Download Chapter14-Emerging global players 1

Chapter 14
Emerging Global
Players: The
Countries
1
EMERGING COUNTRIES IN
A
GLOBAL WORLD
Philippe Lasserre
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The world in 2010
Average
GDP 2010 GDP per capita Population growth
(current US$) (current US$)
(million) (1990-2010) % of GDP
North America
15390
45152
341
1,0%
24,4%
Europe
17340
33000
523
4,1%
27,3%
Asia and Pacific
17650
16650
3670
6,7%
28,0%
Latin America
4630
8230
623
7,3%
7,3%
Africa
1590
1630
974
4,0%
2,5%
Middle East
1880
15000
120
6,8%
3,0%
Transition ex USSR
1910
7107
363
5,4%
3,0%
World
63120
9227
6840
5,4%
100,0%
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What is an emerging country?
There is no clear definition of what an emerging country is, but
this term often describes countries with:
•
•
•
•
high economic growth
a growing middle class
a high degree of infrastructure investments
a market which is opening up to international trade
and investment
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Different types of emerging countries
• Emerging giants: Brazil, Russia, India, China (BRICs)
• Transition economies: Eastern Europe
• Industrializing countries: Latin America, Asia, Africa (e.g.
South Africa, Chile, Malaysia)
• The developing world (e.g. Vietnam, Nigeria, Pakistan)
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Countries life cycle
09%
Latin America
Middle East
08%
07%
Asia and Pacific
06%
05%
Average growth
yearly rate
(1990-2010)
Transition Economies
Europe
04%
Africa
03%
02%
01%
North America
00%
0
10000
20000
30000
40000
50000
60000
-01%
GDP/Capita (2010)
Bubbles proportional to GDP 2010
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Source: World Bank. World Development Indicators
High economic growth
14,00%
12,00%
10,00%
8,00%
BRICs
6,00%
Poland, Czech Rep, Hungary
4,00%
Malaysia, Chile, South Africa
2,00%
0,00%
World
-2,00%
USA
-4,00%
EU
-6,00%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: World Bank. World Development Indicators
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7
High economic growth cont.
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8
Source: World Bank. World Development Indicators
Middle class effect in emerging countries
+ 20%
%
+ 66%
Very poor
Poor
Middle class
Rich
Average
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Evolution of urban household income in China
100%
90%
1995
80%
70%
60%
50%
40%
2005
30%
20%
2015
10%
2025
0%
0
25000 40000
POORS LOWER
MIDDLE
CLASS
~ 3000
~4500
100000
UPPER
MIDDLE
CLASS
150000
200000
MASS
AFFLUENTS
~12000
250000
GLOBAL
AFFLUENTS
~24000
RMB
USD
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Middle class in China: McKinsey Survey 2011
A) Total Population
(Million)
B) Urban Population
%:
C) Percent of Urban
population in Middle
Class Affluent,
Mainstream and Value
(%)
D) Urban Middle
Class Population
(Million)=A*B*C
Of which Afflent+
main Stream
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1262
1338
1450
36%
45%
55%
63%
90%
95%
28
540
760
5
43
430
High degree of infrastructure investments
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12
Opening up to international trade and investment
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13
Source: World Bank. World Development
Indicators and UNCTD World Investment Report , 2010)
BRICs: the path to 2050
Forecast in 2001/2003 for 2050 by Goldman Sachs
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The world in 2050 according to Goldman Sachs
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The world in 2050 according to Goldman Sachs cont.
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Growth of BRICs
Growth drivers
- Labour force input
- Middle class
- Export
- Investments
- Productivity
Conditions for growth
- Macro stability
- Openness
- Education
- Institutions
Disregarded
- Inflation, cycles, wild cards
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The obsession with growth
The emphasis on growth over development
• Easier to achieve and to measure
• Less subjective and controversial
• A safe heaven for technocrats
The social impact of growth
•
•
•
•
Widespread dislocation, winners and losers
Rapid change and resistance to change
Deterioration of direct environment
Relative loss of position (income/status, etc.)
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APAC 02 / 18
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China: the potential for continuing high growth
Pros
Cons
• Examples from East Asia
• Public debt
• Lending to SOEs
• Resources
• Social welfare system
• Workforce input
• Unemployment
• Rural/urban
• Investments
• Total factor productivity
• Introduction of market efficiency
• SOEs/private
• Manufacturing/services
• Technology flow/education
• Foreign investment
• Inequalities
• Infrastructure improvements
• Corruption
• Banking reforms
• Energy shortages
• Government
• Environmental degradation
• Institutions
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“Shining India”
Growth drivers
Labour force input
- Excellent demographics
- Unfortunate labour laws
Investments
- Low, but increasing saving rate/industrial investment
- Good financial system; high foreign-exchange reserves
Productivity
- Large pool of scientists and engineers
- Very poor physical infrastructure
- Old and new technology
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APAC 02 / 20
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China and India
China
The factory of the world
Led by strong government
High domestic savings
High inflow of DFI
Relatively good infrastructure
India
The ‘back office’ of the world
For knowledge-intensive industries
Excellent educational institutions
World-class professionals
Emerging MNCs
but:
Weak legal system
Weak financial system
Inefficient allocation of capital
but:
Weak physical infrastructure
Shortage of capital
Weak government
Electronics/sport shoes Cars Software/pharmaceuticals
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Russia:
and liabilities
Russia:assets
A Balance
Sheet
Liabilities
Politics run markets
Dominance of state
Obsession with control
Ambiguity towards FDI
Assets
Oil/gas windfall profits
From deficit to surplus
From debtor to creditor
Stabilization fund
Relatively good infrastructure
Good technology
Education
Institutions/administration
Rule of law
Corruption (rank 143!)
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Brazil: the country of the future
• Independent since 1822
• Diversified economy (agriculture, mining, manufacturing)
• Miracle years from mid-60s to mid-70s
• Followed by oil shocks, financial crisis
- The ‘lost decade’
- Hyperinflation, stagnation, debt
• Lulu (II) government today
- Finally higher growth
- Financial stabilization
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A virtuous/vicious Cycle
Relationship between income and institutions
10
8
6
4
Low
Aggregate governance measure
Log of real GDP per capita
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Four tenants of a ‘good institutional
environment’:
1.
Rule of law
2.
Property rights
3.
Transparency and quality of bureaucracy
4.
Stability (political and macro)
 Independent central bank
 Checks and balances
High
This index measures the overall quality of governance including the degree of corruption, political rights, public sector efficiency,
and regulatory burdens.
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The role of institutions
Voice and accountability
Political stability
Government effectiveness
Regulatory quality
Rule of law
Control of corruption
2.00
Poor countries
1.00
Aggregate Governance Measure
2005
Good institutions
1000
2000
4000
0.00
6
7
8
8
80009
10
16000
10
32000
11
-1.00
Rich countries
Bad institutions
India
-2.00
High income countries
Low income countries
Middle income countries
China
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Real GDP per capita2005
(log scale)
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Source: World Bank
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