Key Trends in Globalisation

An insight from Asian airports

On a recent trip to India I had a meeting with a director of a leading Indian motor manufacturer. It gave many insights into relevant issues in the industry but the most striking was a much more general observation.
We were discussing - as is an inevitable topic of conversation with any foreign business figure - the deplorable state of Heathrow airport. This led to a discussion about the relative merits of various US airports which were considered preferable.
I remarked that I was suprised that he had not mentioned Singapore or Hong Kong, as these seemed to me superior even to the US airports he mentioned - or even Shanghai compared favourably to some he discussed. He replied: 'Well yes, of course, but you can't expect Asian standards in the US or Europe.'
Note the structure of the thought. He automatically considered the US and Europe on a lower standard of comparison than the most advanced Asian ones. Not that this applies, of course, to all Asian airports - Delhi or Mumbai themselves do not yet come up remotely to the best European or US standards. But he already internally judged that the highest levels set in Asia were on a far higher level than the US or Europe who had become 'poor cousins'. This from a leading business figure.
Thirty years ago such a view would have been inconceivable. Today few outside Asia understand it exists. But it confirms once again just how much globalisation is not a purely economic process. It will transform perceptions as well. Not only an economic but a cultural earthquake is developing.

The Chinese Blogsphere

Richard Edelman has an extremely informative post on his blog regarding the state of the Blogsphere in China which deserves the widest possible circulation - as does one of the comments on it. They reflect the real situation in China - the relevant post is for 13 June. http://www.edelman.com/speak_up/blog/

Asia's developing academic and cultural challenge

Most companies and commentators in the US and Europe, except at the very top, still greatly underestimate both the form and the scale of challenge that is coming not only from the BRIC economies but from Asia more generally.

To some extent the economic power of Asia is understood - although even here there is still frequent underestimation of the scale of the shift taking place. But the way in which this will progressively spread into other fields is still not adequately grasped. This process is only beginning but it will continue to deepen.

Fortune on 11 July therefore carries a particularly illuminating article on the effect that is beginning in the academic field. Linda Livingstone, dean of Pepperdine’s Graziadio School of Business and Management, notes in an interview the process that is beginning to occur in terms of salaries paid for recruitment of some academic staff:

It used to be that students around the world, seeking a global business education, studied in the U.S. or Europe. Today, they sign up for MBA programs in China or India—or Abu Dhabi, Dubai or Qatar. “Hong Kong and Singapore are putting tremendous effort into their MBA programs,” Livingstone adds, “and hiring business faculty has become very competitive.” One professor she knows got an offer from a business school in Singapore for three times his U.S. salary.'

This concerns an academic area closest to business, MBAs, but sheer weight of money will make its way in the world. In the same way that, due to their dynamism, the Asian economies can outbid the US and Europe for oil they are able to outbid them for academic staff - greatly reinforcing their academic and cultural positions.

This process is only at its beginning and, except in Japan, it will take a whole period to raise the 'stock' of Asian academic excellence, including in this the facilities available for research, to the same level as the US and Europe. But a number of Asian governments are consciously preparing this process. One of the most groundbreaking pieces of research carried out anywhere in the last period was the 'cultural audit' carried out by Shanghai - which London under Ken Livingstone took as a model for its own research in the field.

This audit evidently underlay a systematic plan by Shanghai to raise its academic and cultural investment over a prolonged period - with the short term focus being strengthening its position in creative industries. The conclusion of the audit was that to achieve this Shanghai must undertake large scale investment over a prolonged period. But China has entirely adequate resources for this.

In the cultural and academic fields, compared to the economic, the shift in favour of Asia is only just beginning but is consequences will be deep.

China and India – the economic gap is widening, not narrowing

One of the most expensive mistakes that can be made in emerging markets is to confuse business and politics.
The political pages of newspapers may attempt to point business decisions in one direction when this is contrary to real business and economic fundamentals. In Russia in the 1990s, for example, even George Soros, as well as many other investors, lost large sums because they became involved in supporting people who were viewed favourably in political newspapers, instead of paying sufficient attention to these business fundamentals. In addition large amounts of time were wasted in forging links with figures who were totally peripheral to real developments – therefore failing to position companies to take advantages of key openings.
A somewhat similar mistake has been made over the last period in comparisons between India and China. There may be political reasons for preferring India to China, but this has led to the mistaken view that India may be catching up China economically, or may even be a better economic bet for the future. This is not true.
China is increasing its economic lead on India – the gap is widening, not narrowing. This is shown clearly in the macro-economic data – where China’s growth rate continues to exceed India’s , which necessarily means that the gap in GDP and overall market size is increasing. But it is also clearly seen at a company level in more detailed examination of data from the FT Global 500 whihch were considered in a previous post. It should be recalled that the FT Global 500 deals only with publicly quoted companies but it is sufficiently comprehensive, and the differences are of sufficient magnitude. to show the situation clearly. http://keytrendsinglobalisation.blogspot.com/2008/07/financial-times-global-500.html
China has almost three times as many companies in the FT Global 500, including Hong Kong, as India (35 compared to 13) and twice as many excluding Hong Kong (25 to 13). Market capitalisation of Chinese companies is over six times that of Indian companies - $2,569bn compared to $421bn. Turnover of Chinese companies in the Global 500 is six and a half times that of Indian companies.
Strikingly both Russia and Brazil continue to be stronger than India at the large company level. Market capitalisation of FT Global 500 companies is Russia $820bn, Brazil $621bn, India $421 bn. In terms of turnover the figure for Russian companies is $295bn, Brazilian $178bn, Indian $87bn.
Evidently, strategically, India is a more important market than either Russia or Brazil. India’s population is much larger than Brazil or Russia. Its growth rate is second only to China’s among the largest emerging markets. The Indian market is therefore immensely important. But China’s economic lead over India is still growing not decreasing.

Key trends in the Financial Times Global 500

As always the publication of the Financial Times Global 500 conveys a great deal of information about the world's most important publicly quoted companies - FT rankings are by stockmarket capitalisation. http://www.ft.com/cms/s/0/e01aab98-40c9-11dd-bd48-0000779fd2ac.html

However the presentation of the material by the FT does not bring out some of the most important trends as a comparison to 1996 is carried out in terms of individual countries. Reorganisation and aggregation of the data shows key trends more clearly.
The most striking trend is the sharp decline in the weight of US and Japanese companies.
In 1996 US companies accounted for 40.6 per cent of the total number of Global 500 companies, and by 2008 this had declined to 33.8 per cent. The decline of Japanese companies was even sharper from 22.0 per cent to 7.8 per cent. A smaller decline took place for the UK.
Unsurprisingly the largest gainers were BRIC (Brazil, Russia, India, China) companies. These rose from 3.2 per cent of the total in 1996 to 14.4 per cent in 2008.
But Eurozone based companies also advanced significantly from 13.4 per cent to 19.8 per cent of the companies in the same period.

The weight of the traditional bloc of US, Japanese and UK companies declined from 71.8 per cent of the total to 48.6 per cent.

These shifts are magnified by the decline in the value of the dollar, but that in turn partially reflects overvaluation of the dollar in the previous period.

At the level of national economies the shift in the balance of the world economy is well recognised - the majority of world GDP growth last year being in China, India and Russia, and in terms of dollar devaluation the Eurozone, in current exchange rates, became the world's largest economic unit following the decline of the dollar. But this new data also shows strikingly the shifts in terms of companies.

Tourism resists the international recession

Highly interesting figures have been produced on the strong performance of world tourism in the early part of 2008 from the United Nations World Tourism Organisation (UNWTO) despite the overall international economic slowdown. http://www.unwto.org/media/news/en/press_det.php?id=2532&idioma=E
These figures are rooted in the well established trend that as personal incomes rise leisure services, of which tourism is a major part, are one of the few sectors of expenditure on which customers spend not only more in absolute terms but an increasing proportion of their income - clothing, health and education are others (although in many countries the latter two are in large part provided by the state).
Promotion of tourism, and suitable physical infrastructure for tourism, therefore has to be an increasing part of county and city economic programmes. However promotion of many tourism in a number of countries remains amateurish -an exception among emerging economies is India's 'Incredible India' campaign which is of extremely high quality. China in contrast continues to drastically underperform in professionalism of tourism promotion and this has doubtless contributed to lower than anticipated visitor numbers to Beijing for the Olympic Games.
World tourism rose by around 5 per cent in the first four months of 2008 compared to the same period in the previous year - one per cent above the long term trend. This was despite the pressures to slowdown in the world economy as a whole. According to UNWTO:

Globalisation and the creation of international financial centres

The rise of a limited number of ‘international financial super cities’ is a not an accidental but a necessary phenomenon in the modern globalised world economy. The two most striking examples of this development are London and New York – the world’s two largest international financial and business service centres. Tokyo had the opportunity, in terms of the depths of its capital markets, to develop as an international financial centre to fully match New York or London. But it failed to do so due to mistakes in policy that will be examined in future posts. The result has been to create a space for an Asian financial centre to rival New York or London. The competition to settle which this will be is not yet resolved. The Chinese government is encouraging a number of its cities to develop projects to become such a centre. The objective possibilities of various Asian cities to become such a centre will be considered subsequently. The similarities of New York and London illustrate that certain features of the development of an international financial centre are not accidental but intrinsic to their its nature. Their advantages compared to rivals will be considered. A crucial feature is that while globalisation is rooted in the economy its effects cannot be confined to the economy. Any concept that countries will trade with each other more, and invest in each other’s countries more, but everything else will remain the same is entirely unrealistic and will decisively weaken the attempt to create a global financial centre. Globalisation has not only economic but major social, cultural and environmental consequences that an international financial centre must prepare for. One of the key strengths of London compared to Paris in the last period for example was that Paris's attitude to international companies was 'your money is very welcome but please leave your culture behind you.' London, in addition to the much greater strength of its financial markets, adopted the approach 'your money is certainly very welcome and we assume you are going to bring your culture with you - which will help make our city more creative and dynamic.' The cutting edge which London acquired in creative industries and culture, as well as its success in winning the Olympic Games, followed from that approach.