchmaking. You cannot change physics a minute remains

a minute. The challenges in the watch industry are different now. First of all, the world changed. Today when you buy a watch you dont buy it to read time. You want a total emotional experience. So you need a strong design and a story. And you need high quality in terms of technical features. You buy a package, an emotion, a brand, a story and a design. The STory for the new Portofino collection came to Kern instinctively. A recreation of the timeless, enigmatic style epitomised by Portofino itself. The seductively beautiful village on the

Ligurian coast of Italy was a famous enclave for the Hollywood glitterati of the 50s and 60s and has always been associated with classical Italian elegance. It was the obvious place to stage a marketing masterstroke. A world-touring exhibition by the celebrated photographer Peter Lindbergh, featuring an extensive cast of brand ambassadors, too many to list, but that includes football legend Zinedine Zidane, actors Kevin Spacey, Jean Reno and Cate Blanchett, and model Elle Macpherson (a particularly fitting choice given that Lindbergh is credited with creating supermodels and
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Kern believes in love brands. These are brands that are so well-loved and known that they inhabit an exclusive realm.

she was the first of the 80s supermodels. Macphersons first professional photo session was with Lindbergh for Italian

of the Brand in attendance. In Dubai the appearance of the Lindbergh Portofino exhibition will be on 10 December at the Dubai International Film Festival. Whilst creating a powerful brand image is essential, there must be genuine substance behind the allure, and this is where IWC really triumphs. The dedication to form and flawless design is immediately evident the moment you see and hold an IWC watch. A tour of the manufacturing plant in Schaffhausen reveals the astounding levels of precision and the rigorous testing implemented throughout. Dedicated employees demonstrate the production of tiny components barely visible to the naked eye, which can only really be appreciated with the aid of powerful microscopes. Even then its only a partial insight into the intense scientific testing each part undergoes before it can be used in a watch that will tell the right time for

centuries to come. Ultimately it is the quality of each IWC product that stands as an immovable frame around which the fabric of the brand can be weaved. This is central to Kerns continual striving to elevate IWC to still greater heights. I believe in love brands meaning that, there are brands out there, and I hope IWC will be one of them, which you love so much that you just go for it. He continues, I truly believe that wealth is growing, the wealth of humanity will grow you see it every year in statistics. The question is who can reach these wealthy people? If you have that love brand quality, if you are able to build one of them, then you are fine. Thats the art, thats the magic. And what are Kerns plans for the future? In the next decade we will turn IWC into an institutional brand, is his confident reply. n

Vogue and he remained a mentor).

Kern lighTS up when he recalls the experience of creating the shoot in late 2010. You know that old perennial question: Who would you invite to your perfect party? This was it. The question put into practice. Not as good as I had hoped for better. Much better. For Lindbergh it was also a dream job and he said afterwards that, This was the sort of shoot I became a photographer for. The sort of shoot I dreamed of as a teenager. The exhibition was unveiled to compliment the launch of the new Portofino collection earlier this year at the Salon International De La Haute Horlogerie (SIHH) in Geneva with a star-studded array of celebrity Friends
December 2011

Profile

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

FlipKart Moves Fast in india

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

local bookstores, he found it online at

2011 New York Times News service

hen Prabhu Kumar could not find a book he wanted in Bangalores

phones and other items in as little as 24 hours at no extra cost. Kumar doesnt have to pay flipkart a single rupee until a courier bearing his books arrives at his door. He can then hand over cash or a credit card. I think it perfectly fits the Indian mentality, Kumar said. While dozens of electronic commerce firms have recently sprung up to capitalise on Indias growing internet use, they have a problem. Indians are not yet comfortable

with shopping on the web. Many of them remain unwilling to use credit cards online. So the Indian retailers have gone to great lengths to gain customers. Clients may pay cash on delivery, and the company fields delivery squads to ensure shipments get to customers quickly. One recent afternoon, four flipkart delivery men loitered at a bungalow in the Koramangala section of Bangalore where the company started. When a small delivery
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Amazon.com for $10. But he had to pay more than $9 in fees to have Amazon ship it to him. Kumar, a software programmer, said he would not be doing that again. He now shops on Indias answer to Amazon flipkart.com which delivers books,

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

van arrived from the companys warehouse, the men rushed to take out two large duffel bags filled with packages that they put onto two tables in the house. After scanning the packages with hand-held computers, they put the boxes into large backpacks, which they carried on their backs as they rode off on motorcycles to deliver them. Online sales still make up a small portion of overall retail spending one estimate pegs it at $10 billion, a tiny fraction of Indias $500 billion retail market but they are growing fast. flipkart says it had revenue of 500 million rupees ($11 million) in its last fiscal year, and is now clocking sales of about 10 million rupees a day. SnapDeal.com, a coupon and deals site similar to Groupon, expects sales of 1.5 billion rupees this year, up from almost nothing the year before. The top executives of the Future Group, Indias largest retail company, says its daily online sales are on pace to triple between now and March next year.
December 2011

This time it is for real, said Kishore Biyani, the founder and chief executive of the Future Group, referring to an earlier wave of e-commerce euphoria in the early 2000s. This is the biggest thing to happen in India. That rapid growth has drawn the attention of venture capitalists who poured $183 million into 20 e-commerce firms within the last year, up from $61 million for 13 firms in the previous 12 months, according to Venture Intelligence, a research firm. The rapid growth has also attracted the notice of American online retailers. Amazon, which has a software development office in Bangalore, is now building a warehouse and hiring employees for an Indian site, according to two industry officials. And earlier this year, Groupon bought an Indian website, SoSasta.com. But, like in frothy Silicon Valley, some Indian analysts and investors are starting to question the frenzied deal-making.

These sceptics find it difficult to justify the high prices venture capitalists are paying to invest in unprofitable Indian e-commerce firms. For instance, VCCircle, a news site, recently reported that flipkart may soon raise $150 million, which would give it a $1 billion valuation. (Executives at the company declined to discuss its financial plans.) IndIa has 50 million to 100 million internet users, according to various analysts, and the number is growing by about 30 per cent a year. JuxtConsult, a New Delhi-based research firm, estimates that 17 million people bought something online this year, up from 10 million last year. The Indian government estimates that household consumption has increased by more than two-thirds in the last five years, and most of that increase has come in the purchase of nonfood items. It seems to be more for real than a flash in the pan, said Kanwaljit Singh,

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

who is a senior managing director at Helion Advisors, which has invested in about a half-dozen Indian e-commerce sites, including MakeMyTrip. But capitalising on Indias growth online will not be easy. Sachin Bansal and Binny Bansal (who are not related), the founders of flipkart, have had to do things that their American or European counterparts would never have. They have set up delivery operations in 13 big Indian cities like Bangalore, Mumbai and New Delhi because Indian shippers do not have the delivery and packagetracking abilities that FedEx and UPS provide for its American customers. They plan to expand flipkarts delivery network to 25 cities within a year. Sachin Bansal, the companys chief executive, said that by having its own staff, flipkart avoids paying courier services commissions of more than two per cent to accept cash on delivery, which make up about 60 per cent of

its orders. It can also track packages more accurately. And because labour costs are relatively low in India, its delivery cost is a modest $1 a package. More than 90 per cent of retail transactions in India are in cash, Bansal said. People like my dad and my uncle, they are much more comfortable with cash. If we want to increase our customer base, we have to accept cash. FlIPKart Is not alone in tweaking its model to suit Indian conditions. Myntra, an online retailer of clothes, has a delivery staff in Bangalore and plans to hire couriers in other cities. SnapDeal offers customers the option of making partial payments online and paying the balance to merchants whose products and services it sells, said Kunal Bahl, a co-founder of the service. Consumers and suppliers laud flipkarts service and execution. But they expect the company to soon face greater competition,

especially if Amazon starts an Indian operation. Today they are the best, said Ananth Padmanabhan, vice president for sales at Penguin India. But, he asked, If Amazon comes here next month, and they might, what will flipkart do? An Amazon spokesman, Craig Berman, declined to comment on the companys plans for India, but Padmanabhan said Amazon officials have been holding talks with publishers, and another industry official said the retailer has begun hiring employees for an Indian site. The Bansals say they are prepared for competition from Amazon. Sachin Bansal, who worked with Binny Bansal as a software developer at Amazon before starting flipkart, brushed aside a suggestion that the firm would make for an easy acquisition by Amazon. We are very keen on going our own way, he said. The opportunity is so large that we would want to grow it to a much bigger level before we think of anything. n
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Advertising

A TemperAmenTAl STAr
Why does the food on your plate never look as good as the one in the TV ad? Thats because theres a huge creative industry behind it, reports David Segal.

Food:

he sauce will not behave. It is supposed to drip twice, on cue, from the bottom

staples of the American diet into luscious objects of irresistible beauty. If you watch television, youve seen his work, and the work of the five or six other major players in this micro-niche of advertising. These men yes, theyre all men make glossy vignettes that star butter-soaked scallops and glistening burgers. Their cameras swirl around fried chicken, tunnel through devils food cake and gape as soft-serve cones levitate and spin. Few outside the business know their names. But given the more than $4 billion in television air time bought by restaurant chains and food conglomerates each year, these directors arguably have some of the widest exposure of any commercial artists in the US. In a typical week, tens of millions of viewers see their work. Aside from movie directors, Somoroff says during a break in shooting, I dont know anyone with an audience as large as mine. On this particular afternoon, he is filming a commercial for a chain that did not want to see its name in this article.
Jimmy Furino lays a piece of chicken on a grill during a shoot for O'Charley's restaurants at MacGuffin Films in New York.

right-hand corner of a forkful of tortellini first as the fork is lifted above the plate and, second, after the fork pauses briefly in the air and starts to rise again. Two drips. A sequence that lasts a second and a half, tops. A dozen men at MacGuffin Films, a studio in Manhattan, are struggling to capture this moment. For more than an hour one recent afternoon, they huddle around a table rimmed with enormous stage lights, fussing over a casserole as if its a movie star getting primped for a close-up. Lights. Roll. Action. Drip! shouts Michael Somoroff, a veteran commercial director who has shot television ads for Red Lobster, Burger King, Papa Johns and dozens of other fast-food and casual-dining chains. A specialist in the little-known world of tabletop directing named for the piece of furniture where most of the work is set Somoroff is hired to turn the most mundane and fattening

And you can sort of understand why. If youve ever been to a restaurant and thought, This does not look like the dish in the ad, heres the irony: The dish in the ad doesnt look like the dish in the ad, either. This casserole shot, for instance, is an elaborate tango of artifice, technology and timing. The steam wafting over the dish comes not from the food, but from a stagehand crouched under a table with the kind of machine that unwrinkles trousers. The hint of Alfredo sauce that appears when the fork emerges from the pasta? Thats courtesy of tubes hidden in the
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2011 New York Times News service

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back of the dish and hooked to what look like large hypodermic needles. Moments before each take, Somoroff yells, Ooze! That tells the guy with the needles, standing just outside of the frame, to start pumping. As for that quarrelsome drip from the fork, it is the responsibility of Anthony DeRobertis, a special-effects rigger who holds his own hypodermic of sauce and is having a hard time synching with a hand model, a young man with a military haircut who is clutching the fork. Anthony, the second drip is about 10 minutes after the shot is over, says
December 2011

Somoroff after five or six takes, sounding faintly annoyed. Im right on it, DeRobertis says. Youre on it, but its not dripping when it has to drip. A break is called and a tube is attached to DeRobertis sauce injector, which is then taped near the bottom tine of the fork, in a way thats invisible to Somoroff s immense Photo-Sonics camera. Sauce and fork are finally in unison. After a few more tries, Somoroff has a take he likes enough to show to reps from the client and its ad agency, a group of whom are waiting in a nearby room that is decked out with a large high-definition

TV. The pasta appears moist, the steam organic and the minuet of drip and hand nothing more than a diner on the verge of a blissful bite. i make my living basically taking food and painting a reality with it, says Somoroff, leaning back in a chair in his office as the team preps another set-up. And if I succeed in a given moment, youre going to go buy that dish because youre going to identify with the experience weve created. To do that with something as banal as food is the challenge. I mean, its easy to go out and

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

shoot a beautiful sunset or a beautiful girl. Theyre beautiful, OK? He gestures toward the middle of the studio. Ive got a noodle over here. This is a good moment to be a tabletop director in the big leagues, particularly if you specialise in food. Low- and midpriced chain restaurants are one of the few segments of the economy that decided, during the recession and in its aftermath, to spend as much or more on advertising than they did in the years before. Fast-food, casual-dining and pizza chains, as well as what are lumped together as doughnut and coffee restaurants, spent $300 million more on

TV ads in 2010 than they did in 2007, according to Kantar Media, a market research firm. If patterns hold, the numbers will be even larger this year. Generally speaking, restaurant chains spend about three per cent of revenue on advertising, says Michael Gallo, an analyst at C.L. King & Associates. Because these restaurant systems are large and have density, television is an easy way to reach customers in a cost-effective way. And any restaurant chain that forswears
Ed Fountain, who builds food-tossing devices, next to a catapult in his workshop at Silvercup Studios in the Queens borough of New York. Fountain originally constructed the contraption for a Long John Silver's commercial that featured colliding shrimp.

TV ads is in serious trouble. If you come off television, when your sales dip, it takes a long time to get them back to where they were before they stopped advertising, says Michael Branigan, vice president for marketing at Sizzler. There are a tonne of studies that show this. You
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Because these restaurant systems are large and have density, television is an easy way to reach customers in a cost-effective way.

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Advertising

occasions, the food you see on screen is merely a facsimile of the product. We used lard and Karo syrup for an ice-cream client, says David Deahl, a tabletop director in Chicago. The lights we have melt the product so quickly that its impossible to make ice cream look like ice cream. So we got permission from our client to fake it. Thats a rarity. Deahl and other directors say they expend far more effort making the food look authentic than they do glamorising it. The risk is overpromising, a topic that comes up a lot on sets. Until the early 1970s, most TV commercials for food and drink were static, shot with a zoomed-in, wide-angle lens mounted on a camera that didnt move. Then came Elbert Budin, a former still-life magazine photographer, who set up a studio not far from Penn Station in Midtown Manhattan; his pet finches had the run of the place. He used micro lenses placed five centimetres from the product, close enough to see individual droplets on a soda can. With the help of a mini jib, he would swing the camera in graceful arcs. If tabletop has a vocabulary, Budin coined many of the words. He popularised prep shots (a kind of back story for the product, typically ingredients being chopped), crave shots (self-explanatory) and hero shots (a glorifying farewell look at the product, usually in the last few
grapheasT

seconds of the ad). And it is from Budin that we get one

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

of the lasting visual tropes of American advertising: flying food. Ever since he launched an orange through a thin sheet of water for Sunkist showing in gorgeous slow motion the hole left by the fruit everything that you can put in your mouth and store in a pantry has been hurtling through the air. Food has to be in motion to have character, says Alex Fernbach, another Budin acolyte, who now works at Arf & Co, a studio in Hoboken, New Jersey. It gives food a personality. n
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lose brain share of your customers, and it is expensive to get revenues up again. If I stopped advertising, Sizzlers revenue would be down, minimally, 10 to 15 per cent for the year. anything that flatters the food, of course, is fair game, and that includes gimmicks youre unlikely to find in a fridge. Glue is used to keep spaghetti on forks and pizzas in place. The ice in a

beverage might be made of acrylic and cost $500 a cube. The frost coming off a beer could be a silicone gel, mixed with powder and water. The difference between enhancement and fakery, though, becomes a little murky, and some directors tiptoe right up to, and well past, the marbles-in-the-soup line. If the tomatoes in a clients red wine reduction arent visible, some fresh ones may be sliced up and tossed in. On rare

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were working somewhere close by everyday with the goal of optimally managing your assets. Our comprehensive private banking services are now also at your disposal

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Media

AmAzon TAkes on Publishing

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

both physical and e-book form. It is a striking acceleration of Amazons fledging publishing programme that will place the retailer squarely in competition with the New York and international houses that are also its most prominent suppliers. It has set up a flagship line run by a publishing veteran, Laurence Kirshbaum, to bring out brand-name fiction and nonfiction. It signed its first deal with the self-help author Tim Ferriss, a favourite with young men. Recently it announced a memoir by the
2011 New York Times News service

mazon will publish 122 books by the end of the year in an array of genres, in

agents used to provide. Several large publishers declined to speak on the record about Amazons efforts. Publishers are terrified and dont know what to do, said Dennis Loy Johnson of Melville House, who is known for speaking his mind. Everyones afraid of Amazon, said Richard Curtis, a longtime agent who is also an e-book publisher. If youre a bookstore, Amazon has been in competition with you for some time. If youre a publisher, one day you wake up and Amazon is competing with you too. And if youre an agent, Amazon may be stealing your lunch because it is offering authors the opportunity to publish directly and cut you out. Its an old strategy: Divide and conquer. Amazon executives declined to say how many editors the company employed, or how many books it had under contract. But they played down Amazons power

and said publishers were in love with their own demise. Its always the end of the world, said Russell Grandinetti, one of Amazons top executives. You could set your watch on it arriving. He pointed out, though, that the landscape was in some ways changing for the first time since Gutenberg invented the modern book nearly 600 years ago. The only really necessary people in the publishing process now are the writer and reader, he said. Everyone who stands between those two has both risk and opportunity. Amazon has started giving all authors, whether it publishes them or not, direct access to highly coveted Nielsen BookScan sales data, which records how many physical books they are selling in individual markets like Milwaukee or New Orleans. It is introducing the sort of one-on-one communication between authors and
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actress and director Penny Marshall, for which it paid $800,000, a person with direct knowledge of the deal said. Publishers say Amazon is aggressively wooing some of their top authors. And the company is gnawing away at the services that publishers, critics and

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December 2011

GeTTY imAGes

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

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Media

When Penguin found out, it went ballistic, Davenport wrote on her blog, accusing her of breaking her contractual promise to avoid competing with it. It wanted Cannibal Nights removed from sale and all mentions of it deleted from the internet. Davenport refused, so Penguin cancelled her novel and has said it will pursue legal action if she does not return the advance. Theyre trying to set an example: If you self-publish and distribute with Amazon, you do so at your own risk, said Jan Constantine, a lawyer with the Authors

GeTTY imAGes

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

their fans that used to happen only on book tours. It made an obscure German historical novel a runaway best seller without a single professional reviewer weighing in. Publishers caught a glimpse of a future they fear has no role for them late in September when Amazon introduced the

Kindle Fire, a tablet for books and other media sold by Amazon. Jeffrey Bezos, the companys chief executive, referred several times to Kindle as an end-to-end service, conjuring up a world in which Amazon develops, promotes and delivers the product. For a sense of how rattled publishers
Laurel Saville self-published a memoir about her mother after it was rejected by conventional publishers. It caught the attention of Amazon editors who offered to republish it, in essence becoming a business partner.

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

are by Amazons foray into their business, consider the case of Kiana Davenport, a Hawaiian writer whose career abruptly derailed in September. In 2010 Davenport signed with Riverhead Books, a division of Penguin, for The Chinese Soldiers

Guild who has represented Davenport. Davenport knows her real crime: Sleeping with the enemy. Penguin declined to comment. If some writers are suffering collateral damage, others are benefiting from this new setup. Laurel Saville was locked out by the old system, when New York publishers were the gatekeepers. I got lots and lots of praise but no takers, said Saville, 48, a business writer who lives
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Daughter, a Civil War love story. She

received a $20,000 advance for the book, which was supposed to come out next summer. If writers have one message drilled into them these days, it is this: hustle yourself. So Davenport took off the shelf several award-winning short stories she had written 20 years ago and packaged them in an e-book, Cannibal

Nights, available on Amazon.

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in the upstate New York town of Little Falls. Two years ago she decided to pay for the publication of her memoir about her mothers descent from California beauty queen to street person to murder victim. She spent about $2,200, which yielded sales of 600 copies. Not horrible but far from earth-shaking. Last autumn, Saville paid $100 to be included in a Publishers Weekly list of self-published writers. The magazine ended up reviewing her memoir, giving it a mixed notice that nevertheless caught the attention of Amazon editors. They sent Saville an email offering to republish the book. It got an editorial once-over, a new cover and a new title: Unraveling

Anne. It was published in November.

Saville did not get any money upfront, as she would have if a traditional publisher had picked up her memoir. In
GeTTY imAGes

essence, Amazon has become her partner. I assume they want to make a lot of
Amazons business model has already made severe inroads into conventional bookstores bottom line. Borders, a large chain, was forced to file for bankruptcy protection. Publishers fear they may be next.

money off the book, which is encouraging to me, said Saville, who negotiated her deal without an agent. Her contract has a clause that forbids her from discussing the details, which is not traditional in publishing. The publicity plans for the book are also secret. Can amazon secretly create its own best sellers? The Hangmans Daughter was an e-book hit. Amazon bought the rights to the historical novel by a firsttime writer, Oliver Potzsch, and had it translated from German. It has now sold 250,000 digital copies. The great and fascinating thing about Amazons publishing programme is that there can be these grass-roots phenomena, said Bruce Nichols of Houghton Mifflin Harcourt, which republished the novel this summer. Saville no longer even contemplates a career with a traditional publisher. They had their shot, she said. She is now writing a novel. My hope is Amazon will

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

think its wonderful and well go happily off into the publishing sunset, she said. n
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2011 NEW YORK TIMES NEWS SERVICE

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

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Germany Dims Its Nuclear Power

The accident at Japans Fukushima nuclear plant alarmed Germany to such an extent that it permanently shut down eight of the countrys oldest reactors and plans to retire the remaining nine by 2022. But sceptics argue that the decision was premature and emotional, reports Elisabeth Rosenthal.

bracing for that possibility after shutting down half its nuclear reactors practically overnight. Nuclear plants have long generated nearly a quarter of Germanys electricity. But after the tsunami and earthquake that sent radiation spewing from Fukushima, half a world away in Japan, the government disconnected the eight oldest of Germanys 17 reactors including the two in the drab factory town of Biblis within days. Three months later, with a new plan to power the country without nuclear energy and a growing reliance on renewable energy, parliament voted to close them permanently. There are plans to retire the remaining nine reactors by 2022. As a result, electricity producers are scrambling to ensure an adequate supply. Customers and companies are nervous about whether their lights and assembly lines will stay up and running this winter. Economists and politicians argue over

oT sInCe THe GrIm perIoD after World War II has Germany had significant blackouts, but it is now

how much prices will rise. Its easy to say, Lets just go for renewables, and Im quite sure we can someday do without nuclear, but this is too abrupt, said Joachim Knebel, chief scientist at Germanys prestigious Karlsruhe Institute of Technology. He characterised the governments shutdown decision as emotional and pointed out that on most days, Germany has survived this experiment only by importing electricity from neighbouring France and the Czech Republic, which generate much of their power with nuclear reactors. Then there are real concerns that the plan will jettison efforts to rein in manmade global warming, since whatever nuclear energys shortcomings, it is low in emissions. If Germany, the worlds fourth-largest economy, falls back on dirty coal-burning plants or uncertain supplies of natural gas from Russia, isnt it trading a potential risk for a real one? The International Energy Agency, generally a fan of Germanys green-leaning energy policy, has been critical. Laszlo Varro, head of

December 2011

Energy

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Energy

on ourselves, he said. The politics are overruling the technical arguments. Germanys planners believed they could forgo nuclear energy in large part because of the countrys remarkable progress in renewable energy, which now accounts for 17 per cent of its electricity output, a number the government estimates will double in 10 years. On days when the offshore wind turbines spin full tilt, Germany produces more electricity from renewable sources than it uses, according to European energy monitors. Germany has exceeded everyones
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expectations on renewable power, said Varro, showing that it could be cost effective and reliable. Until it closed the reactors, Germany was Europes leading energy exporter. With a total of 133 gigawatts of installed generating capacity in place at the start of this year, there was really a huge amount of space to shut off nuclear plants, Harry Lehmann, a director general of the German Federal Environment Agency and one of Germanys leading policymakers on energy and environment, said of the road map he helped develop. The country needs about 90.5 gigawatts of generating capacity on hand to fill a typical national demand of about 80 gigawatts a day. So the 25 gigawatts that nuclear power

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

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contributed would not be missed at least within its borders. To be prudent, the plan calls for the creation of 23 gigawatts of gas- and coalpowered plants by 2020. Why? Because renewable plants dont produce nearly to capacity if the air is calm or the sky is cloudy, and there is currently limited capacity to store or transport electricity, energy experts say. New coal and gas plants will use the cleanest technology available and should not aggravate climate change, government officials said, because they will operate within the European carbon-trading system in which plants that exceed the allowed emissions cap have to buy carbon
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German chancellor Angela Merkel inspects a commercial offshore wind farm in the Baltic Sea. Merkel extended the operating licenses of Germany's nuclear plants last year, but she had to do an about face earlier this year due to public pressure.

the agencys gas, coal and power markets division, called the plan very, very ambitious, though it is not impossible, since Germany is rich and technically sophisticated. Even if Germany succeeds in producing the electricity it needs, the nuclear moratorium is very bad news in terms of climate policy, Varro said. We are not far from losing that battle, and losing nuclear makes that unnecessarily difficult. The government counters that it is

prepared to make huge investments in improving energy efficiency in homes and factories as well as in new clean power sources and transmission lines. So far, there have been no blackouts. Juergen Grossmann, chief executive of the German energy giant RWE, which owns two closed reactors here in Biblis, about 64 kilometres south of Frankfurt, expressed scepticism. Germany, in a very rash decision, decided to experiment

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Energy

Angela Merkel, herself a physicist, decided last fall to extend the operating licenses of Germanys nuclear plants over concerns that innovation alone would not satisfy the countrys energy appetite. Fukushima changed everything. That Japan is a technologically advanced country made the nuclear accident more alarming to the German people than the Chernobyl disaster, at an old Soviet reactor. Despite that, industry experts and residents of reactor towns like Biblis and nearby Philippsburg were stunned by the suddenness of the about-face. Both towns will lose hundreds of jobs and millions in tax revenue. German energy companies, however, say they have been handed a national energy template that looks good on paper but is technically challenging. Although the countrys production of energy is bounteous, they say it is not always available where and when it is needed. Northern Germany has offshore wind
Stefan Martus is the major of Philippsburg. The town will lose hundreds of jobs and millions in tax revenue when its nuclear plant is closed.

and coal deposits, but southern Germany a manufacturing epicentre that is home to Mercedes, BMW and Audi has no plentiful local fuel source other than nuclear. Germanys current grid is highly decentralised, lacking high-voltage transmission lines to move electricity over long distances. Now, with the nuclear shut down, we have a very difficult task, said Joachim Vanzetta, head of transmission system operations at Amprion, the largest of the countrys four grid operators. This winter, Amprion predicts its grid will have 84,000 megawatts of electricity at its disposal, to provide 81,000 megawatts needed for consumption an uncomfortably slim margin of safety, Vanzetta said. In prior years, electricity was readily available for purchase on the European grid if the price was right. But exported German power is what helped keep France glowing in winter. At the moment, we have a stressed system, but its under control, Vanzetta said. If we have days with no wind and no solar and cant buy energy from abroad, then there is the risk of blackouts. n
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credits from companies whose activities are environmentally beneficial, thus evening out the environmental ledger. Electricity prices are expected to rise by 35 to 40 euros ($50 to $60) per household each year, or less than five per cent, the government estimates. Although nuclear energy generally costs less than newer options, German law has long stipulated that renewable energy must be purchased first even if it is costlier.

But sceptics consider government assumptions overly optimistic. Stefan Martus, the mayor of Philippsburg, says he believes energy costs could rise more dramatically than government estimates; the price of permits to offset dirty power plants is highly unpredictable and variable, like the value of stocks. And the International Energy Agency does not think Germany or any other country will be able to reduce its emissions at a reasonable cost without nuclear power.

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

even before Fukushima, nuclear energys days in Germany were numbered. Biblis had been the site of giant national antinuclear demonstrations, and Germany was already enacting a plan for slowly phasing out nuclear energy by 2023. The country has become the world leader in wind power and a master at squeezing more energy efficiency out of appliances and homes, having built tens of thousands of self-heating passive houses. Still, Chancellor

CYPRUS: A Dynamic International Business and Financial Centre at the Crossroads of Three Continents
We are very happy to have selected Cyprus as a base and aspire to maintain, lead and expand our operations from the island. Cyprus accession to European Union has enhanced the countrys credit standing, transferring the image of a low tax jurisdiction to a serious regional trading and service hub. We also believe that the Euro Zone entry upgrades the countrys standing within the European Union. Mehran Eftekar, Director Nest Investments Holdings

CYPRUS

INVEST WITH CONFIDENCE

Cyprus is an attractive investment destination and a reputable international business and financial centre that provides a gateway to Europe, the Middle East and North Africa. Cyprus provides a thriving market oriented economic system combined with low cost and flexibility features along with: Lowest corporate tax regime in the EU of 10% A centre for Banking Excellence and an Alternative Funds jurisdiction Effective and transparent tax system that is fully EU, OECD, FATF and FSF compliant Access to EU as a member state since 2004 and a member of the European Monetary Union since 2008 An extensive network of Double Tax Treaties with 43 countries Relatively lower operating costs with high quality end-to-end business services Highly qualified and well-trained professionals who provide expertise on all aspects of banking, legal, accounting and business services Advanced transport and telecommunications infrastructure with state-of-the-art high-speed internet and mobile telecommunications, two International airports and deep-sea ports Cyprus offers ease of doing business in a professional environment and the surroundings of a sophisticated culture and advanced quality of life. More than just a holiday destination, Cyprus provides the ideal environment to set up your business operations effectively and efficiently.

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

Cyprus has more than 30 years experience as an International Business and Financial Centre

P.O.Box 27032 Lefkosia 1641, Cyprus Tel. + 357 22 441133 Fax + 357 22 441134 www.cipa.org.cy info@cipa.org.cy

The Ministry of Commerce, Industry and Tourism Tel. + 357 22 867100, Fax + 357 22 375120 www.mcit.gov.cy/ts, perm.sec@mcit.gov.cy

64

Banking

VS.

PROFIT

RISK

Banks are targeting the rapidly growing emerging markets to keep profits flowing. But emerging markets are volatile and have unique regulations, report Susanne Craig and Ben Protess.

W
2011 New York Times News service

all Street loveS to crow about its overseas conquests.

profits is often filled with mistakes and setbacks. A lot of big banks are looking to developing markets, but historically its tended to be a volatile move, said James Sinegal, a bank analyst at the research firm Morningstar. It might not be as easy as they expect. Banks like Citigroup, Goldman Sachs and Morgan Stanley are chasing the potential payoff abroad. The economies of countries like China, India and Brazil are growing faster than that of the United States.

Such places also represent an untapped client base, with a growing middle class and a large number of wealthy individuals. As profits wane on the home front, Wall Street firms are increasingly dependent on the emerging markets to bolster their bottom lines. Citicorp, a division of Citigroup, draws about half of its revenue from emerging countries, up from roughly 25 per cent in 2005. International markets account for 47 per cent
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Vikram S. Pandit, the head of

Citigroup, boldly promised in 2009 that we will be the single largest emerging markets financial services company. Goldman Sachs chief executive, Lloyd C. Blankfein, said at a conference last year that one of his firms big goals was to be Goldman Sachs in more places. But theres a quiet truth to success in those risky markets: The path to

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of Goldmans profits. Morgan Stanley generated nearly a third of its net revenue from outside the Americas. With the United States slowing down, it is not surprising that institutions are looking in the emerging markets, said Hamid Biglari, a Citicorp vice chairman and chief of emerging markets. But the perils can be plentiful, with economic, political and regulatory challenges. Foreign regulators have scolded banks, fined them and even banned their activities in various countries. Citigroup twice ran into problems with Japanese authorities. In turn, Wall Street says it has cleaned house at overseas offices, taken greater control of foreign ventures and tapped local bankers to lead new projects. Local knowledge is especially critical, as firms try to navigate the regulatory and political environment that is crucial to a banks business. Earlier this year, Citigroup found itself in hot water with Indonesian suspected embezzlement by an employee and the death of a client after meetings with the banks outside debt collectors, the countrys central bank imposed sanctions on Citigroup, including a one-year ban on opening new branches. In June, the bank removed its top country officer, replacing him with a native Indonesian, Tigor Siahaan, a seasoned banker experienced in dealing with local regulators and government officials. Now, the bank is tweaking its internal controls, bringing its debt collecting in-house and regularly rotating back-office personnel. The bank said it was also working closely with Indonesian authorities. How to behave responsibly in these markets comes with experience, Biglari said. You have to figure out how to work with the cultural norms. Financial firms have also realised that they need to commit to a market, because it can take years if not decades to build up local relationships and understand the countrys customs.
December 2011
GeTTY imAGes

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

regulators. After an investigation into

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

While Goldman says on its website that it has had a presence in Russia since 1998, the firm has had its troubles in the country. Not long after opening in Russia, Goldman downsized its operations, concerned about the financial crisis that prompted the government to devalue the ruble. It closed the Moscow office and reassigned staff members. Christopher Barter, co-chief executive for Goldmans Russia business, said the investment bank should not have left the country. We missed out on years of a footprint there, he said. When you go into a country, you have to maintain your commitment. It took years to build up the business in Russia again. Goldman reopened the
Hamid Biglari, a Citicorp vice chairman and chief of emerging markets, stresses the importance of understanding the cultural norms of different markets.

Moscow location in 2001, but it didnt fully ramp up there until 2006, when it obtained a brokerage license. Today, the firm has 140 employees in Russia, up from

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Banking

Its one of the industrys few options as banks deal with costly new regulations, sluggish economic growth in their home markets and a volatile market all of which are weighing on profits.
more management oversight of overseas investments. Morgan Stanley was one of the
Stephen Roach, non-executive chairman of Morgan Stanley Asia, has valuable local knowledge thanks to having lived in Tokyo, Hong Kong and Singapore. The chairman and CEO of Goldman Sachs, Lloyd Blankfein, wants to expand aggressively in emerging markets.

first investment banks to establish a joint venture in China. In 1995, it teamed up with China Construction Bank to form the China International Capital Corp. But the Wall Street bank was a passive investor, owning just one-third of the business, the limit for foreign securities firms under Chinese rules. It also ceded management control to its partners. In 2010, Morgan Stanley sold the stake to a group of private equity firms. Since then, Morgan Stanley has forged a new relationship with Huaxin Securities. While it still owns a one-third stake in the venture, called Morgan Stanley Huaxin Securities, it has seats on the firms board and plays a role in the day-to-day management of the firm. A Morgan Stanley managing director, Yang Kai, is the chief executive of the company. While foreign business is hardly a guaranteed win, financial firms are willing

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

to take the risks. Its one of the industrys few options as banks deal with costly new regulations, sluggish economic growth in their home markets and a volatile market all of which are weighing on profits. These guys are hurting and it gets worse by the day, said Michael Driscoll, a professor at Adelphi Universitys business school and former senior trader at Bear Stearns. You can only squeeze so much till you go looking elsewhere for a return. n
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30 people five years ago.

PhoTos oN This PAGe: GeTTY imAGes

several times a year. And Blankfein, along with other Wall Street chiefs like Jamie Dimon of JPMorgan Chase, has joined a committee set up by the Russian government to help bring more foreign money to the country. Firms have also realised they need

The company has established stronger ties in the country since it has returned. In 2008, Goldman held a board meeting in Russia, a nod to its re-emergence there. Michael Sherwood, vice chairman at Goldman Sachs, now visits Russia

The besT of leisure and lifesTyle

Essentials

Essentials Travel

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Russia
A cruise along the historic VolgaBaltic Waterway not only takes in St Petersburg and Moscow but also all the history and scenery along the route, reports Christina Pfeiffer.
December 2011

sLOW BOaT ThROugh

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n ethereal calm fills the air as the MS

that connect the Volga River to the Baltic Sea. Cruising is one of the most comfortable ways to travel through Russia, where few people speak English and reading the Cyrillic alphabet is next to impossible. Then there is also the luxury of only unpacking once and having your belongings float with you. After a $14 million refit, MS

day there is a shore excursion in a village, town or city, accompanied by a team of attentive young English-speaking men and women. When passengers are not exploring, there is a daily programme of cultural and educational activities such as Russian language lessons, history lectures, dollpainting, balalaika-playing and cooking lessons. The informative talks about Russian costumes, tea and vodka were particularly well attended. St PeterSburg is the perfect place to embark as this historic city is spread over 101 islands and 66 canals, meaning that water is never far from your mind. From St Petersburg the Neva River flows into Europes largest freshwater lake, Lake Ladoga (its the worlds 14th largest lake), then into the Svir River, where the MS AmaKatarina cruises past colourful timber houses and jewel-box churches. After touring grand palaces, golden-domed churches and museums in St Petersburg, cruising through the countryside is a relaxing contrast. At Svirstroy, a small town with around

AmaKatarina cruises past

fishing boats towards a landscape of oniondomed churches, spires, monasteries and colourful villages, towns and cities. Slicing across Lake Ladoga, the ship creates ripples of liquid gold to match the colour of the sky. It is past 11pm at night and the sun is a fiery ball sinking slowly behind the forested shore. Yet it feels like it is still early afternoon as I stand on deck, marvelling at the Russian white night. Even after the sun has set, magic lingers in the purple-pink sky, leaving me with vivid memories of midnight sunsets that flood my mind long after I have left Russia. The cruise between St Petersburg and Moscow travels along a picturesque section of the Volga-Baltic Waterway, which flows through 1,367 kilometres of lakes, rivers, reservoirs and canals

AmaKatarina began cruising Russias

waterways in May 2011. By Russian standards, the ship is luxurious with 10 stateroom and suite categories. Many of the staterooms have balconies and amenities such as new ensuite bathrooms, satellite television, internet access and a nightly turndown service with chocolates on your pillow. The ship accommodates 212 passengers and it is the most spacious vessel on the Volga-Baltic Waterway. There are two restaurants, the Opera on the second floor and the cosier Symphony above it, and two bars. The atmosphere aboard is convivial and the open seating policy makes it easy to make new friends. Each
Kizhi island is a unesco World heritage site, famed for its wooden buildings. The Church of the Transfiguration is russias oldest wooden church.

Valaam is an archipelago of islands in lake ladoga, which is the largest lake in europe.
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Essentials Travel
1,000 residents, we stretched our legs among villagers dressed in colourful Russian costumes selling toys, lace, hand-carved timber eggs, dolls, lacquer bowls and crochet tops. The shopping in Svistroy is much cheaper than in Moscow and St. Petersburg, which makes it a good place to buy souvenirs. One of the highlights of the cruise is Kizhi Island, which is a UNESCO World Heritage site of timber buildings and home to the oldest wooden church in Russia the 14th-century Church of the Resurrection of Lazarus. In the 1950s, dozens of historical wooden buildings were moved to the island from various parts of Karelia (a federal republic of Russia) for preservation purposes. Nowadays, the entire island and the nearby area form a national open-air museum with more than 80 historical wooden structures. Our walking tour of the island took us in and out of chapels, belfries, log houses, mills, bath houses, barns and the jaw-dropping 18th-century Church of the Transfiguration with its 22 silvery onion-domed cupolas glittering in the sun. Lake Onega is connected to the Kovzha River via the Volga Baltic canal, which is a series of locks that rise 80 metres (about the height of a 30-storey building). The river then flows into Lake Beloye and Sheksna River where we docked at Goritsy and toured the nearby Kirillo-Belozersky monastery. The monastery is a massive complex of 15th to 17th century churches surrounded by fortress walls on the shore of Lake Siverskoye. Inside are some of the most intricate and beautiful historic icons Ive seen while just outside, along the shores of the lake, is the local swimming spot. ItS at this point, as one gets closer to Moscow, that the cruise enters one of
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Its at this point, as one gets closer to Moscow, that the cruise enters one of the most fascinating regions in Russia known as the Golden Ring of cities.

the most fascinating regions in Russia known as the Golden Ring of cities. The main currents of history ignored these cities, leaving towns such as Vladimir, Suzdal, Sergiev Posad, Rostov Velikiy and Yaroslavl as quaint and perfect as when they were first constructed. The golden refers to the historic and architectural wonders preserved in these towns. Some of them, like Yaroslavl, were centres of powerful principalities subjugated by Moscow during its rise to power. Others, like Uglich, have never been large or powerful but have still played important roles in Russian history. The MS AmaKatarina calls at two of these towns. First is Yaroslavl, which is one of Russias oldest cities and traces its roots back to the Vikings. The historical part of the city, a World Heritage Site, is located at the confluence of the Volga and

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

Passengers on the MS AmaKatrina can participate in daily cultural and educational activities.
December 2011

the Kotorosl Rivers. Besides the unique architecture in the old town, the Yaroslavl

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Travel

Essentials

Museum of Russian Art in the former governors residence has a unique collection that includes Russian icons and masterpieces of ornamental art. Museum guides dressed in beautiful silk ball gowns lead visitors through the grandly furnished rooms. The tour ends in the ballroom with a recital of chamber music. Uglich is a small town with a bloody history but you wouldnt think so looking at the picture-book Church of Prince Dmitry on the Blood with its blue domes

dotted with stars. Here, our guides regale us with tales of treason and murder; this is where Ivan the Terribles 10-year-old son Dmitry had his throat cut in the palace courtyard. Suspicion immediately fell on the tsars chief advisor, Boris Godunov. Official investigators concluded however that Dmitrys death was an accident. The officials cut a tongue from the cathedral bell that had rung the news of Dmitrys death and exiled it to Siberia. In Uglich, we were given the opportunity to experience modern life by having breakfast in a local home. Some of us got a taste of life with poor families in the countryside while others visit Sovietera apartments in town. Many of the hosts speak little or no English but we were all served the same food: millet porridge, blini and home-made jam. the next and last stop is Moscow, where the various tours naturally include Red Square and the Kremlin, the Tretyakov Museum, an optional visit to the Moscow Circus, and Moscows famed Metro. Tourism in Russia is still in its infancy and the overall standard of cruise ships is not in the same league as the luxury cruise ships in Western Europe, where companies compete to launch more luxurious ships every year. Keep this in mind when travelling through Russia and youll enjoy the amazing history, culture and architecture that the country has to offer. After 12 days aboard MS
uglich, another Golden ring town, is full of architectural wonders. of particular note are the historic wooden houses with their ornate trim.

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

AmaKatarina, I know for sure Ive fallen

in love with Russia. n
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GETTY iMAGEs

yaroslavls Museum of russian art is housed in the former governors residence. Museum guides in ball gowns teach visitors the intricacies of ballroom dancing.

74

YVES SAINT LAURENT

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

He wAs THe ABsoluTe embodiment of the French couturier, says Frances First Lady, Carla Bruni-Sarkozy, who modelled his creations during her years on the catwalk. He turned art into fashion and fashion into art and gave women strength, beauty and freedom, she adds. But one shouldnt think of Yves Saint Laurent as solely French as he proved that beauty had no borders. He was inspired by the burning sun of the Mediterranean and it was that fire that was always alive within him and pushed his work forward. Yves Mathieu-Saint-Laurent was born in 1936 in Oran, Algeria, which, at the time, was a French colony. As a child he made costumes for paper dolls and later designed dresses for his mother and sisters, which his mother had made-up by a local dressmaker. Saint Laurent moved to Paris in 1954 after winning top prizes in the dress category of a design competition. The editor of French Vogue introduced him to Christian Dior and history was made. Dior took him on as an assistant in 1955 and two years later, at just 21, Saint Laurent became the houses top designer after Dior began suffering from ill-health. It was

during his time at Dior that Saint Laurent met Pierre Berg, who was to become his astute business partner, and his friend for life. Berg now runs the Yves Saint Laurent Foundation in Paris. Together, in 1961, Saint Laurent and Berg, with the help of an American backer, opened the first Yves Saint Laurent fashion house in Paris. Yves Saint Laurent understood that power lay with men, so he used mens clothes to dress women. It was a transfer of power, says Berg. Saint Laurents pantsuits, jumpsuits and safari jackets were mens clothes, but when he made them for women they became sensual, seductive and feminine. Yves Saint Laurent spent his life thinking about women and how to make their bodies look beautiful, Berg confides. So many designers stay in their ivory towers, but Yves Saint Laurent helped women move ahead and create a new identity for themselves. An entire wall of the Madrid show is devoted to variations of Saint Laurents 1966 Smoking Suit, inspired by the tuxedo. The spectacular exhibition succeeds in synthesising an enormous body of work in order to show the harmony in Saint

Laurents creations. He was neither a minimalist nor an extravagant baroque type. He achieved a balance, says Berg, describing what makes Yves Saint Laurent so quintessentially French. One hundred and fifty pieces of haute couture and prt-a-porter are displayed in a number of galleries with low lighting and the feel of a giant catwalk. The shows 11 themes showcase how he redefined the female silhouette by introducing the trapeze line, how he produced runway travelogues that borrowed from Russian, Chinese and Moroccan native dress, and how he made the perennial fashion motifs of flora and fauna his own. A keen art lover and collector, Saint Laurent also took inspiration from classical masters such as Vermeer, Goya and Velasquez, as well as contemporary artists including Picasso, Mondrian and Jean Cocteau as can be seen in the 1965 cocktail dress with blocks of primary colours. Numerous pieces stand out above the rest a 1988 Van Gogh Irises jacket embroidered with 40 pounds of sequins and beads; a 1997 garden party gown with a thicket of pink and green organza
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Yves Saint Laurent with American actress Raquel Welch in 1975.

December 2011

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With my imagination and through books with photos I travel to faraway lands. Morocco was the only country Saint Laurent visited regularly. It was there that he had a second home, Le Majorelle, in the colourful city of Marrakesh. Today the house and gardens are a museum dedicated to his work. Many of the pieces on show in Madrid are inspired by journeys, either real or imaginary, which connect the designer with foreign people. There are garments with direct influences from China, Japan and Russia. Then there are six African-inspired pieces from the 1967 spring/summer collection beginning with a silk organza column gown with wood beading. Its inspired by textiles from the Congo and is combined with a raffia coat as big as a wigwam. Colours were essential to his work and he particularly loved gold and red. In the last room of the exhibition visitors

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

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

are treated to a series of gowns in a wide variety of brilliant hues. The muslin gowns, from his last collection in 2002, show his brilliant use of colours, either as a singular tone or in amazing combinations. Yves Saint Laurent wasnt always acclaimed by the press and his summer 1971 collection was harshly criticised by the fashion magazines. Although

flowers, leaves, semiprecious stones and satin ribbons; a 1990 coat flocked with flame-coloured rooster, pheasant and vulture feathers; and finally the black wool dress with satin collar and cuffs worn by Catherine Deneuve in the 1967 film Belle

the exhibition displays some of the most luxurious gowns youll ever see all made to order for the richest women in the world, including Lauren Bacall, The Duke and Duchess of Windsor, Nan Kempner, Marisa Berenson and Princess Grace. I hate travel, Saint Lauent once said.

de Jour. Reminding us of a by-gone era

Torero look from 1979.

Iconic Le Smoking tuxedo suit from 1966.

The 1965 homage to Piet Mondrian.

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Saint Laurent has been the inspiration for many across a number of decades and his influence and inspiration is still being felt. This year saw the film LAmour Fou (Crazy Love) released. It tells the story of the designers dramatic life from rags to riches. A flurry of books and new editions of biographies are also hitting the shelves, such as Laurence Benaims emotional chronicle Requiem pour Yves Saint

Laurent or Alice Rawsthorns biography

titled Yves Saint Laurent. The designer is also the subject of an album of 16 songs by Alain Chamfort that is set to open as a full-scale musical in 2012 at the Parisian Chaillot National Theatre. Its an interesting moment to think about Saint Laurents work, now that fashion is so important in womens politics.

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

seemingly inspired by the 1940s and the war years in Paris, Yves Saint Laurents real inspiration came from the type of women he imagined living in that time. The pieces were aimed to be worn by the woman who wanted to provoke a reaction. The bad press had no effect on sales and the public adored the new style and flocked to the boutiques. Perhaps thats why the most provocative pieces in the show are the ones that changed the way women dressed, back when haute couture really was a design laboratory for ideas that filtered out to the world. Theres a wool pea coat from 1962, a cotton safari jacket from 1968, and the first le smoking from 1966. These are so basic, and yet so groundbreaking. And theyre looks you

would find at almost any department store in the world today. Even from a young age, Saint Laurent was hugely involved in marketing and maintaining the image of his own label. In 1971 he posed naked, albeit discreetly, for photographer Jeanloup Sieff for an advertisement for his first perfume for men. In Madrid visitors can contemplate 14 other art-inspired images from the same shoot for the first time. There are also photos of the designer at work, his models and portrait photos such as the informal shot taken by Andy Warhol, which provide a glimpse of the man.
Yves Saint Laurent with Carla Bruni in 1996. Bruni married French president Nicolas Sarkozy in 2008.

Hillary Clintons pantsuits and Sarah Palins sexy secretary look are all inspired by Saint Laurents work over the decades. Saint Laurent thought that if you took the male garment and you passed it to the womens shoulders, you pass the power from men to women, Berg says. For Saint Laurent, fashion was a dialogue, a rendezvous between a designer and a woman. And according to Berg, much of fashion today is out of touch. Designers are telling women what to do, not listening to what they want. n
The Madrid exhibition will be on show at the Mapfre Exhibition Gallery until 8 Jan 2012. More information at exposicionesmapfrearte.com.ysl
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So many designers stay in their ivory towers, but Yves Saint Laurent helped women move ahead and create a new identity for themselves.

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The ArT of ApprAisAl

grapheasT

Knowing how much your collection is worth is essential for insurance purposes or when you want to sell. But make sure you get the right appraiser, otherwise it can be an expensive mistake, reports Ann Carrns.

hether it is fine wines, vintage movie posters or abstract paintings, some

All appraisers are not created equal, said John Cahill, a lawyer in New York who specialises in art. And even the good ones are not good at everything. You can, of course, ask for referrals from lawyers or wealth management advisers. But even then, you should check the appraisers qualifications. Personalproperty appraisers arent licensed, but reputable professionals are affiliated with at least one of the three major appraisal organisations: the Appraisers Association of America, which focuses on personal property; the American Society of Appraisers, which includes specialists in real estate and other areas; and the International Society of Appraisers. These groups require members to keep up to date with appraisal practices, called the Uniform Standards of Professional Appraisal Practice, and to adhere to a

code of ethics. That means, for instance, that they charge only fees based on an hourly rate, or a negotiated project rate, rather than on a percentage of the appraised value. You can search for an appraiser by name or expertise, and review information about his or her background, on each groups website. If an appraiser says they know it all, run as fast as you can, said Jane Jacob, an appraiser who specialises in American and European fine art from the 19th through 21st centuries. Collectors have a variety of options for getting pricing information for artwork, collectibles and wine at online sites that primarily track sales at public auctions. Appraisers consult those sites too but only as a first step. Gayle Skluzacek, a New York appraiser who evaluates both artwork and wine, says a knowledgeable expert can
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people spend a great deal of time and money compiling collections of valuables. Even if theyre collecting out of personal passion, rather than as an investment, it makes sense to keep tabs on how much the collection is worth. You need to know what you own, and to know the value of what you own, said Nancy Harrison, a fine art specialist with Emigrant Banks fine art financing unit in New York and the president of the Appraisers Association of America. Whether an appraisal is done for tax purposes, for an insurance policy or to divide property in a divorce, the most important first step is finding someone who has broad, deep knowledge about the kind of pieces you collect.

2011 New York Times News service

Essentials Art
interpret the nuances of a given sale. Why did it sell above or below the estimate? Was it offered before? Only a professional, she said, knows what questions to ask when discrepancies appear. Expertise is especially important with appraisals that are submitted for tax purposes, because the Internal Revenue Service has detailed requirements for appraisals submitted as documentation for donations or estate tax calculations. The IRS requires a written appraisal by a qualified appraiser for any deduction taken on items valued at more than $5,000. The agencys own appraisal staff reviews valuations, and some appraisals are subject to further review by its Art Advisory Panel, a group of 25 volunteer experts. The panel meets periodically to review appraisals and may decide they are too high (or, in the case of estate tax Arthur fleischer, a New York lawyer and arts patron whose collection includes prints by the artist Elizabeth Murray and images by the Dutch photographer Hellen van Meene, said he didnt spend much time worrying about the value of his collection because his motivation was not to make money. When he has made gifts to museums, including the Whitney Museum of American Art and the Solomon R. Guggenheim Museum, he has worked with the appraisal service of the Art Dealers Association of America, for the documentation the IRS requires. I know valuations, too low). Last year, the panel reviewed 475 items valued by taxpayers at a total of nearly $235 million and recommended adjustments on more than half, according to its 2010 report. from my experience in the art world, he said, that theyre a well thought of, responsible and reliable organisation. Susan Brundage, the director of that groups service, said it focused primarily on appraisals of fine art for tax purposes. It draws on the records of its member dealers, she said, to supplement data on prices for works sold at public auction. The appraiser will often but not always examine an item or collection physically to determine its condition, before conducting research into previous sales of similar works to determine a value. Personally examining an object allows for a thorough assessment of its condition, but sometimes appraisals are done from photographs and other documentation although that must be disclosed on the appraisal report. You have more gravitas if youre

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

reuTers

The ivory-pleated Subway dress worn by actress Marilyn Monroe from the 1955 film The Seven Year Itch was expected to bring up to $2 million at auction. It sold for $4.6 million.
December 2011

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

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

reuTers

of costumes owned by Debbie Reynolds, for instance, increased the value of outfits worn by Marilyn Monroe, Audrey Hepburn, Grace Kelly and others. BecAuse mArkets can change quickly, insurance companies encourage collectors to have works reappraised periodically to make sure coverage is adequate. Mary Sheridan, assistant fine arts manager for Chubb Personal Insurance, said collectors with extensive inventories typically worked with professional curators and kept their appraisals current. Those with smaller or lower-value collections say, less than $10 million are sometimes reluctant, however, to spend the money for regular appraisals, which can cost as much as $300 an hour, along with the higher premiums an increase in valuation might bring. They do not see a need until theres a claim, she said. Failing to keep up with rising values can prove risky. Sheridan recalled an owner who had a painting by the French artist Raoul Dufy, illuminated by a picture light attached overhead. The screws came loose from the light, allowing the bulb to fall into the painting and burn a hole through the canvas. It was a total loss, Sheridan said. The painting was insured on the collectors homeowners insurance policy, for $18,000. The market for Dufys work had grown, she said, and the paintings value at the time of the damage was close to six figures. n
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The value of the Ferrari 250 LM has risen and fallen with economic cycles. $2.5 million is the record price for a 250 LM in this decade, but it is well below the record price of $5.5 million paid in 1990.

grapheasT

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

substantiating something youve seen in person, said Elizabeth von Habsburg, managing director of the Winston Art Group. Even with a thorough appraisal, fluctuations in the art markets can lead to surprises. Collectors must understand that there is not one
phoTos oN This page: geTTY images

Chinese artworks. Von Habsburgs firm was asked to appraise a collection of 20thcentury decorative jade and porcelain pieces from an estate. Previous sale records led to an estimated maximum price of roughly $124,000, but they sold for more than $1 million on the online auction site iGavel. The market for collectibles, like Hollywood or sports memorabilia, is also volatile; prices can surge when there is a landmark auction taking place, said Leila Dunbar, an appraiser who specialises in such items. The auction earlier this year

mammoth market that determines a works value, said von Habsburg, adding, There are many submarkets, and they move at different rates. Lately, for instance, Chinese collectors have been bidding up the prices of

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Technology

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

Is It Getting Any Closer?

Oxfordshire village of Culham in England, some of the worlds leading physicists stare at a monitor to review a video of their wondrous, yet fleeting, creation. Not too bad. That was quite a clean one, observes starmaker-in-chief Professor Steve Cowley. Just a few metres away from his control room, a mini star not much larger than a family car has just burned, momentarily bright, at temperatures approaching 23 million degrees centigrade inside a 70-tonne steel vessel. Last year, when asked to name the most pressing scientific challenge facing humanity, Professors Stephen Hawking and Brian Cox both gave the same answer: producing electricity from fusion energy. The prize, they said, is enormous: a nearlimitless, pollution-free, cheap source of energy that would power human
Guardian

star is born. and, less than a second later, it dies. On a drab science park just outside the it is a moral duty to commercialise this technology as fast as possible. Without it, our species will be in very deep trouble indeed by the end of this century. If only it were that simple. Fusion energy in essence, recreating and harnessing here on Earth the process that powers the sun has been the goal of physicists around the world for more than half a century. And yet it is perpetually described as 30 years away. No matter how much research is done and money is spent attempting to commercialise this saviour technology, it always appears to be stuck at least a generation away. Cowley hears and feels these frustrations every day. As the director of the Culham Centre for Fusion Energy, he has spent his working life trying to shorten this exasperating delay. Fusion energy is already a scientific challenge arguably more arduous than any other we face, but recent events have only piled on further pressure: international climatechange negotiations have stalled; targets to ramp up renewable energy production seem hopelessly unrealistic; and the Fukushima disaster has cast a large shadow over the future of fusions nuclear cousin, fission energy, which has been providing electricity since the 1950s. But today, Cowley seems upbeat. After an 18-month shutdown to retile the interior of the largest of the centres two tokamaks ring doughnut-shaped chambers where the fusion reaction takes place he is bullish about the progress being made by the 1,000 scientists and engineers based at Culham. By 2014-15, we will be setting new records here. We hope to reach breakeven point in five years. That will be a huge psychological moment. Cowley is referring to the moment of parity when the amount of energy they extract from a tokamak equals the amount
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development for many centuries to come. Cox is so passionate about the urgent need for fusion power that he stated that

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of energy they put into it. At present, the best-ever shot as the scientists refer to each fusion reaction attempt came in 1997 when, for just two seconds, the JET (Joint European Torus) tokamak at Culham achieved 16MW of fusion power from an input of 25MW. For fusion to be commercially viable, however, it will need to provide a near-constant tenfold power gain. so, what are the barriers preventing this great leap forward? We could produce net electricity right now, but the costs would be huge, says Cowley. The barrier is finding a material that can withstand the neutron bombardment inside the tokamak. We
December 2011

Fusion is the process that powers the sun. But replicating this process on Earth poses huge technological challenges.

could also just say damn to the cost of the electricity required to demonstrate this. But we dont want to do something that cannot be shown to be commercially viable. Whats the point? At the heart of a star, fusion occurs when hydrogen atoms fuse together under extreme heat and pressure to create a denser helium atom releasing, in the process, colossal amounts of energy. But on Earth, scientists have to try and replicate a stars intense gravitational pressure with an artificial magnetic field that requires huge amounts of electricity to create. The fusion reaction occurs when the fuel (two types, or isotopes, of hydrogen known as deuterium and tritium) combines to form a super-hot plasma which produces, alongside the helium, neutrons which have a huge amount of kinetic energy. The goal of plasma physicists such as Cowell is to harness the release of these neutrons and use their abundant energy to drive conventional turbines to generate electricity. The JET tokamak has been shut down for the past 18 months while the interior has been stripped of its 4,500 carbon tiles and replaced with new tiles made from beryllium and tungsten. The hope

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The fusion reaction takes place inside a tokomak a ring doughnut-shaped chamber that has to withstand temperatures up to 23 million degree centigrade.

is that these new tiles will be far more neutron resilient, allowing for shots to be conducted for longer periods and at much higher temperatures. last year, bulldozers began clearing land 60 kilometres north-east of Marseille in southern France. By 2019, it is hoped that the worlds largest and most advanced experimental tokamak will be switched on. The 15 billion International Thermonuclear Experimental Reactor (ITER) is being funded by an unprecedented international coalition, including the EU, the US, China, India, South Korea and Russia. Everything learned at Culham will be fed into improving the design and performance of ITER which, it is hoped, will demonstrate the commercial viability of fusion by producing a tenfold power gain of 500MW during shots lasting up to an hour. But ITERs projected costs are already rocketing, and politicians across Europe have expressed concern, demanding that budgets be capped. Fusion energy also has its environmental detractors. When the ITER project was announced in 2005, Greenpeace said it deplored the project,
Professor Steve Cowley, a plasma physicist, is the director of the Culham Centre for Fusion Energy. He believes electricity from commercial fusion is still 30 years away.

arguing that the money could be better spent building offshore wind turbines. Meanwhile, there is criticism from some plasma physicists that the design of ITER is wrong and alternative designs might produce better results for much less money. Francesco Romanelli, the Italian director of the European Fusion Development Agreement, the European agency that funds JET, rejects this analysis. We simply must make this investment, he says: The prize on offer is too tantalising to ignore. Fusion doesnt produce greenhouse gases, it is intrinsically safe and it leaves no burden on future generations. And the fuel is virtually unlimited. All you need is lithium and hydrogen. Sea water alone could fuel current human consumption levels for 30 million years. If fusion offers such glorious bounty, it prompts the question why the world isn't concentrating much harder on delivering
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Essentials Technology
it as fast as possible. Yes, 15 billion is a lot of money to be spending building ITER. But, by comparison, the global cosmetics and perfume industry is worth some $170 billion a year. If the motivation was there, the global community could find the money to fund 10 rival fusion projects to fast-track the process of finding the optimum design. So, why havent we seen a Manhattan Project-style push for fusion? People and particularly politicians still remember fissions early claims that it would produce electricity that was too have to be honest, too: we thought it would be easy to crack fusion. But theres no other comparable challenge. There is no model for this technology. Were having to start from the very beginning. Cowley says a Manhattan Project for fusion would, of course, greatly speed up its delivery. ITER will cost around 15 billion, but that is not expensive when you consider the prize. At present, all we can hope for is, if oil prices are still high in 2015 and we pull off a big shot demonstrating parity of power, this gets us the international attention and therefore the funding we need to really push on. Its hard not to look at the potential of fusion and scream: We need this right now! But Cowley says we still face a 30-year wait for the magic day when we flick a switch and electricity generated from fusion flows from the socket. After ITER, we will then have to build a demonstration plant. We hope to have that built by 2040. This is why there needs what Cowley is admitting, though, is that as long as fusion research remains underfunded (a term he doesnt utter, but the implication is there) then it will never save humanity from climate change, oil wars and the poverty and underdevelopment caused by ever-higher energy costs. As if to prove his point, he admits that on occasion he has even turned to eBay to buy spare parts for the smaller UK-owned tokamak at Colham, which is known as Mast (Mega Amp Spherical Tokamak). But such things do not deter him from pushing forward as best he can, he stresses. He is first and foremost a plasma physicist. Saving the planet is a nice thing to do, he laughs. Doing something that no one else has ever done is attractive, too. But, ultimately, this is fascinating. Every night on the train home I prefer to do a calculation rather than a sudoku. I try to work out things such as how a 200million-degree-celsius plasma behaves in a magnetic field. Such things are critically
Scientists have to replicate a stars intense gravitational pressure with a magnetic field to enable the fusion process.
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cheap to meter, says Cowley. We scientists

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

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

important for the future of our world, but theyre really good fun, too. n

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Style

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ThaT Man SMellS FaMiliar

Men are far more brand loyal than women, which is why classic mens fragrances are still on the shelves. And now there is even a retro movement afoot, reports Michael Walker.
As nostAlgiA for the eArly 1960s persists, a handful of mens fragrances from that period are getting a second look. Their names evoke twobutton Botany 500 suits and drinks sipped in a 707s front cabin: Eau Sauvage, Habit Rouge, Pour Monsieur. And although sales are a fraction of the overall market for fine mens fragrances, experts in the field acknowledge their lasting relevance. Theyre like benchmarks anything that comes after is almost always a direct descendant, said Grant Osborne, founder and editor of Basenotes, a website for perfume enthusiasts. Chanel Pour Monsieur, introduced in 1955, should by all rights be sitting under a triple-glass bell jar next to the metre and kilogramme at the Pavillon de Breteuil as the reference masculine fragrance, wrote Luca Turin, the biophysicist, olfactory scholar and an author of Perfumes: The Guide. Christian Diors Eau Sauvage, introduced in 1966, revolutionised the
2011 New York Times News service

iterations like Grey Vetiver, by Tom Ford. These classic mens fragrances left very long-lasting impacts on how people develop perfumes, said Eddie Roschi, a founder of Le Labo artisanal perfumery in New York. You look at what Guerlain did with Vetiver, and so much of it has been copied. In some countries you can smell it in the subways because everyone wears it. (In Europe, the classics still sell as if its 1969; last year Eau Sauvage was the third best-selling mens fragrance in France, according to the NDP Group, a market research company that tracks sales in department stores.) The vogue for all things retro is a marketing opportunity not lost on perfume makers. Christian Dior promoted Eau Sauvage with a print and television campaign built around a 1966 photo of French actor Alain Delon. (The music for one commercial
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mens category as the first perfume to make heavy use of hedione, a synthetic analogue of jasmine. Guerlain Vetiver, based on the aromatic grass native in India and introduced in 1961 after similar scents by Givenchy (1959) and Carven (1957), continues to beget modern

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was a snippet from the theme of Mad

Last year, the flagship Old Spice line, including the original aftershave in a buoy-shaped bottle, grossed $33 million at mass-merchandise outlets excluding Walmarts, according to Symphony IRI, a Chicago-based market research company. Meanwhile Brut, which was introduced in 1964 and endorsed by quarterback Joe Namath during his heyday, grossed $9 million. Brut is an amazing fougere, said Roschi, referring to the lavender-based fragrance family also including Canoe (introduced in

1936 and still in production). But for a generation raised on CK Be and body sprays like Axe, retro scents arent necessarily an easy sell. At Beverly Hills Perfumery, which stocks a comprehensive collection of vintage perfumes, the owner, Alan Berdjis, sprayed a test card with Pour Monsieur and took a long sniff. Its kind of a thin, creamy citrus, he said approvingly. But Berdjis, 30, added, If you introduced this today and it did not have the Chanel brand recognition, I dont think it would do well. Why? You smell it and just know, he said. This is an old fragrance. Epitomising the new is Acqua di Gio, introduced by Giorgio Armani in 1996

Men.) In an age when hip young people

transformed the flat-lining Pabst Blue Ribbon and Parliament brands into winking fashion statements, it makes sense that artefacts like Eau Sauvage and Habit Rouge might follow. indeed, the venerable Old Spice has been brand-extended so deftly that most younger users are probably unaware that the formula dates to 1938 or was derived from a womens perfume.

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

December 2011

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

and the No. 1-selling fine mens fragrance for the past 10 years, according to the NDP Group. Acqua di Gio popularised the light, quiescent aquatic accord that dominates mens fragrances today and has inspired countless imitators a slew of apologetic, bloodless, grey, whippetlike, shivering little things that are probably impossible, and certainly pointless, to tell apart, Turin said. CompAred to the breezy aquatics, certainly, the classic 60s scents with their base notes of musk, oak moss, sandalwood and leather can seem leaden, especially to younger noses. Nevertheless, sweet, unisex aquatics are ceding market share to scents redolent of woods and spices. Of the top four mens fragrances introduced in 2010, two were woods, one was a woody oriental and only one was a water, said Karen Grant, a beauty industry analyst with the NDP Group. The introduction last year of Bleu de Chanel, which despite its sport-aquaticsounding name is considered a woody aromatic, was a sign that the pendulum is swinging toward earthier accords; it became the No. 3 best-selling mens scent in the United States.

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

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

Men are far more brand-loyal than women when it comes to fragrance, Grant said, which is why when something becomes a top scent it continues to be a top scent its hard to break into that ranking. She added that in survey after survey, men say the No. 1 consideration when they buy a fragrance is that it appeal to their partners. A lot of women feel the newer fragrances for men are a little too feminine, Berdjis said, a sentiment hammered home in the recent The Old Spice Guy campaign, which pointedly mocked lady-scented body washes with the tag, smell like a man, man. Female customers at his store, Berdjis added, buy the older-type fragrances to give to their boyfriends. Their preference on a man goes back to the more masculine type of smell, he continued. That might speak to how society has changed you didnt have metrosexuals in the 1960s. Indeed, what constitutes a masculine fragrance today, said Roschi, who himself wore Chanel No. 5 for several months, is going to be much more diverse than it was in the 50s and 60s, because masculinity has evolved so much. n
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Max Schubert
Winemaking legend and creator of Penfolds Grange
Dreamed of making a truly Australian red with such balanced complexity it would mature and develop for at least 20 years and rival the worlds finest wines. First vintage maligned and misunderstood. Ordered to stop making it, he persisted (with the support of Jeffrey Penfold-Hyland). Penfolds Grange is now one of the most sought after red wines in the world.

Newspix/News Limited

To the renegades. To those who do things for love not money. 160 years of winemaking.

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Environment

Essentials

Northeast Passage Dream reviveD

Global warming is shrinking the Arctic ice pack, resulting in governments and companies scrambling to exploit new opportunities in this previously inaccessible region, reports Andrew Kramer.
Rounding the noRtheRnmost tip of Russia in his oceangoing tugboat this summer, Captain Vladimir V. Bozanov saw plenty of walruses, some pods of beluga whales and in the distance a few icebergs. One thing Bozanov did not encounter while towing an industrial barge 3,702 kilometres across the Arctic Ocean was solid ice blocking his path anywhere along the route. Ten years ago, he said, an ice-free passage, even at the peak of summer, was exceptionally rare. But environmental scientists say there is now no doubt that global warming is shrinking the Arctic ice pack, opening new sea lanes and making the few previously navigable routes near shore accessible more months of the year. And whatever the grim environmental repercussions of greenhouse gas, companies in Russia and other countries around the Arctic Ocean are mining that dark clouds silver
2011 New York Times News service

sector of the Arctic Ocean. But shipping, mining and fishing ventures are also looking further north than ever before. Icelands president, Olafur Ragnar Grimsson, speaking at a recent conference on Arctic Ocean shipping held in the Russian port city of Arkhangelsk not far south of the Arctic Circle, called it paradoxical that new opportunities are opening for our nations at the same time that the threat of carbon emissions has become imminent. At the same forum, Prime Minister Vladimir V. Putin of Russia offered a full-throated endorsement of the new business prospects in the thawing north. The Arctic is the shortcut between the largest markets of Europe and the AsiaPacific region, he said. It is an excellent opportunity to optimise costs. This summer, one of the warmest on record in the Arctic, a tanker set a speed record by crossing the Arctic Ocean in 6 days, carrying a cargo of natural gas condensate. The previous record was eight days. Scientists say that over the last 10 years the average size of the polar ice sheet in September, the time of year when it

is smallest, has been only about twothirds the average during the previous two decades. The Arctic Monitoring and Assessment Programme, a Norwegian group studying the Arctic, forecasts that within 30 or 40 years the entire Arctic Ocean will be ice-free in the summertime. And so business plans are being drawn up to capitalise on changes in a part of the world that for much of seafaring history was better known for grim final entries in diaries of explorers like Hugh Willoughby of England. He died with his crew in 1553 trying to navigate this shortcut from Europe to Asia, known as the Northeast Passage. The Russians, by travelling near the coast, have been sailing the Northeast Passage for a century. They opened it to international shipping in 1991, after the breakup of the Soviet Union. But only recently have companies begun to find the route profitable, as the receding polar ice cap has opened paths further offshore allowing larger, modern ships with deeper drafts to make the trip, trimming days off the voyage and saving fuel. In 2009, the first two international commercial cargo vessels travelled north of Russia between Europe and Asia. This
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lining by finding new opportunities for commerce and trade. Oil companies might be the most likely beneficiaries, as the receding polar ice cap opens more of the sea floor to exploration. The oil giant Exxon Mobil recently signed a sweeping deal to drill in the Russian

Essentials Environment
A decade ago it was rare that the Northeast Passage was ice-free, necessitating the use of expensive icebreakers to move shipping.

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Environment

Essentials
The Northeast Passage Opens Up
The Arctic ice cap has been shrinking, opening up new shipping lanes. This has given access to oil and gas elds, as well as shing in international waters that were not accessible before.
Northeast Passage
MAP KEY

Shorter, more northern routes now accessible

RUSSIA Tiksi Khatanga

Dudinka Dikson Island

Anadyr Bering Sea Nome

Pevek

Arkhangelsk

Chukchi Sea

Barents Sea

Murmansk FINLAND

Kirkenes

International waters
UNITED STATES ALASKA Beaufort Sea

Observed ice extent in September North Pole 2011

Median ice extent in September, 1979-2000

LE

SWEDEN NORWAY

AR

Thule GREENLAND (DENMARK)

CT

CANADA

Bafn Bay

IC
ICELAND Reykjavik Atlantic Ocean 40% 30 20 10 11
Sources: The National Snow and Ice Data Center; Pew Environmental Group; [Russian] Partnership of Northern Sea Route Users; Natural Earth (map terrain)
THE NEW YORK TIMES

Hudson Bay 79

CI

Portion of the Arctics international waters ice-free in September

RC

00

The voyage to Lianyungang in China took 21 N.Y Times News Service . Date: compared with the 37 days typically days in 2010,10/25/11 Graphic Slug: ARCTIC-KRAMER-BSPR required Size: 7.2 xto China through the Suez. Tschudi to sail 7.2 With Story: (BC--ARCTIC-KRAMER-BSPR--NYT) executives estimate they save about $300,000 a trip. Very few people in the shipping community know about this route, Felix Tschudi, the chairman, said in an interview.
year so far, 18 ships have made the now mostly ice-free crossing. The voyages included a scenic cruise through the Northeast Passage, the first ever, departing from Murmansk and arriving in Anadyr, a Russian port in the Pacific Ocean across the Bering Sea from Alaska. The voyage offered attractions such on some routes, the trip over the top of Russia is now competitive with the passage from Europe to Asia via the Suez Canal. The voyage from Rotterdam to Yokohama, as abandoned Russian polar stations, the Australian operator, Aurora Expeditions, noted in its promotional literature.

Japan, via the Northeast Passage, for example, is about 7,162 kilometres shorter than the currently preferred route through the Suez, according to Russias Transportation Ministry. (Of course, the Arctic route has far to go before catching up to the 18,000 ships a year sailing through the Suez Canal.) But the primary use of Arctic Ocean shipping so far has been to support other industries heading further north, like mining and oil drilling, according to participants at the Russian conference. Tschudi, a Norwegian shipping company, has bought and revived an idled iron ore mine in the north of Norway in order to ship ore to China through the Northeast Passage. The voyage to Lianyungang in China took 21 days in 2010, compared with
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Essentials Environment

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

the 37 days typically required to sail to China through the Suez. Tschudi executives estimate they save about $300,000 a trip. Very few people in the shipping community know about this route, Felix Tschudi, the chairman, said in an interview. The Russian company Norilsks nickel and copper mine can now ship its metals across the Arctic Ocean without chartering ice breakers, as in the past, saving millions of rubles for shareholders. In northwest Alaska, the Red Dog lead and zinc mine moves its ore through the Bering Strait, which is less often clogged Citigroups Moscow office has identified five Russian companies well positioned to benefit from global warming in the north, where temperatures are rising about twice as fast as the global average. Besides Norilsk, they included Sovcomflot, the state shipping company, and the nations two largest natural gas companies, Gazprom and Novatek. The fifth is Rosneft, the state oil company that has entered the joint venture with Exxon Mobil to drill in the Kara Sea, a part of the Russian sector of the Arctic Ocean. Russia is retooling a military shipyard outside Arkhangelsk that built the Soviet
December 2011
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frozen year round. Now, large portions north of Alaska and eastern Siberia are usually ice-free in the summer. The spectre of hungry southern nations fishing the newly navigable doughnut hole prompted a recent report by the Pew Environment Group to warn that without a new set of regulations for the region, Arctic cod populations might be decimated. Meanwhile, because ice floes still menace shipping even in the otherwise open sea lanes, authorities in the United States, Russia and Norway are studying the business potential of overhauling ports on both sides of the Northeast Passage to transfer containers from ordinary freighters to ice-class vessels that would ply the Arctic Ocean, serving Asia, Canada, the US West Coast and Europe. Under this plan, now hopelessly remote ports like Kirkenes in Norway or Adak in Alaska, south of the Bering Strait, might be transformed into bustling logistics FoR the international fishing industry, the target is the so-called Arctic Ocean doughnut hole the millions of square kilometres in the oceans centre that are beyond the 322-kilometre exclusive economic zones of the coastal nations. Until 2000, the entire doughnut hole was hubs for Arctic shipping. Alaskas lieutenant governor, Mead Treadwell, was one of the attendees at the Russian conference. He noted that about $1 billion worth of goods passed through the Bering Strait last year. The ships, he said, are coming. n

with pack ice than in past decades.

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

Unions nuclear submarines to make icecapable oil and gas drilling platforms.

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Other Business

Essentials
Rock Replaces Carols
Times are economically tough in Europe and shoppers arent feeling very festive. In France household spending dropped 1.3 per cent in September versus the same month a year earlier and spending on clothing fell 7.3 per cent, according to Frances statistics office. Thats why live rock and roll is replacing recorded Christmas carols in the windows of Galeries Lafayette as the famed Parisian department store seeks to drum up curiosity, and client numbers, for this years giftbuying season. With a debt crisis forcing much of Europe into austerity, consumption has dropped in recent weeks, making crowd-pullers all the more important, even for upmarket stores that can count on a large tourist contingent in the heart of the French capital. Rock legend Iggy Pop has helped Galeries Lafayette get the show on the road, posing for photo fliers in red Santa hat and matching shoes. The opening weeks include nightly live shows in the window by a variety of major-label rock and folk bands. Galeries Lafayette, which first started doing its Christmas window shows after World War II, says that this years show was inspired by the increasingly close relationship between rock and fashion.

German Accounting Blunder

The German government has been scathing about the accounting practices of some Eurozone countries, so it was particularly embarrassing when a 55 billion accounting mistake came to light. Federal Minister of Finance Wolfgang Schaeuble said it was an extremely annoying mistake for the nationalised mortgage bank Hypo Real Estate (HRE) and the PwC accountancy firm to have let such an error slip through undetected. The blunder briefly raised Germanys total debt by more than 55 billion, and Schaeuble and the government were lampooned by cartoonists and pilloried in editorials. As a result of the corrected debt, Germany now expects its ratio of debt to gross domestic product to be 81.1 per cent for 2011, 2.6 percentage points less than previously forecast.

Wild West Cash

appraisers and auction houses into a storage space where more than 8,000 bits of Americana have been gathering dust for years. Reed began buying the artefacts with tax dollars Harrisburg, the cash-strapped capital of Pennsylvania, USA, has enough muskets, stage coaches, sheriff's badges and ammunition to see off creditors. Nearly all of the artefacts were collected by former Mayor Stephen Reed, who dreamed of building a Wild West museum in Harrisburg that never materialised. Desperate to climb out of a $300 million debt crisis, Harrisburg has allowed more than five years ago. Two city auctions of some of the Wild West pieces in 2007 and 2008 have netted $1.66 million. Harrisburg spokesman Robert Philbin said about nine companies have taken a recent look at the artefacts and gave the city hope some of the $8 million to $15 million Reed spent to buy them will be recouped.
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