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  • Lynge Nielson in his working paper, “Classifications of Countries Based on Their Level of Development: How it is Done and How it Could be Done?” has questioned the system developed by UNDP, the World Bank and the IMF arguing that their “…existing taxonomies suffer from lack of clarity with regard to how they distinguish among country groupings. The World Bank does not explain why the threshold between developed and developing countries is a per capita income level of US$6,000 in 1987-prices and the UNDP does not provide any rationale for why the ratio of developed and developing countries is one to three. As for the IMF’s classification system, it is not clear what threshold is used.” He proposes “an alternative transparent methodology where data—rather than judgment or ad hoc rules—determine the thresholds. In the dichotomous version of this system, the threshold between developing and developed countries—pitched at the average development outcome—lies well below existing thresholds used by international organizations.” He proposes the replacement of dichotomous version with trichotomous version arguing, “…the group of higher development countries is broadly equal to the group of developed countries in existing systems and the two lower groups provide for the distinction among developing countries that all three institutions find warranted. The taxonomy can be implemented using a variety of development proxies. Multivariate proxies—such as the UNDP’s HDI or a lifetime income measure—can easily be incorporated into this framework.”

Transcript

  • 1. Theoretical Perceptions and Ground Realities Presented By: Zahid Hussain Khalid BUREAU Chief & Country Manger – Pakistan ASiAMONEY Magazine, a Euromoney Institutional Investor (Jersey) Company Country Manager – Pakistan and Regional Coordinator, GCC Countries Innovation Management, World‘s # 1 Online Magazine on Innovation zahidhkhalid.research@gmail.com. zahid.khalid@asiamoney.com, zahid@innovationmanagement.se
  • 2. Sequence of Slides◦ Stages of Development ◦ Five Pillars of Innovation and Innovation Outputs◦ Controversial Income Thresholds ◦ The Need for a New Set of Competencies◦ Two Observations ◦ Five Challenges Ahead◦ Financial and economic hotspots around the world, 2010 and Q1 2011 ◦ Three Shifts in the Competitive Landscape ◦ How to Consolidate Economic Gains and Arrest Social Unrest◦ Three Keys and Twelve Pillars of Competitiveness◦ Three indicators of Emerging Market‘s Present Growth ◦ Entrepreneurial Strength and Potential Role◦ Emerging-Market‘s Growth Projections ◦ Two Required Initiatives◦ Emerging-Market‘s Growth Advantage ◦ Cycle of Nine Social and Economic Evils◦ Half of $55 Billion Will Come From Asia Pacific Over the Next Five Years ◦ Window of Opportunity◦ Global Wealth and Emerging-Market‘s Pace o Wealth Growth ◦ Emerging Business Philosophy◦ Emerging-Market Credit Metrics and Macroeconomic Management ◦ The Only Way out◦ Balance Sheet Effects and Currency Depreciations are less of a Concern ◦ Creation of an Entrepreneurial Platform◦ World Government Debt ◦ Need for Drawing of Human and Natural Flow Maps◦ Global Distribution of Global Net Government Debt◦ Foreign Exchange Reserves Held by Emerging Markets◦ Foreign Assets, Liabilities and Current Account Imbalance◦ Nine Areas of Business Regulation Reforms◦ Measuring Reforms Around the World◦ Who Made Starting a Business Easier in 2009-10 and What Did They do?◦ Annual Wealth Growth Rates by Country , 2000-09 and 2010-2011◦ Economist Intelligence Unit‘s Growth Engines◦ Global Distribution of GDP◦ Global Middle Class Spending◦ World Wealth Levels 2011◦ Dollarization of Opportunities in Emerging-Market Cities◦ Six Imperatives for Capturing Opportunity presented by Emerging Market Cities◦ Nine Areas of Business Regulation Reforms◦ General Perceptions and Ground Realities◦ Highlights of the concerns (?) before the Boom Bubble Bursts!◦ Why China is Important?◦ Measuring Reforms Around the World◦ Who made starting a Business Easier in 2009-10 and What Did They Do?
  • 3. Introduction• Stages of Development• Controversial Income Thresholds• Two Observations• Financial and economic hotspots around the world, 2010 and Q1 2011
  • 4. IntroductionEver accelerating pace of globalization has opened a window of opportunity for innovative entrepreneurs tojump from spring board of their locally retained markets into promise lands of globally acclaimed high rankingbusiness heavens. The other name of these business heavens is Emerging Markets. It is now a known factthat the growth advantage in emerging markets, if other things remain the same, is expected to translate into62% of global growth. Multinationals expect about 70 percent of the world‘s growth over the next few years tocome from emerging markets, with 40 percent emanating from just two countries: China and India. In additionto growth rate advantage, expanding middle-class consumer base, impressive Doing Business regulatoryreforms, more than half of $55 billion of global middle-class spending will come from Asia Pacific.Global financial and economic crisis has necessitated the emphasis on business regulatory reforms. Throughits indicators World Bank and IFC‘s co-publication Doing Business Index 2011 has tracked changes tobusiness regulation around the world, recording more than 1,500 important improvements since 2004.―Long-term success,‖ according to Deloitte‘s report Innovation in Emerging Markets - strategies for achievingcommercial success, ―will take far more than simply making minor adjustments to existing products, loweringprices, or replicating existing sales channels. Instead, a new set of competencies and organizationalstructures will be required to generate a continuing stream of innovative products and services tailored to theneeds of consumers and industrial buyers in emerging markets.‖
  • 5. IntroductionReferring to challenges ahead ILO / International Institute for Labor Studies in one of their Studies onGrowth with Equity titled Making Recovery Sustainable – Lessons from Country Innovations maintain thatunemployment and inefficient income inequalities are the principal factors explaining social unrest. ―Theissue,‖ according to them, ―deserves urgent attention.‖How these unemployment and income inequalities can be addressed? For that the global businessentrepreneurs and financial institutions have to address a Cycle of Nine Social and Economic Evils bycreating a powerful independent apolitical Entrepreneurial Platform for developing a genuine Global Naturaland Human Resource Vision and Index as a take-off base for a Global Entrepreneurial Initiative with a Five-Point Agenda. Why do I want the entrepreneurs and financial sector to focus their attention on the first tworings, illiteracy / ignorance and unemployment, of the cycle of social and economic evils? Is there room forany doubt that the first casualty of social unrest is always economic activity? The truly genuine social unrestthat is invisible at present, if not addressed before it is visible, can and will surely turn all growth projectionsupside down.
  • 6. IntroductionLocal growth of and expansion in a business enterprise motivates a businessman, as an entrepreneur,to come up with an innovative overseas business expansion plan that requires internal and / orexternal financing. The companies in country focused pioneering and local competitive business cyclesremain confined to local / a single country market. Retentive business cycle encourages ambitiouscompanies / entrepreneurs to start thinking and planning for crossing the borders and entering intocompetition in regional and global markets. However an extremely powerful innovative pioneeringinitiative breaks the barriers of boundaries and local competitive / retentive business cycles to directlycatapult a local brand into a transnational brand in international markets, such as, Microsoft Windows,Apple appliances, Yahoo, Face Book, Google, Twitter, 800 CC Suzuki cars and now potentially Tata‘sNano etc. etc. A country‘s economic development and growth is nothing but the cumulative growth andexpansion of its manufacturing, agriculture and service sectors.
  • 7. IntroductionSTAGES OF DEVELOPMENT:The ―economicians‖ have divided the countries / markets into following three, widely used and acceptedbut controversial, categories and two sub categories based on income thresholds for establishingstages of development: Under-developed, Developing and Developed. The transitory sub-categoriesfall between the first and second and the second and third categories respectively upgradingconsequently the countries / markets from under-developed to developing and developing to developedcountries / markets as illustrated below:◦ Underdeveloped First transition phase◦ Developing Second transition phase◦ Developed
  • 8. IntroductionCONTROVERSIAL INCOME THRESHOLDS FOR ESTABLISHING STAGES OFDEVELOPMENTSTAGE OF DEVELOPMENT GDP PER CAPITA (In US$)Stage 1: Factor Driven >2000 Transition from Stage 1 to Stage 2 2000-3000Stage 2: Efficiency Driven 3000-9000 Transition from Stage 2 to Stage 3 9000-17000Stage 3: Innovation Driven > 17000 SOURCE: WORLD ECONOMIC FORUM – THE GLOBAL COMPETITIVENESS REPORT 2010-2011
  • 9. IntroductionTWO OBSERVATIONSFIRST OBSERVATION:Lynge Nielson has questioned the system developed by UNDP, the World Bank and the IMF arguing that their―…existing taxonomies suffer from lack of clarity with regard to how they distinguish among country groupings.The World Bank does not explain why the threshold between developed and developing countries is a per capitaincome level of US$6,000 in 1987-prices and the UNDP does not provide any rationale for why the ratio ofdeveloped and developing countries is one to three. As for the IMF‘s classification system, it is not clear whatthreshold is used.‖ He proposes ―an alternative transparent methodology where data—rather than judgment orad hoc rules—determine the thresholds. In the dichotomous version of this system, the threshold betweendeveloping and developed countries—pitched at the average development outcome—lies well below existingthresholds used by international organizations.‖ He proposes the replacement of dichotomous version withtrichotomous version arguing, ―…the group of higher development countries is broadly equal to the group ofdeveloped countries in existing systems and the two lower groups provide for the distinction among developingcountries that all three institutions find warranted. The taxonomy can be implemented using a variety ofdevelopment proxies. Multivariate proxies—such as the UNDP‘s HDI or a lifetime income measure—can easilybe incorporated into this framework.‖Lynge Nielson, ―Classification of countries based on their level of development: How it is done and how it could be done,‖ IMF working paper, February 2011
  • 10. IntroductionTWO OBSERVATIONSSECOND OBSERVATION:Markus Jaeger of Deutsche Bank Research in his report captioned, ―The Great Risk Shift – or why it may bethe time to rethink the developed-/emerging-markets distinction,‖ has also demanded, though in assessmentof sovereign default risk context, justification for ―…the fact that until very recently Greece and China carriedpretty much the same long-term foreign currency ratings. It looks odd that Greece with very limitedmacroeconomic flexibility due to EMU membership and a public debt burden exceeding 100% of GDP shouldbe rated at the same level as China whose public debt amounts to a mere 25% of GDP and whose FXreserves exceed 45% of GDP.‖He has raised another point regarding emerging market credit metrics and qualitative improvement inmacroeconomic management. He argues ―… the distinction between Emerging Market-Developed marketobscures more than it enlightens. When the world‘s major economies were the largest economies with thehighest degree of financial stability, the strongest external financial position (at least vis-à-vis less developedcountries) and the highest per capita incomes, this distinction may have made sense. But following what mayin the future be recalled as the ‗great risk shift‘ regarding ‗developed‘ and ‗emerging economies‘, it may betime to re-think old labels and traditional distinctions – and established views of economic and financial risk.‖Markus Jaeger, “The Great Risk Shift – or why it may be the time to rethink the developed-/emerging-markets distinction,” DeutscheBank Research, 2010
  • 11. IntroductionFINANCIAL AND ECONOMIC HOTSPOTS AROUND THE WORLD, 2010 & q1 2011 SOURCE: Capgemini Analysis 2011
  • 12. The Keys to Emerging Market’s Future Growth◦ Three Keys and Twelve Pillars of Competencies◦ Three indicators of Emerging Market’s Present Growth◦ Emerging –Market’s Growth Projections◦ Growth Advantage in Emerging-Markets◦ Half of $55 Billion Will Come from Asia Pacific Over the Next Five Years◦ Global Wealth and Emerging Market’s Comparative Pace of Wealth Growth◦ World Government Debt◦ Global Distribution of Global Net Government Debt◦ Foreign Exchange Reserves Held by Emerging Markets◦ Foreign Assets, Liabilities and Current Account Imbalance◦ General Perceptions and Ground Realities◦ Highlights of the Concerns Before the Boom Bubble Bursts◦ Why China is Really Important?◦ Nine Areas of Business Regulation Reforms◦ Measuring Reforms Around the World◦ Who Made Starting a Business Easier in 2009-2010 and What Did They Do?
  • 13. The Keys to Emerging Market’s Future GrowthTHREE KEYS AND TWELVE PILLARS OF COMPETITIVENESS: Factor-Driven Efficiency-Driven Economies Economies Higher education and training Institutions Innovation-Driven Goods market efficiency Economies Infrastructure Labor market efficiency Business sophistication Macroeconomic environment Financial market development Innovation Health and primary Technological readiness education Market size
  • 14. The Keys to Emerging Market’s Future GrowthTHREE INDICATORS OF EMERGING-MARKET’S PRESENT GROWTH: 1: Resilience Multi-faceted growers have withstood the test of the financial crisis and the economic downturn---and continued to outperform 2: Consistent Growth Companies from emerging markets are outgrowing competitors from developed ones at a startling pace 3: Expanding Market Share The smallest companies, with revenues of less than $1 billion, are growing by increasing their market share to a much greater extent than larger companies are.
  • 15. The Keys to Emerging Market’s Future GrowthEMERGING-MARKET GROWTH PROJECTIONS:ACROSS THE BOARD EMERGING-MARKET COMPANIES GROW FASTER THAN THOSE FROM DEVELOPED ECONOMIES  *revenue growth rates segmented by geographic market *  Compound annual growth rate (CAGR)By Location of Company Overall Growth Growth in Home Growth in Developed Growth in EmergingHeadquarters Market Market (for developed, Markets (for emerging other than home) markets other than home)Emerging Market Companies 23.9% 17.9% 22.4% 30.7%Developed Market Companies 10.7% 7.5% 11.7% 12.6%Growth Rate Advantage in 13.2% 10.4% 10.7% 18.1%Emerging Markets  *Based on growth-decomposition analysis of 2229 market segments for 720 companies, spanning a number of time frames between 1999 and 2008  SOURCE: McKinsey Quarterly – “Drawing a new road map for growth.” April 2011
  • 16. The Keys to Emerging Market’s Future GrowthEMERGING-MARKET CREDIT METRICS AND MACROECONOMIC MANAGEMENT:The growth rate advantage in emerging market economies is a planned outcome of emerging market creditmetrics and qualitative improvement in macroeconomic management, ―that,‖ according to Markus Jaeger ―…theagencies have insufficiently taken into account.‖ Substantiating his argument he explains ―…a typical, top-tier EMtoday has ‗excess‘ FX reserves and does not suffer anymore from ‗foreign currency mismatches‘, which were atthe epicenter of virtually every EM crisis of the past 15 years. Most emerging markets are also net externalcreditors. This has allowed the EM to overcome the ‗fear of floating‘ and adopt more flexible exchange ratearrangements, making them far less vulnerable to balance-of-payments shocks.During ―the past twenty years, especially the post-2000 era,‖ according to Alan M. Taylor in his CFR reportcaptioned The Future of International Liquidity and the Role of China, ―…demand for reserves has seen anexplosive growth. Most of this growth has taken the form of demand for international reserves denominated in U.S. dollars, and most has occurred in emerging markets.‖ ―External liabilities‖ of emerging markets according toEswar Prasad ―are no longer dominated by foreign-currency debt and have shifted sharply towards directinvestment and portfolio equity. Their external assets are increasingly concentrated in foreign exchangereserves. Given the trajectories of reserve currency economic areas, the long-term risk on emerging markets‘external balance sheets is shifting to the asset side.‖What is even more interesting is that, on the asset side, foreign exchange reserves account for a large share oftotal external assets—47 percent for Brazil, 69 percent for China, 68 percent for India and 37 percent for Russia(17 percent for South Africa).‖
  • 17. The Keys to Emerging Market’s Future GrowthBALANCE SHEET EFFECTS ARE LESS OF A CONCERN AND SO ARE CURRENCYDEPRECIATIONS (?):―Currency depreciations‖ another area of serious concern according to Eswar Prasad‘s assessment ―are far lessof a risk for emerging markets now than in the debt dominated era. First, the effects of such currencydevaluations are likely to be small since emerging markets no longer have large stocks of foreign currency-denominated external debt, either sovereign or corporate. The devastating balance sheet effects that broughtsome Asian economies to their knees during the Asian financial crisis of 1997-98 are less of a concern. Indeed,with many emerging markets now able to issue international debt denominated in their own currencies, even debtis no longer as fearsome as it once was.Elaborating that further Alan M. Taylor maintains, ―…since 1990, the ratio of reserves to GDP in the advancedcountries has held steady at about 4 percent, but the emerging markets‘ reserve ratio has more than quintupled,going from 4 percent to more than 20% of GDP. Since 1990, global holding of international reserve assets haverisen fully sixty-fold, from $200 billion to roughly $12 trillion.‖ He deduces from the trend, ―…reserve accumulationseems to have been motivated by a desire for insurance against capital flight in a world of semi-fixed exchangerates.In his working paper ―Role Reversal in Global Finance,‖ Eswar S. Parsad also maintains, ―…emerging marketsare looking for more insurance against balance of payments crises even as adverse debt dynamics in advancedeconomies increase the potential costs of self-insurance through reserve accumulation.‖
  • 18. The Keys to Emerging Market’s Future GrowthBALANCE SHEET EFFECTS ARE LESS OF A CONCERN AND SO ARE CURRENCYDEPRECIATIONS (?):The liabilities of emerging markets have come to be dominated by FDI and portfolio equity flows, while theirassets are increasingly in the form of foreign exchange reserves. In tandem with the uphill flows of capitalcharacterized in other studies, this implies a sharp role reversal between emerging markets and advancedeconomies. Emerging markets have not only become net exporters of capital to the advanced economies buthave also substantially reduced the risk emanating from the structure of their external liabilities even asadvanced economies‘ external liabilities continue to be dominated by debt.The emerging economies have survived the Great Recession in remarkable shape and headed off on a moresecure recovery track, which no one could have expected beforehand. Their gross asset to GDP ratios are nowfar above anything seen during recorded history. Moreover, the process of cross-border financial integration ispotentially subject to a worrisome feedback. The larger these balance sheet connections grow, the morevulnerable emerging economies are to a funding crisis. That vulnerability drives emerging economies toaccumulate more reserves, so expanding cross-border balance-sheet linkages further and setting off the nexttwist in the cycle. “In light of the fiscal challenges,‖ Sebastian Becker of Deutsche Bank Research seems hopefulin his paper, ‗Public Debt in 2020: A sustainability Analysis for DM and EM countries,‘ ―many DM countries mayintroduce new or more effective national debt limits, similar to those put in place by some EMs.‖
  • 19. The Keys to Emerging Market’s Future GrowthWORLD GOVERNMENT DEBT:Aggregate Debt (in trillion of US dollars) Rate of Aggregate Debt to Aggregate GDP (in %) DATA SOURCES: IMFs Fiscal Monitor, International Financial Statistics and World Economic OutlookNotes: This figure shows the aggregate level of general government debt (upper panel) and the ratio of this variable to aggregate world GDP (lower panel),with all variables converted to U.S. dollars at market exchange rates. In the upper panel, the data for advanced and emerging market economies add up to theworld aggregates. In the lower panel aggregate debt is expressed as a ratio of aggregate GDP for the respective group of countries. Net debt is used exceptfor the following countries that report only gross debt data: Advanced Economies -- Czech Republic, Greece, Hong Kong SAR, Singapore, Slovak Republicand Slovenia; Emerging Market Economies -- Argentina, China, India, Indonesia, Malaysia, Pakistan, Peru, Philippines, Romania, Russia and Thailand.
  • 20. The Keys to Emerging Market’s Future Growth GLOBAL DISTRIBUTION OF GLOBAL NET GOVERNMENT DEBT:DATA SOURCES: IMFs Fiscal Monitor, International Financial Statistics and World Economic OutlookNOTES: Other AE denotes other advanced economies and EM stands for emerging markets. Net debt is used except for the following countries thatreport only gross debt data: Advanced Economies -- Czech Republic, Greece, Hong Kong SAR, Singapore, Slovak Republic and Slovenia; EmergingMarket Economies -- Argentina, China, India, Indonesia, Malaysia, Pakistan, Peru, Philippines, Romania, Russia and Thailand.
  • 21. The Keys to Emerging Market’s Future GrowthFOREIGN EXCHANGE RESERVES HELD BY EMERGING-MARKETA: Total Foreign Exchange Reserves (trillion USD) B: Currency CompositionC: Share of Reserves for Which Currency Composition is Known DATA SOURCES: IMF COFER Database, June 30, 2011; The People’s Bank of China
  • 22. The Keys to Emerging Market’s Future GrowthFOREIGN ASSETS, LIABILITIES AND CURRENT ACCOUNT IMBALANCES:Foreign Assets and Liabilities Current Account ImbalancesSource: Robert C. Feenstra and Alan M. Taylor, Inter- Sources: IMF, RBNZ Calculationsnational Economics (New York: Worth Publishers,2007), p. 411
  • 23. The Keys to Emerging Market’s Future GrowthGENERAL PERCEPTIONS AND GROUND REALITIES:In order to see the bubble beneath the boom. I refer to the following three articles for a first hand assessment ofthe ground realities:By Minxin Pei, ―China‘s $2 trillion Hole,‖ The Diplomat, July 31, 2011http://the-diplomat.com/2011/07/31/china%E2%80%99s-2-trillion-hole/By Minxin Pei, ―China‘s Tricking Time Bomb,‖ The Diplomat, July 5, 2011http://the-diplomat.com/2011/07/05/china%E2%80%99s-ticking-debt-bomb/By Brian P. Klein, ―The Danger to China‘s Economy,‖ The Diplomat, August 9, 2011http://the-diplomat.com/2011/08/09/the-danger-to-china%E2%80%99s-economy/
  • 24. The Keys to Emerging Market’s Future GrowthHIGHLIGHTS OF THE CONCERNS (?) BEFORE THE BOOM BUBBLE BURSTS:Serious questions are now surfacing about China‘s own state-led economic management. Massive overcapacityin infrastructure, stubbornly high inflation and a pile of potentially bad bank loans are undermining historiceconomic reforms only half completed.Forced relocation, runaway environmental degradation, and cash-strapped social programmes like education,healthcare, and social security systems have been tolerated for questionable projects, many with little practicaluse.Entrepreneurial and middle-income business development, meanwhile, remains starved of resources, limitingdomestic consumption. The public at large heavily finances the state-centric investment model with their interestlosing bank deposits (yields below inflation) which are then lent out to state-owned enterprises at preferentialrates. The net effect: a wealth gap widening into a chasm – and increasing government concerns over socialstability.The lift that keeps the ‗build-it-and-they-will-come‘ model going – largely policy inertia tied to a massive stimulusplan and tight relationships between banks, state-owned companies, and local governments – can‘t defyeconomic gravity forever.Warning signs have been evident for some time. Back in late 2009, Wang Shi, Chairman of one of Chinaslargest development companies, China Vanke, warned that a significant bubble was forming. In August 2010,officials in Beijings largest commercial district, Chaoyang, released figures showing half of vacant real estate hadbeen empty for at least 3 years. http://the-diplomat.com/2011/08/09/the-danger-to-china%E2%80%99s-economy/
  • 25. The Keys to Emerging Market’s Future GrowthHIGHLIGHTS OF THE CONCERNS (?) BEFORE THE BOOM BUBBLE BURSTS:Beijing has managed to keep its economy growing during the global slump by resorting to massive bank lendingto local governments, which then went on an infrastructure spending binge that‘s certain to haunt the country foryears to come. If we remember the causes of the economic crisis that has ravaged the United States andWestern Europe, the most important one is something euphemistically termed ‗credit boom‘ – excessive lendingand borrowing that fuelled housing bubbles and unsustainable consumption. China seems to have been afflictedwith the same disease, with only one major variation: much of the debt incurred in China has gone into theinfrastructure sector, not consumption.Based on the figure released by the National Audit Office (NAO) at the end of June, local governments haveaccumulated debts totaling 10.7 trillion renminbi (RMB) or $1.65 trillion – about 27 percent of China‘s GDP in2010. Because the NAO‘s figure was based on a sampling of 6,500 local government-backed financial vehicles(out of more than 10,000 such vehicles nationwide), the actual magnitude of local government indebtedness ismuch greater. The People‘s Bank of China, the central bank, recently estimated that local government debttotaled 14 trillion RMB (most of which was owed to banks), almost 30 percent higher than the NAO figure.On paper, China‘s debt to GDP ratio is under 20 percent, making Beijing a paragon of fiscal virtue compared withprofligate Western governments. However, if we factor in various government obligations that are typicallycounted as public debt, the picture doesn‘t look pretty for China. Once local government debts, costs of re-capitalizing state-owned banks, bonds issued by state-owned banks, and railway bonds are included,China’s total debt amounts to 70 to 80 percent of GDP, roughly the level of public debt in the UnitedStates and the United Kingdom. Since most of China‘s debt has been borrowed in the last decade, China is onan unsustainable trajectory at the current rate of debt accumulation, particularly when economic growth slowsdown, as it‘s expected to do in the coming decade.
  • 26. The Keys to Emerging Market’s Future GrowthHIGHLIGHTS OF THE CONCERNS (?) BEFORE THE BOOM BUBBLE BURSTS:One banking regulator revealed that only one third of these projects can produce enough cash flow toservice their loans. This implies that local governments won‘t be able to recoup the bulk of theirinfrastructure investments – or repay the banks.Because about half of the bank loans borrowed by local governments will come due in the next two years, wecan expect a short-term repayment crisis. Chinese state-owned banks will have to roll over these loans,pretending that they are still performing. They may even have to lend local government‘s new money to paythe interests on these loans. The net effects of such accounting gimmicks would be reduced profitability forChinese banks, admittedly not a cause for real concern. But accounting tricks can only temporarily delay theinevitable. http://the-diplomat.com/2011/07/05/china%E2%80%99s-ticking-debt-bomb/
  • 27. The Keys to Emerging Market’s Future GrowthHIGHLIGHTS OF THE CONCERNS (?) BEFORE THE BOOM BUBBLE BURSTS:China‘s $2 trillion dilemma is well-known. Since 1994, China has kept its currency, the renminbi, effectivelypegged to the dollar. While initially this policy worked well in stimulating Chinese exports and stabilizingdomestic prices, Beijing allowed the peg to continue for too long, mainly to maintain an undervalued currency ingaining a competitive advantage in foreign trade. By the middle of the last decade, the undervaluation of therenminbi became a hot bilateral issue between the United States and China as America‘s bilateral trade deficitswith China soared.Under pressure from Washington, Beijing reluctantly began to raise the value of its currency in mid-2006 (whenits total foreign exchange reserves totaled just under $1 trillion). China‘s revaluation process was disrupted bythe global economic crisis in 2008. Fearful that its growth could falter if revaluation made Chinese exports lesscompetitive, the Chinese government suspended raising the value of the renminbi in late 2008. As a result,Chinese current account surpluses continued to balloon. The numbers are astounding. In July 2009, Chinareported $2.2 trillion in forex reserves, more than double the amount in 2006. Today, two years later, China‘sforex reserves have reached $3.2 trillion.So for the moment, China finds itself in a $2 trillion hole it has dug for itself over the last decade. It watches thepolitical paralysis in Washington and the resulting economic uncertainty in complete helplessness. Contrary tothe fears harbored by many Americans that China would use its mammoth Treasury holdings as a financialweapon of mass destruction against the United States, China is being taken to the equivalent of the financialcleaners in the unfolding US debt ceiling drama. http://the-diplomat.com/2011/07/31/china%E2%80%99s-2-trillion-hole/
  • 28. The Keys to Emerging Market’s Future GrowthWHY CHINA IS IMPORTANT?China is important for two reasons:As a market China is rightly taken seriously by foreign direct investors as a strategic partner for consistenteconomic growth, advantage of widest available consumer base and the economy of scale with the highestpossible profit margins / returns. Consequently, non-Chinese companies have a significant share in China‘seconomic growth. The booming Chinese business has an indirect reflection of their share in the China‘s growingGDP.China has heavily invested in USA and Europe both in dollars, SIVs and other assets sharing the risk of anyadverse fall out of an economic recession and financial loss.I strongly believe that any economic and financial earthquake in Europe and / or America will make strong ripplesthat will be felt not only in China but across the globe. So, IT IS ADVISABLE TO WHATCH CHINA TOO!I have not intentionally touched upon India, Brazil, Russia and other countries of the emerging markets becausethey do not pose any serious threat to global economic stability.What the policy makers need is to remain focused on major areas of Business Regulation Reforms!
  • 29. The Keys to Emerging Market’s Future GrowthNINE AREAS OF BUSINESS REGULATION REFORMS: Dealing with Trading Paying Protecting Closing a Starting a Registering Getting Enforcing construction across Business property credit contracts taxes investors business permits bordersTHREE MAJOR AREAS OF REFORMS FOR:STARTING BUSINESS, GETTING CREDIT & OBTAINING ELECTRICITY CONNECTION: •Documentation •Credit Bureau Coverage • Second most important •Cost of starting a •Use of assets as constraint business collateral • Procedures, time and •Choice of formal and •Need for Centralized cost informal sector collateral registries • Lack of transparency • Need for regulatory reforms Obtaining Starting Getting Credit Electricity Business connection DATA SOURCE: Doing Business Index 2011, World Bank/IFC
  • 30. The Keys to Emerging Market’s Future GrowthMEASURING REFORMS AROUND THE WORLDGOOD PRACTICES AROUND THE WORLD IN MAKING IT EASY TO START A BUSINESS PRACTICE ECONOMIES* EXAMPLES Putting Procedures online 105 Cape Verde, FYR Macedonia, Maldives, New Zealand, Puerto Rico, Saudi Arabia, Singapore Having no minimum capital requirement 80 Bangladesh, Belarus, Canada, Colombia, Mauritius, Tunisia, Vietnam Having a one-stop shop 72 Afghanistan, Azerbaijan, Italy, Jordan, Peru, Philippines, Rwanda*Among 183 countries surveyed Source: Doing Business Database, World Bank (2009f)
  • 31. The Keys to Emerging Market’s Future GrowthWHO MADE STARTING A BUSINESS EASIER IN 2009-10---AND WHAT DID THEY DO?Feature Economies Some Highlights Bangladesh, Brunei Darussalam, Chile, DR of Congo, Haiti, before the earthquake, eliminated theSimplified registration formalities Croatia, Grenada, Guyana, Haiti, India, Kazakhstan, requirement that the office of the president or prime(seal, publication, notarization, inspection, other Kenya, Kyrgyz Republic, Lithuania, Luxemburg, Panama, minister authorize publication of company statutes inrequirements) Syrian AR, Tajikistan, Zimbabwe the official gazette. Entrepreneurs can now publish them directly in the gazette. This cut start-up time by 90 days. Bangladesh replaced the requirement for buying a physical stamp with payment of stamp fees at a designated bank. It also enhanced its electronic registration system. Start-up time fell by 25 days. Brazil, Brunei Darussalam, Chile, Croatia, Ecuador, Croatia made it possible for limited liability companiesIntroduced or improved online procedures Germany, India, Indonesia, Islamic Republic of Iran, to file registration applications electronically through Italy, Malaysia, Mexico, Peru the notary public. This cut 1 procedure and 15 days from the start-up process. Brazil, Cape Verde, Arab Republic of Egypt, The Philippines introduced a one-stop shop for theCut or simplified post registration procedures (tax Montenegro, Mozambique, Peru, Philippines, municipal license and cut the inspection by the mayor’sregistration, social security registration, licensing) Taiwan (China) office, reducing start-up time by 15 days. Cameroon, FYR Macedonia, Mexico, Peru, Peru created an online one-stop shop allowing anCreated or improved one-stop shop Slovenia, Tajikistan, Vietnam entrepreneur to receive confirmation of business registration and the tax registration number at the same time. This cut 3 procedures and 14 days from start-up. Bulgaria, Denmark, Kazakhstan, Sweden, Syrian Arab Zambia eliminated its minimum capital requirement.Abolished or reduced minimum capital requirement Republic, Ukraine, Zambia Syria reduced its requirement by two thirds.SOURCE: Doing Business Database
  • 32. Business Prospects and Growth Potential◦ Annual Wealth Growth Rates by Country , 2000-09 and 2010-2011◦ Economist Intelligence Unit’s Growth Engines◦ Global Distribution of GDP◦ Global Middle Class Spending◦ Global Wealth Levels 2011◦ Dollarization of Opportunities in Emerging-Market Cities◦ Six Imperatives for Capturing Opportunity Presented by Emerging- Market Cities
  • 33. Business Prospects and Growth PotentialANNUAL WEALTH GROWTH RATES BY COUNTRY, 2000-09 AND 2010-11 2010-2011 2010-2011 2010-2011 High (>10%) Medium (5%-10%) Low (>5%) Australia, Brazil, Chile, Colombia, Czech Republic, Poland Bulgaria, France, Hungary, India, Indonesia, Malaysia, South2002-2009 Africa Romania, Russia, TurkeyHigh (>10%) Canada, Korea, Mexico, Philippines, Egypt Austria, Belgium, Germany, Greece,2000-2009 Sweden, Switzerland, Thailand Italy, Netherland, Portugal, UKMedium (5%-10%) Argentina, Hong Kong, Japan, Saudi Taiwan, USA2000-2009 ArabiaLow (>5%)Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Wealth Databook 2011
  • 34. Business Prospects and Growth Potential GROWTH ADVANTAGE IN EMERGING MARKETS:It is now a known fact that the growth advantage in emerging markets, if other things remain the same, is expected to translate into 62% of global growth. Multinationals expect about 70 percent of the world‘s growth over the next few years to come from emerging markets, with 40 percent emanating from just two countries: China and India. According to Bloomberg Businessweek‘s 2010 ranking of the ―50 Most Innovative Companies,‖ 15 are Asian and, for the first time, 11 are from emerging economies.If this growth rate remains unchallenged by natural and man-made circumstances than according to an―estimate,‖ by Wayne G. Borchardt, Jill S. Dailey and Paul F. Nunes published in 3rd issue of Accenture Outlookin 2011: ―New global middle class will rise from approximately 1.8 billion households in 2009 to nearly 4.9 billionin 2030.‖ This new middle class at present has annual household incomes between $5000 and $30,000 alreadyrepresenting ―…a surging mass market all by themselves, and these newly empowered consumers shop eagerlyfor stylish and high quality goods.‖ The following graph from The Emerging Middle Class in Developing Countriesin a report by OECD Development Centre indicates that in developing countries by 2030, global middle-classspending is expected to more than double, reaching more than $55 billion---and over half of that spending willcome from Asia Pacific. Over the next five years,
  • 35. Business Prospects and Growth PotentialECONOMIC INTELLIGENCE UNIT’S GROWTH ENGINES:SOURCE: Economist Intelligence Unit
  • 36. Business Prospects and Growth PotentialGLOBAL DISTRIBUTION OF GDP:DATA SOURCES: IMFs Fiscal Monitor, International Financial Statistics and World Economic OutlookNOTES: Other AE denotes other advanced economies and EM stands for emerging markets. GDP is measured at current prices and converted to a common currency at market exchange rates.
  • 37. Business Prospects and Growth PotentialHALF OF $55 BILLION WILL COME FROM ASIA PACIFIC OVER THE NEXT FIVE YEARS:If this growth rate remains unchallenged by natural and man-made circumstances than according to an―estimate,‖ by Wayne G. Borchardt, Jill S. Dailey and Paul F. Nunes published in 3rd issue of Accenture Outlookin 2011: ―New global middle class will rise from approximately 1.8 billion households in 2009 to nearly 4.9 billionin 2030.‖ This new middle class at present has annual household incomes between $5000 and $30,000 alreadyrepresenting ―…a surging mass market all by themselves, and these newly empowered consumers shop eagerlyfor stylish and high quality goods.‖ The following graph from The Emerging Middle Class in Developing Countriesin a report by OECD Development Centre indicates that in developing countries by 2030, global middle-classspending is expected to more than double, reaching more than $55 billion---and over half of that spending willcome from Asia Pacific. Over the next five years,
  • 38. Business Prospects and Growth PotentialGLOBAL MIDDLE-CLASS SPENDING ($ million): Source: The Emerging Middle Class in Developing Countries, OECD Development Centre, 2010
  • 39. Business Prospects and Growth PotentialGLOBAL WEALTH AND EMERGING-MARKET’S PACE OF WEALTH GROWTH:Wealth is one of the pillars of economic system - driving economic growth, the accumulation of capital, trendsin consumption, asset prices and specific industries such as pharmaceutical and banking. Credit SuisseResearch Institute estimates that global household wealth totaled USD 231 trillion in mid-2011, equivalent toUSD 51,000 per adult. From the viewpoint of their estimate, the financial crisis would appear to be more thana modest setback in a benign decade for household wealth accumulation, which saw aggregate wealthdouble from USD 113 trillion recorded for 2000. Part of the rise may be attributed to the rise in the adultpopulation from 3.6 billion to 4.5 billion.Credit Suisse Research Institute expects to see a big improvement in the position of emerging marketeconomies. Wealth in both China and Africa as whole is projected to rise by over 90%, but India and Brazilare forecast to do even better, with personal wealth more than doubling by 2016. The case of India isparticularly striking. With total wealth of USD 4.1 trillion in 2011, India‘s household wealth is comparable to theUSA in 1916. But during the next five years India is projected to gain as much wealth as the USA achievedover the course of thirty years beginning in 1916. This is due to increase in wealth per adult accompanied bya significant rise in the adult population. The case of Brazil is also noteworthy. With household wealthexpected to reach USD 9.2 trillion by 2016 – a level comparable to the USA in 1948 – the rise in wealth in thenext five years should correspond to the gain in the USA over the 23-year period from 1925 to 1948. Totalhousehold wealth in China is currently USD 20.1 trillion, equivalent to that recorded for the USA in 1968. Ifrecent trend continue, by 2016 China could reach the wealth level that USA achieved in 1990 – a jump of 22US years in just five years.
  • 40. Business Prospects and Growth PotentialGLOBAL WEALTH LEVELS 2011Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Wealth Databook 2011
  • 41. Business Prospects and Growth PotentialDOLLARIZATION OF OPPORTUNITIES IN EMERGING-MARKET CITIES: POPULATION One-third of the world‘s population---2.6 INFRASTRUCTURE billion people---live in mega cities, The infrastructure investment HOUSING cluster capitals, specialized hubs and in these cities is forecast at horizon towns which are located in the Emerging markets will $30 trillion to $40 trillion emerging markets. By 2030, the number require an estimated cumulatively over the next 20 of emerging-market urban dwellers will $13.8 trillion in housing years. The shortfall between increase by another 1.3 billion. In investments from 2010 needed infrastructure in contrast, cities in developed markets will to 2030, with a huge emerging-market cities and add only 100 million new residents in the portion of the demand available public funds is next 20 years. coming from Brazil, estimated to be in the China, India and Mexico neighborhood of $11 trillion to $14 trillion through 2030CONSUMPTION: Emerging market cities will account for 30 percent of global private consumption by 2015 and private consumption is growing at a rate of 11 percent per year._______________________________________________________________________________________________DATA SOURCE: WINNING IN EMERGING MARKET CITIES – A GUIDE TO THE WORLD’S LARGEST GROWTH OPPORTUNITIES, BOSTON CONSULTING GROUP, 2008_______________________________________________________________________________________________
  • 42. Business Prospects and Growth Potential SIX IMPERATIVES FOR CAPTURING OPPORTUNITY PRESENTED BY EMERGING-MARKET CITIES: 1 Define growth plans on the 2 Specify the necessary go- 3 Develop true expertise and basis of specific target cities--- insight regarding consumer to-market models to enable the portfolio of emerging- needs across a range of city profitable expansion into more market cities to be served now environments in emerging and smaller cities and in the future markets 4 Forge a game plan to profit 5 Develop talent and 6 Upgrade capabilities for organization plans at a city-by- from infrastructure boom city level over a five-to-ten- managing complexity and risk year time frame_______________________________________________________________________________________________________SOURCE: WINNING IN EMERGING MARKET CITIES – A GUIDE TO THE WORLD’S LARGEST GROWTH OPPORTUNITIES, BOSTON CONSULTING GROUP, 2008______________________________________________________________________________________________________________________________
  • 43. Innovating the Innovated• Five Pillars of Innovation and Two Innovation Outputs• The need for a New Set of Competencies• Five Challenges Ahead• Three Shifts in the Competitive Landscape that are Ushering in the New Age of Aggregation• How to Consolidate Gains and Arrest Social Unrest
  • 44. Innovating the InnovatedFIVE PILLARS OF INNOVATION AND TWO INNOVATION OUTPUTS:Global Innovation Index 2011‘s ―…Innovation Input Sub-Index gauges elements of the national economythat enable innovative activities, grouped in five pillars:(1) Institutions,(2) Human capital and research,(3) Infrastructure,(4) Market sophistication, and(5) Business sophistication (almost same as in WEF‘s Global Competitiveness Report 2011). The Innovation Output Sub-Index captures actual evidence of innovation outputs, divided in two pillars:(6) Scientific outputs and(7) Creative outputs.‖
  • 45. Innovating the InnovatedTHE NEED FOR A NEW SET OF COMPETENCIES:―Global manufacturers are focused intently on the opportunities to source, develop, manufacture, sell, and service their products in emerging markets. But long-term success will take far more than simply making minor adjustments to existing products, lowering prices, or replicating existing sales channels. Instead, a new set of competencies and organizational structures will be required to generate a continuing stream of innovative products and services tailored to the needs of consumers and industrial buyers in emerging markets.‖ Deloitte‘s report Innovation in Emerging Markets - strategies for achieving commercial success
  • 46. Innovating the InnovatedFIVE CHALLENGES AHEAD:1. Rethinking value propositions,2. Globalizing research,3. Tailoring talent management,4. Mastering the complexity of global value chains and5. Managing risks
  • 47. Innovating the InnovatedTHREE SHIFTS IN THE COMPETITIVE LANDSCAPE THAT ARE USHERING IN THENEW AGE OF AGGREGATION:1. Converging business activities and players are blurring industry boundaries,2. Rising incomes and the desire for affordable luxury are melding to create a new global middle class and3. Savvy new emerging-market players are redrawing the competitive map―…the companies must first redefine their business strategies to include the new markets and segments. They must then redraw their product/market matrix with an eye toward refining existing offerings and creating new ones, and work out the issues that surround expanded retail channels, logistics requirements and supply chain management considerations.‖ ―Companies must also redraw positioning maps to take into account the entry of new competitors from emerging markets and other industries and to incorporate the newly expanded set of customer values and demands that are surfacing as companies bring scattered market segments together.‖ From: Accenture‘s report New paths to growth – The Age of Aggregation
  • 48. Innovating the InnovatedHOW TO CONSOLIDATE THE GAINS AND ARREST SOCIAL UNREST:Another aspect of the challenges ahead is pointed out by International Labor Organization / InternationalInstitute for Labor Studies in one of the Studies on Growth with Equity titled Making Recovery Sustainable –Lessons from Country Innovations. ―To sustain recovery,‖ study cautions, ―several emerging and developingcountries need to consolidate the gains made in boosting domestic sources of growth in order to compensatefor weaker export markets in advanced economies. Well-designed employment and social policies can beinstrumental in this respect. There is no one-size-fits-all strategy for achieving this. Indeed, the obstacles todomestic growth vary across countries, requiring a different mix of infrastructure investment, wage and socialprotection policies and rural development initiatives, including facilitating enterprise creation and expansion.‖The study refers ―to recent events in certain countries in the Middle East and North African region that havehighlighted the centrality of employment and balanced income developments for social cohesion – itself a keyingredient of sustainable growth. Empirical evidence shows that unemployment and inefficient incomeinequalities are the principal factors explaining social unrest. The issue deserves urgent attention, especiallysince the trend rise in food prices is likely to exacerbate income inequalities.‖
  • 49. Entrepreneurship & Financing Entrepreneurial Strength and Potential Role Two required Initiatives Cycle of Nine Social and Economic Evils Window of Opportunity Emerging Business Philosophy The Only Way Out Creation of An Entrepreneurial Platform Need for the Drawing of Human and Natural Flow Maps
  • 50. Entrepreneurship & Financing ENTRPRENEURAL STRENGTH AND POTENTIAL ROLE:In 2010, Global Entrepreneurship Monitor (GEM) surveyed 175,000 people in 59 economies covering over52% of the world‘s population and 84% of the world‘s GDP. ―Some 110 million people between 18 and 64years old,‖ according to the findings of the survey, ―were actively engaged in starting a business. Another 140million were running new businesses they started less than 3⅟2 years earlier. Taken together, some 250million were involved in what GEM defines as early stage entrepreneurial activity. Out of these individuals anestimated 63 million people expected to hire at least five employees over the next five years, and 27 million ofthese individuals anticipate hiring twenty or more employees in five years. This illustrates the contribution ofentrepreneurship to job growth across the globe.‖Entrepreneurship and financing are two areas that can be looked at for employment creation and balancedincome developments for social cohesion
  • 51. Entrepreneurship & FinancingTWO REQUIRED INITIATIVESGovernments, in present global economic and fiscal scenarios, can not go beyond facilitating policy support.There are two specific initiatives that need to be focused by entrepreneurs and financial institutions: creationof institutions for work integrated learning and subsequent employment creation in professional careercorridors and re-packaging and heavily advertised global introduction of financial products for self-employment avenues. First is successfully done in Germany with excellent results and being attempted indozens of other countries. The second is scarcely available and rarely advertised. Investment in these twoareas will equip the entrepreneurs with the quality human resource that is an essential pre-requisite forsuccess of and expansion in any business any where in the world.Prior to that, it is necessary, first of all to address a vicious Cycle of Nine Social and Economic Evils: Illiteracyand Ignorance; Unemployment; Poverty; Deprivation; Disease; Crime and Corruption; Injustice and Violationof Human Rights; Political, Religious and Ethnic Prejudices; Sectarianism and Terrorism.
  • 52. Entrepreneurship & FinancingCYCLE OF NINE SOCIAL AND ECONOMIC EVILS:If one carefully looks at the formation of the cycle of social and economic evils he will note that the last sevensocial and economic evils are nothing but the direct outcome of the first two evils, i.e. illiteracy / ignorance andunemployment. These social and economic evils are inter-connected and that connection needs to be clearlyunderstood before any remedial plan or process is initiated: Illiteracy and Ignorance Sectarianism and Terrorism Unemployment Political, Religious and Cycle of Nine Ethnic Prejudices Social and Poverty Economic Evils Injustice and Violation of Deprivation Human Rights Crime and Corruption Disease
  • 53. Entrepreneurship & FinancingWINDOW OF OPPORTUNITY WHO IS THE FIRST CASUALTY OF THE SCOIAL UNREST:When crime and corruption, injustice and violation of human rights, political, ethnic and religious prejudicesand sectarianism and terrorism paralyze cities and countries, the first casualty of that unrest is alwaysbusiness activity resulting in daily business losses of hundreds of millions of dollars per hour and per day inboth developed and developing countries. Who suffers the most? The business community suffers the mostexcluding those who sell arms and ammunition and also those who provide financial back up for suchactivities. If you look at the rarely discussed genuine reasons for present economic crisis you will surely seethe same evils working behind the scene. The situation in and around Iraq, the ongoing war on terror in andaround Afghanistan, the unrest and armed conflicts across Africa, the real and artificial political upheaval inthe middle-east are all directly or indirectly influencing the supply and prices of the commodities, products andservices. This situation, wars, unrest and upheavals or engineered changes in political landscapes all arecaused by the illiteracy / ignorance and unemployment and other evils that follow the two. You may also addthe inward looking and self-centered educated strategists and policy makers into the list of culprits at thedelivering end who are taking undue advantage of the illiteracy / ignorance and unemployment of socially andeconomically deprived people who are at the receiving end across the globe. Consequently, creating artificialhurdles in the flow of natural and human resources and making them expansive to the extent that a largenumber of people around the world are economically pushed below poverty line every day.
  • 54. Entrepreneurship & FinancingEMERGING BUSINESS PHILOSOPHY: SOMETHING OTHER THAN SOCIALENTREPRENEURSHIPADDRESSING SOCIAL AND ECONOMIC EXCLUSION THROUGH SEGMENTATION:There is a very important aspect of emerging business survival philosophy that needs to be explored andseriously discussed further at platforms like these. And that philosophy necessitates the focus on those―economically (dis)advantaged consumers (too) who (cannot) shop eagerly for stylish and high qualitygoods.‖ In this I see a window of opportunity for innovative entrepreneurs to create a range of products, planfinancial packages and show case low-cost services for socially and economically deprived people byconsciously and scientifically addressing social and economic exclusion that is the main reason for unrestboth in the developing and the developed economies. The message is to create room at considerably low-cost through innovative entrepreneurship and financial assistance for that socially and economicallyhandicapped / deprived segment of the consumer mix that has the potential to disturb economic progress,growth and development in emerging markets and geo-politically sensitive resource-rich economic zones.As a business rule, the entrepreneurs and financial institutions have to make sure that all market segmentsare taken into consideration at a planning stage so that the intentionally or unintentionally excluded segmentdoes not resort to violent agitation at a later stage hindering the implementation or expected outcome of thestrategic business plan in any part of the world. This is actually what is ignored at present in sensitiveeconomic zones around the globe creating uncertainty and confusion in entrepreneurial, business andfinancial circles.
  • 55. Entrepreneurship & FinancingTHE ONLY WAY OUT:How can these uncertainties and confusion be addressed? The immediate remedial measures that need tobe discussed are rationalization of profit margins, reduction in unrealistic gaps in pay scales and removal ofregulatory flaws. Another area of concern is the urgent need for balancing of consumer and commercialincome and expenses to create room for personal and institutional savings and genuine profit margins. ―Thelevel of savings,‖ according to 2011 Global Wealth Report, ―is one obvious source of wealth differences, withincreased savings translated into greater aggregate wealth and a higher wealth-income ratio. In practice it isoften difficult to identify the connection. Among G7 countries, the household saving rate shows substantialheterogeneity, ranging from as little as 2% in Japan to 16% in Italy and 17% in Germany. During the past 15years, saving rates decreased in the UK, the USA, Italy, Japan and Canada, but remained unchanged inFrance and even rose slightly in Germany.‖ This situation calls for ―provision of more sophisticated financialinstruments‖ and ―carefully engineered impact of financial innovation on debts.‖ The declining saving rate isalarming for economic activity across the globe leading to flawed economic and business growth projectionsand disappointing results.
  • 56. Entrepreneurship & Financing1: CREATION OF AN ENTREPRENEURIAL PLATFORM WITH FIVE-POINT AGENDA:The entrepreneurs need to create an independent powerful apolitical entrepreneurial platform for developing aGlobal Natural and Human Resource Vision and Index as a take-off base for a Global EntrepreneurialInitiative with the following Five-Point agenda that can be discussed, debated and reviewed: 1: Resources 2: Performance Evaluation The proper evaluation of the natural and human resource potential A real and unbiased evaluation of the performance of the social of the least developed and the developing countries in general and and economic indicators to determine the precise extent of their ―failed / fragile countries‖ in particular self-reliance and reliance on others 5: Accountability The mandatory authorization of International Court of Justice to try and punish the rulers, politicians, bureaucrats, top officers of the armed forces and business tycoons who are responsible for the creation and perpetuation of the ―Cycles of National, Regional and Global Social and Economic Evils‖ through ―Well-Conceived Structures and Systems of Inhuman Exploitation.‖ 3: Gap 4: Removal of Barriers The declaration of a Strategic Plan consisting of workable options The creation of unhindered channels for the flow of human and for the bilateral, regional and global entrepreneurial cooperation to natural resources from human and natural resource rich countries fill and / or narrow the artificial bridgeable gap between natural and to natural and human resource poor countries. human resource potential and social and economic performance
  • 57. Entrepreneurship & Financing2: THE NEED FOR DRAWING NATURAL AND HUMAN RESOURCE FLOW MAPS:I propose to draw two short-term, mid-term and long-term maps of natural and human resources that areavailable and will be available in a given timeline. Based on real potential and actual performance, the humanand natural resource efficiency and deficiency spots have to be marked on the map highlighting their flowfrom resource rich to resource poor countries. The proposed map will also indicate the artificial barriers of anynature in the flow of resources and the cost of barrier to the countries involved.If something is not done seriously on these lines than I have every reason to believe that economicunpredictability, uncertainty and crises after crises will make the world economically unviable!
  • 58. Thank You for your AttentionMY CONTACT DETAILS:ZAHID HUSSAIN KHALIDBUREAU CHIEF AND COUNTRY MANGER – PAKISTAN, ASIAMONEY MAGAZINECOUNTRY MANAGER – PAKISTAN AND REGIONAL COORDINATOR GCC COUNTRIESINNOVATION MANAGEMENT, WORLD’S # 1 ONLINE MAGAZINE ON INNOVATIONZAHIDHKHALID.RESEARCH@GMAIL.COM,ZAHID.KHALID@ASIAMONEY.COM,ZAHID@INNOVATIONMANAGEMENT.SE