The Banker's Finance Minister of the Year awards celebrates the officials that successfully steered their countries through the economic turbulence of 2012.

Nizar Baraka, Morocco

Finance Minister of the Year
Global and Middle East
Nizar Baraka, Morocco

Nizar Baraka was appointed Morocco’s minister of economy and finance in January 2012 and has quickly gained international recognition for his bold but successful moves to usher in a raft of much-needed economic reforms.

“A partnership agreement was signed in March 2012 between the government and the private sector to strengthen our collaboration and tackle the economic issues we face,” says Mr Baraka. “This agreement has led to the creation of specific public-private committees in charge of accelerating the pace of sectoral reforms, enhancing competitiveness and labour relations.”

Mr Baraka has also reformed the country’s Organic Finance Law - a move aimed at enhancing fiscal transparency by allowing parliament to have greater access to information relating to the country’s debt, thereby enabling lawmakers to assist the government in hitting its fiscal targets.

The progress the country has made to date in improving its business climate has been recognised by the World Bank’s Doing Business report for 2012 which states that Morocco improved its business regulation the most out of all global economies, climbing 21 places to rank 94th. It highlights the fact that the country has simplified the construction permitting process, eased the administrative burden of tax compliance, and provided greater protection to minority shareholders.

While busy implementing these reforms, Mr Baraka has ensured the country remains on a steady economic path – recording low inflation of 1.8% in October 2012, general government debt stands at 39% of gross domestic product (GDP) and achieving sustained GDP growth, with the economy forecast to grow at a respective 4.5% and 4.8% in 2012 and 2013.

“The fact that the International Monetary Fund approved a $6.2bn line of credit to Morocco in August 2012 is proof that our financial and economic policy is sound and effective,” says Mr Baraka. “We want to maintain and reinforce the trust and confidence we have from the international community, as displayed recently during our international $1.5bn sovereign bond issue.”

In December 2012, Morocco issued a $1bn Eurobond maturing in 2022 which was 10 times oversubscribed, prompting the government to sell an extra $500m in 30-year bonds.

The country’s economic performance is particularly impressive given that it has been confronted by the twin challenges of the political unrest associated with the Arab Spring and the eurozone debt crisis.

“During a financial crisis, countries tend to turn inward and implement protectionist policies, but that’s where the danger lies,” says Mr Baraka. “Morocco, to the contrary, is keen on making the most of its trade agreements with about 55 countries that gives investors access to 1.2 billion consumers.

“In terms of the global economy, I believe that a brighter outlook is highly possible if the European economy manages to benefit from the recovery registered in the US and certain Asian countries, and hopefully starts to rely on the southern Mediterranean countries, such as Morocco, as strategic growth drivers.”

At the top of Mr Baraka’s agenda in 2013 are plans to reduce the fiscal burden on small and medium-sized enterprises and reform the Moroccan tax system.

“SMEs account for 95% of our manufacturing activity,” he says. “Dedicated measures are being set, namely a reduction of the corporate tax to 10%, the Small Business Act to ease their access to public procurement markets with a large fixed quota of 20%, a guarantee fund for loans, as well as specific technical and financial support programmes.

“An open multi-party debate on our tax system is programmed for the beginning of 2013.”

Finance Minister of the Year, Europe
Andris Vilks, Latvia

The amount of column inches and hand-wringing dedicated to the woes of crisis-stricken southern Europe make it easy to forget that some parts of the EU were hit even harder. In Latvia, gross domestic product (GDP) declined by almost 25% while the unemployment rate soared from 6% to 21%.

Nevertheless, the Baltic state is now experiencing rates of growth that are extremely impressive, and not just by European standards. In the first nine months of 2012, Latvia’s economy grew 5.6%, the fastest pace of any EU country. The road to this remarkable turnaround was not an easy one, however. After entering into an International Monetary Fund (IMF)-supported readjustment programme in 2008, Latvia implemented a programme of fiscal adjustment which totalled about 15% of its GDP. The results were painful, but resulted in renewed
confidence and subsequent successful bond issues.

“In 2012, we presented our last austerity budget; we made some cuts and increased some fees, but now this is producing results, and we are doing much better than we expected,” says Mr Vilks. “What we did in these very difficult circumstances, I am very proud about. A lot of people left Latvia [during the crisis] and wages went down significantly. We were enrolled in an IMF programme and GDP constriction was even more severe than it was in Greece. It was a very tough environment, but I believe that Latvia will be able to come out of this crisis stronger than before, and will be able to do so faster than expected.”

Indeed, the 2012 budget deficit was less than 2% of GDP, according to the IMF, and moreover, in December 2012, Latvia confirmed that it would make an early repayment of its outstanding obligations to the IMF ahead of a scheduled 2015 deadline.

Mr Vilks credits these good results to a cohesive group effort from across government ministries. “Latvia achieved this success through extremely strong commitment from several ministers and ministries to guide it through the crisis. We were all joined by a common goal of getting out of the crisis as quickly as possible, and the Ministry of Finance was a key player in that respect,” he says. “It was a titanic job, but if you are in a good team, you can do that… That’s how a country should move on from a crisis – a united effort where all are involved, trust in what is being done, and believe it is possible.”

There is still work to be done, however. Unemployment remains high, and the benefits of growth are yet to filter their way through to all segments of society. “After heavy wage cuts and high unemployment a lot of people are still quite pressed,” says Mr Vilks. “We have to communicate and explain to them that more and more, households will feel the benefits of growth too, although it might take six to
12 months.”

Finance Minister of the Year, Asia-Pacific
Tharman Shanmugaratnam, Singapore

As a small and open economy, Singapore is vulnerable to the shocks in the global economy, and since 2010 its finance ministry has been on a bold path of economic reform. In 2009, Singapore’s gross domestic product (GDP) growth dropped by 1% but by 2010 it had bounced back. At a time when many developed economies were still reeling from the crisis and were in fire-fighting mode, Singapore took a proactive approach to restructuring its economy.

The reforms are aimed at improving the productivity, efficiency, skills and innovation of Singapore’s domestic economy and pushing the city-state’s industries up the value chain.

The restructuring includes reducing Singapore’s dependence on foreign workers, with the aim of pushing businesses to compete in terms of efficiency and innovation, rather than relying on cheap labour.

Singapore’s growth for 2012 was disappointing, estimated to be about 1.5% for the full year, and for 2013 forecasts are somewhere between 1% and 3%. “What matters most is the way we are restructuring our economy,” says Tharman Shanmugaratnam, Singapore’s deputy prime minister and minister for finance, who is also the chairman of the International Monetary Financial Committee of the International Monetary Fund.

“We’ve been completely focused on this since we came out of the crisis. It [will not yield] quick results. It will take much of the decade, but we are determined to move our economy to a much higher level of productivity and better quality jobs,” he adds.

Although the GDP growth has been weak, Singapore’s unemployment has recently fallen to less than 3% for local workers.  

The finance ministry has provided incentives for older workers, early retirees and homemakers to fill the workforce gap that has been left by the reduction of foreign workers. At the same time, small and medium-sized enterprises have been given special employment credit for employing older workers, and they can also access a credit scheme that encourages smaller businesses to invest in innovation and skills.

“We are using our fiscal tools very aggressively to support every effort to upgrade productivity. We are also stepping up social policies, to help preserve social mobility and prevent disadvantages being passed down from one generation to the next,” says Mr Shanmugaratnam.

“If I were to categorise what we are doing, it’s about taking the supply side of the economy to a new level. It is not about conventional macroeconomic policy or demand management. I’d say more broadly, we are demand-constrained but we are also severely supply-strained around the world – rigid labour markets, mismatches between public education and the needs of the market, gaps in rule of law and barriers to cross-border investment. Getting back to sustainable growth will require a much greater focus on supply constraints, everywhere.”

Finance Minister of the Year, Americas
Luis Castilla, Peru

Peru’s economic growth is hard to miss. It is forecast by the International Monetary Fund that the country will have closed 2012 with 6% gross domestic product (GDP) growth, the highest in Latin America. This follows years of sustained development that reached a peak in 2011 with a 6.9% GDP growth.

The country’s open market policies have attracted interest from abroad and foreign direct investment (FDI) was a record 7% of GDP in 2012. Good macroeconomic management and further investments across the country’s business and social sectors – both from outside and inside the country – suggest another great economic performance this year.

Luis Miguel Castilla, Finance Minister, Peru 

 

“Our economic policy is designed to generate sustained and important rates of growth, while focusing on reducing poverty and inequality, and enhancing social inclusion and development,” says finance minister Luis Castilla. “We will continue to entrench macroeconomic stability – we expect to grow at 6% [in 2013] – while maintaining inflation around the central bank’s 2% target and pursuing further structural reforms.”

Much has been done in Peru over the past 12 months, with a series of reforms such as a tax programme that aimed at broadening the tax base and reducing evasion, as well as a new tax scheme for the mining industry – one of Peru’s key economic sectors.

Other crucial reforms include a better private pension fund system, improvements in the career prospects of teachers, and measures aimed at reducing the impact of the financial crisis through more decentralised public investment decisions and additional support to exporters.

If it sounds as though 2012 was a busy year for Peru’s ministry of finance, the next 12 months may be even more demanding. “We still have a long list of important challenges,” says Mr Castilla. “Over the next few months, we expect to implement additional major reforms, including one for revamping our civil service, another for boosting the development of our capital markets, a third for strengthening the career [prospects] of our military and police, another for enhancing public investment and public-private partnerships, and another for improving our economic competitiveness – which includes administrative simplification, strengthening human capital and promoting innovation.”

Peru’s government has recently passed its budget for 2013, where greater resources were put behind social and financial inclusion, as well as the improvement of public services and infrastructure. “We emphasise fiscal sustainability [with a target of] 1% surplus and the allocation of resources to productive social development and inclusion sectors, which count for about 50% of the budget,” says Mr Castilla,

“Improving the quality and efficiency of our expenditure [is also crucial] – about half the budget has been assigned under a performance-based approach.”

The ultimate goal of such reforms, Mr Castilla underlines, is to bring the country’s economic development to as many Peruvians as possible.

Finance Minister of the Year, Africa
Charles Koffi Diby, Côte d’Ivoire

For much of the past 12 years, Côte d’Ivoire has lurched from one political crisis to another. Matters reached boiling point when it teetered on the brink of civil war for several months following disputed elections in late 2010.

But the Francophone country’s recovery from that period, during which 3000 Ivorians lost their lives, has been impressive. Under a new government headed by Alassane Ouattara, the legitimate winner of the 2010 polls, the economy, having shrunk 5% in 2011 year, was expected to have risen 8.5% in 2012.

Ivorian officials believe growth can reach double digits by 2014. The International Monetary Fund is not quite so sanguine, but still predicts a high average of 7% to 8% between 2013 and 2015.

This optimism is thanks in no small measure to Côte d’Ivoire managing to secure debt relief in the wake of its strife. This was an arduous process that began as soon as Mr Ouattara came to power and was led by Charles Koffi Diby, who was finance minister until late November last year, when he was named foreign minister. It included Côte d’Ivoire being given heavily indebted poor country (HIPC) status in June and its external liabilities being slashed by $8bn to $4.7bn. The result is a sovereign debt-to-gross domestic product ratio today of about 36%, compared to 67% previously.

Mr Diby says this was crucial, given that almost of one-third of the Ivorian budget was going on debt payments before, and it will allow the government to fund much-needed infrastructure investments. “In the past 30 years the weight of [our] external debt made it almost impossible to implement a sustainable economic policy,” he says. “The process of restructuring our debt was an opportunity that had to be pursued for Côte d’Ivoire to… relaunch its economy.”

Another boost came in early November 2012 when holders of Côte d’Ivoire’s $2.3bn Eurobond, which went into default during the hostilities, accepted Mr Diby’s plan to pay three missed coupons over the next two years. That they have confidence in the new government is exemplified by the bond’s price, having risen from 50 cents on the dollar at the start of 2012 to about 93 by mid-December, making it one of the world’s best-performing sovereign Eurobonds over that period.

Mr Diby has also been at the forefront of efforts to launch widespread structural reforms in the past 18 months. Although sometimes controversial, particularly when it comes to measures to develop the cocoa sector, Mr Diby says they are needed to improve the country’s competitiveness. Should they succeed, analysts believe Côte d’Ivoire will be on its way to regaining its position as the economic powerhouse in French-speaking west Africa.

“The potential for our economy is immense,” says Mr Diby. “A clear vision to transform it has been defined and the leadership and political will exist.”

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