Q2 2010 Global Market Brief & Labor Risk Index

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Groundbreaking resource for multinational companies. …

Groundbreaking resource for multinational companies.

The Global Market Brief and Labor Risk Index is joint production between KellyOCG and Eurasia Group.

The report leverages Kelly’s labor market knowledge with Eurasia Group’s expertise in political and socio-economic risk analysis to deliver an innovative resource tool for companies as they assess scenario plans around market investments and global labor strategies.

Published on a quarterly basis, the report is segmented by four geographies: the Americas, Asia-Pacific, Europe and Eurasia, and the Middle East and Africa, with detailed insights on 55 countries. It is based on the detailed analysis of more than 30 metrics related to the labor market, and socio-economic, and political factors, layered with local expertise from in-country consultants.

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  • 1. Think ouTside. Global Market Brief & Labor Risk Index ampler 2010 eporT 2 only hodo l ogy s meT 
  • 2. Global Market Brief & Labor Risk Index 2010 This is meThodology sample reporT only. 2 To subscribe to the global market Brief & labor risk index, visit kellyocg.com/marketbrief
  • 3. conTenTs 3 preface: rolf kleiner, senior Vice-president, kelly ocg & ian Bremmer, president, eurasia group 4 methodology 72 about sponsors The Americas Asia Pacific Europe and Eurasia Middle East and Africa 6 overview 17 overview 34 overview 60 overview 7 risk index 18 risk index 35 risk index 61 risk index 8 argentina 19 australia 36 Baltics 62 algeria 9 Brazil 20 china 37 Belgium 63 egypt 10 canada 21 hong kong 38 Bulgaria 64 israel 11 chile 22 india 39 czech republic 65 kenya 12 colombia 23 indonesia 40 denmark 66 kuwait 13 mexico 24 Japan 41 France 67 morocco 14 panama 25 malaysia 42 germany 68 Qatar 15 united states 26 new Zealand 43 hungary 69 saudi arabia 27 pakistan 44 ireland 70 south africa 28 philippines 45 italy 71 united arab emirates 29 singapore 46 luxembourg 30 south korea 47 netherlands 31 Thailand 48 norway 32 Vietnam 49 poland 50 portugal 51 romania 52 russia 53 spain 54 sweden 55 switzerland 56 Turkey 57 ukraine 58 united kingdom cover: ancient bridge, Zagoria, greece © 2007 Kai Koehler This material was produced by Eurasia Group in collaboration with KellyOCG. This is intended as general background research and is not intended to constitute advice on any particular commercial investment, trade matter, or issue, and should not be relied upon for such purposes. Eurasia Group is a private research and consulting firm. © 2010 KellyOCG and Eurasia Group. 
  • 4. conTenTs 4 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic Preface europe such as Australia. Most developed challenges, including political and eurasia middle easT economies continue to face high unrest in Thailand and pulling off and aFrica unemployment, however, and are a successful soccer World Cup in aBouT sponsors managing only a modest recovery, South Africa. as in the US, or suffering continued Governments in the developed contraction, as in Ireland. world also face serious challenges. Governments in some emerging Efforts to keep debt and deficits markets have already begun to in check have become serious withdraw stimulus measures, concerns, particularly in the relying on the private sector and eurozone. The EU and the IMF external demand to sustain growth. provided a loan package to Greece ➔ As the world rebounds It remains to be seen whether this to stave off sovereign default, and from the financial crisis, emerging transition comes soon enough recently announced a $930 billion markets are outpacing the emergency loan package for other to keep expansionary policies developed world both in the speed EU governments facing fiscal issues, from fueling inflation. If inflation of their recovery and job growth. such as Spain, Portugal, and Italy. does increase, workers will likely The Asia-Pacific region leads Stubbornly high unemployment demand higher wages to keep will likely be a bigger concern in the way, though Latin American pace, potentially sparking social rolf kleiner, ian Bremmer, many other developed markets, economies are also recovering unrest. Policymakers will have to senior Vice-president, president, potentially affecting elections in kellyocg eurasia group strongly. Thanks to high commodity balance that risk as well the need Japan this summer and the US in prices, growth is also robust in for long-standing structural reforms, November. Russia and the Middle East, as including to the labor market. well as a few developed nations Some governments face additional ■ ■ ■ 
  • 5. conTenTs 5 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic Methodology europe For all variables, scores range macroeconomic environment the ability of labor to influence and eurasia from 1 to 10, where 1 is ‘high risk’ middle easT This indicator captures the current policymaking, and the near-term and aFrica and 10 is ‘low risk’. health of the macroeconomic potential for changes in the labor aBouT sponsors environment through an assessment regulatory environment. macro-poliTical/ of the stability of monetary and counTry risk labor availability fiscal policy, the stability of trade political environment The labor availability indicator and capital flows, and the quality of This indicator estimates the incorporates migration, urban economic performance, controlling predictability of the political population, the size of the labor for historic macroeconomic stability environment by measuring force, the extent to which women and the quality of official statistics. regime and government stability, participate in the labor force, government and opposition policy environment for and unemployment. effectiveness, and how well the foreign investment labor quality government functions. This indicator measures how ➔ The Global Market Brief & The quality of labor is measured Labor Risk Index is based on detailed hospitable the policy and regulatory social environment by the education and skill level of a analysis of hard metrics of 30 unique environment is for foreign investment This indicator captures the presence labor force, the general health of the labor market, socio-economic, and by assessing the extent to which and intensity of social conflict population, and labor productivity. political factors, layered with localized among ethnic and other minorities, there are barriers to economic expertise of in-country consultants. controlling for the mitigating effects activity and the degree to which labor contentment of the socioeconomic wellbeing of the economy is a destination for This indicator assesses the likelihood The analysis aggregates the foreign investment. of labor discontent by combining the the population and the equality of individual factors into 9 core risk existence or potential of near-term wealth distribution. variables: 5 macro variables and 4 labor unrest with the misery index, laBor risk labor variables that are each assigned security environment which incorporates unemployment a score on a 10-point scale projecting This indicator captures the issues labor market flexibility and inflation rates. the degree of risk over the next of personal security by incorporating This indicator captures labor market 90 days. Each risk variable is also both the risk of armed conflict flexibility, assessing the regulatory ■ ■ ■ assessed as to whether it is trending (either domestic or foreign) and environment that employers face negative or positive. criminal activity. in managing human resources, In addition to assessing the current risk environment, this report also takes into consideration the trajectory of risk trends. Arrows alongside risk scores explain where risks are likely to show a very positive trend (X X), positive trend (X), negative trend ( Y), very negative trend (Y Y ), or remain unchanged (blank) over the 3-month period of the report. 
  • 6. conTenTs 6 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas overview Overview: risk index due to a collapse of labor-intensive legislative agenda before Congress argentina exports to Venezuela. Meanwhile, shuts down in July. In Mexico, Brazil The Americas the economic recovery has been accompanied by renewed calls the ruling party’s efforts to push through an ambitious labor reform canada chile colombia for higher pay in countries such package that would increase the mexico as Argentina and Brazil, where transparency of labor unions and panama labor unions are demanding wage make employer-worker contracts united states ➔ Economies throughout increases in excess of stubbornly more flexible are also likely to be asia paciFic the Americas are showing signs heavily diluted by an uncooperative europe high inflation. and eurasia of a sustained recovery thanks to opposition that is positioning itself middle easT continued fiscal and monetary Labor reform has also crept onto for state elections later this year. and aFrica stimulus and to rising commodity the legislative agenda of several Finally, in the US, the Democratic aBouT sponsors prices. Brazil is leading the way countries, although the chances leadership may try to bring the with strong job creation and a of passage look slim. In Brazil, Employee Free Choice Act (which legislators hoping to strengthen makes it easier for workers to GDP that is officially projected to their electoral prospects in unionize) to a vote after long delays grow by 6% this year. Throughout in order to win labor support ahead the rest of the hemisphere, GDP October’s general elections of the midterm elections. But the growth rates are expected to range have joined forces with unions chances of the measure passing between 3% and 5%, according to to shorten the work week and remain slim. government estimates, although increase overtime pay, but will Colombia is likely to lag behind struggle to find room in a crowded ■ ■ ■ 
  • 7. conTenTs 7 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas overview The americas – risk index summary TaBle – Q2 2010 risk index argentina macro risks laBor risks Brazil Foreign canada political social security economic Flexibility availability Quality contentment investment chile colombia Argentina 5 Y 7 8 4 5 Y 5 4 7 4 mexico panama Brazil 7 6 6 7 5 3 Y 6 5 6 united states asia paciFic Canada 8 X 7 9 7 X 8 7 7 8 6 X europe and eurasia Chile 7 6 9 5 X 7 7 5 8 6 middle easT and aFrica aBouT sponsors Colombia 7 Y 5 3 6 6 7 6 6 5 Mexico 6 6 5 Y 6 X 7 4 X 4 5 7 Panama 8 6 7 Y 6 7 4 3 5 7 Y United States 8 8 Y 9 7 X 8 8 8 9 7 X For all variables, scores range from 1 to 10, where 1 is ‘high risk’ and 10 is ‘low risk’. very positive trend positive trend negative trend very negative trend 
  • 8. conTenTs 8 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas overview Brazil risk index is 29% higher than the rate of job many investors inferred that the argentina creation registered in any other reason stemmed from the desire Brazil previous month of March. Given of Henrique Meirelles, the central canada chile these strong numbers, the Ministry bank governor, to run for elected colombia ➔ The country’s growth of Labor is increasingly confident office in October. Meirelles has mexico outlook improved over the first that unemployment will drop to 7% since stated he won’t run, but his panama three months of 2010, further by the end of 2010. loss of credibility probably means united states strengthening workers’ leverage the central bank will have to more asia paciFic to demand higher pay. Brazil’s Such a promising growth outlook aggressively hike interest rates to europe and eurasia faster-than-expected economic has led to an uptick in inflationary assure markets that the government middle easT pressures and growing concern, is committed to keeping inflation A pending constitutional and aFrica rebound also caused the country’s aBouT sponsors jobless rate to drop. According to some of it unfounded, that the low. The central bank’s decision to amendment in the lower a central bank survey, the country’s Central Bank of Brazil may face raise interest rates by 75 basis points house would reduce the work expected GDP growth rate rose political pressure not to raise interest on 28 April is a clear indicator that week from 44 to 42 hours and from 5.3% in January to 6.06 % in rates. Projections for year-end that the government’s commitment increase overtime pay from inflation for 2010 have grown from to keep inflation low has not been 50% to 75% above regular May. Meanwhile, unemployment 4.5% to 5.3% in the central bank’s undermined. hourly compensation. The fell from 9% in March 2009 to 7.4% proposal is being driven by in February 2010, while 226,415 weekly survey since the end of 2009. ■ ■ ■ the desire of some legislators new jobs were created in the formal The central bank opted against to enact a popular reform labor market in March alone—which raising interest rates in March, and prior to the October elections. While the reform may be low risk 10 MACRO RISKS LABOR RISKS approved in the lower house, 9 it is unlikely to become law 8 as there is little time to gain 7 approval in the Senate before 6 5 congress shuts down in July. 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  • 9. conTenTs 9 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas overview Canada risk index This will be particularly painful for rules and end incentives for home argentina manufacturing-intensive central renovation. Collectively, higher Brazil Canada, particularly Ontario. interest rates, a stronger dollar, tax canada chile Ontario industry, dominated by the hikes in two key provinces, and colombia ➔ The Canadian economy is auto sector, has already been under slowing housing and construction mexico at a significant turning point. Like significant restructuring pressures. markets would all seem to suggest panama its neighbor to the south, Canada Ontario also faces uncertainty in an economic slowdown is likely. united states will be adjusting to a withdrawal Yet the Canadian economy is also asia paciFic its consumer sector, along with of stimulus funds and a likely being bolstered by higher oil prices, europe British Columbia, as the provincial and eurasia tightening of interest rates by July which act as an economic growth government harmonizes the middle easT engine in western Canada. The While rising oil prices have and aFrica 2010. The Bank of Canada signaled provincial sales tax with the federal financial sector is also healthy. A aBouT sponsors at its 20 April meeting that such a stabilized the outlook for goods and services tax. This means recovery in the oil sands sector and Canada’s strategic oil sands sector, tightening was expected, sending that a wider range of goods and the ongoing strength of financials not all signals are positive on the the Canadian dollar once again services will now be subjected to should help offset job losses energy front. Natural gas prices above par with the US dollar. With a provincial sales tax in addition to elsewhere. Unemployment rates are have collapsed, putting significant the loonie expected to hover at the federal tax. thus unlikely to rise, but probably pressure on Alberta’s economy close to parity for some time, won’t improve much either. in particular. Last year was the Canadian export industries will Adding uncertainty is a decision first year in which royalties from continue suffer throughout 2010. by Ottawa to tighten mortgage ■ ■ ■ bitumen (oil sands) production exceeded natural gas revenues for the provincial government. low risk 10 MACRO RISKS LABOR RISKS Alberta gas prices are trading 9 about $1/mmbtu below 8 benchmark US prices, due to 7 their distance from markets. The 6 5 Canadian gas export industry also 4 faces significant competitive 3 pressure in defending its 2 markets from emerging 1 shale gas production high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment in the US. Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  • 10. conTenTs 10 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic Overview: overview exports has also led to sharper than and New Zealand, authorities must risk index expected growth in export-oriented monitor the impact of stimulus australia Asia Pacific countries such as Singapore and Malaysia. With growth secure, on public finances, even as they maintain expansionary policies. china hong kong india the governments of these states indonesia have turned their policy focus While pockets of uncertainty Japan from stimulus toward how best will remain in some Asia-Pacific malaysia to position themselves for an countries, these are more likely to new Zealand improved longer-term expansion. be a drag on growth than to derail pakistan ➔ The Asia-Pacific region, led philippines it during 2010. Domestic political by emerging giants China, India, In other Asia-Pacific countries, singapore and security problems in Pakistan south korea and Indonesia, will power much meanwhile, smart government and Thailand will complicate Thailand of the nascent global economic policy and macroeconomic those countries’ efforts to secure Vietnam recovery in 2010. A combination management will be critical to europe an economic recovery, but the and eurasia of recovering global demand for securing a return to sustainable impact of these problems will be middle easT exports, government stimulus growth in 2010, while minimizing and aFrica contained. South Korea’s prospects policies, and buoyant domestic risks of other macroeconomic aBouT sponsors are brighter, but risks of worsening consumption has helped these problems. Governments in Australia tension with North Korea could countries grow faster than expected and Vietnam, for instance, will dampen investor sentiment toward in the first quarter of 2010. The need to continue balancing pro- the region. strong recovery of global demand growth policies with those aimed for the region’s manufacturing at containing inflation. In Japan ■ ■ ■ 
  • 11. conTenTs 11 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic asia paciFic – risk index summary TaBle – Q2 2010 overview risk index macro risks laBor risks australia Foreign china political social security economic Flexibility availability Quality contentment investment hong kong india Australia 8 Y 9 9 8 8 8 7 8 8 indonesia China 7 Y 4 Y 8 6 6 5 X 6 6 6 Japan malaysia Hong Kong 7 Y 7 10 7 X 9 8 6 Y 8 7 new Zealand pakistan India 7 4 6 Y 4 X 4 5 4 2 X 6 philippines Indonesia 6 X 6 7 6 X 5 XX 3 5 4 5 singapore south korea Japan 6 Y 9 10 7 X 8 6 7 9 9 Thailand Vietnam Malaysia 5 3 Y 8 6 X 5 6 4 6 Y 7 europe and eurasia New Zealand 7 9 10 6 X 8 8 7 8 8 middle easT and aFrica Pakistan 4 3 Y 3 3 Y 6 4 3 2 4 aBouT sponsors Philippines 5 X 5 6 5 4 X 5 X 5 5 8 Singapore 8 7 8 7 X 10 7 6 8 7 South Korea 7 9 7 Y 7 X 8 4 6 8 7 Thailand 4 Y 5 Y 6 Y 6 7 7 5 5 7 Vietnam 7 6 X 9 4 X 5 4 5 4 7 Y For all variables, scores range from 1 to 10, where 1 is ‘high risk’ and 10 is ‘low risk’. very positive trend positive trend negative trend very negative trend 
  • 12. conTenTs 12 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic China overview part reflects the fact that China was in several coastal provinces by risk index coming from a low base in the first 13%–20% to attract more migrant australia quarter of 2009. Inflation slowed labor. china hong kong a bit from February to March, Given these pressures, appreciation india ➔ The growth outlook falling from 2.7% to 2.4%, with indonesia of the yuan is looking more likely. for China remains relatively the quarterly figure still below the Japan A revaluation would make imports positive, but there are significant government’s 3% target for 2010. malaysia cheaper and lower costs for new Zealand challenges ahead, including an But Beijing is worried that property industries that rely on imported pakistan overheating property sector, prices in 70 cities climbed 11.7% in components or equipment. In philippines inflationary pressures, and economic March. The Chinese government fact, China’s central bank has been singapore restructuring. These challenges has already announced measures A broad policy document south korea making the inflation argument as was issued in April that underscore Premier Wen Jiabao’s to cool the property sector, some of Thailand a justification to change currency formalizes the shift of assessment that China is moving which include prohibiting lending Vietnam policy. If it comes, however, any FDI from the traditional europe from its most difficult year in 2009 to for second or third homes. But and eurasia appreciation is sure to be gradual manufacturing sectors to its most complicated one in 2010. officials must be careful to avoid middle easT to minimize damage to the export higher technology and value- and aFrica triggering a hard landing. This year China posted first-quarter sector and to maintain jobs. added services and industries. aBouT sponsors growth of 11.9% and its consumer Rising wages present another The document also promotes price index grew by 2.2%. The inflationary concern this year. ■ ■ ■ FDI to central and western higher than expected growth in Minimum wages have been raised regions. Beijing clearly wants to harness foreign help to restructure the economy. low risk 10 MACRO RISKS LABOR RISKS Foreign investors should 9 think critically about the 8 opportunities created by this 7 process as China’s leaders shift 6 5 focus away from the coast 4 to the rest of the country. 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  • 13. conTenTs 13 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic Japan overview more manageable coalition, offering 31 March. The government has kept risk index some hope that Tokyo will soon be up rhetorical pressure on the Bank australia able to start making progress toward of Japan to maintain and augment china rebalancing the country’s economy expansionary monetary policy to hong kong india ➔ Japan’s macroeconomic by strengthening domestic demand. combat deflation. Having survived indonesia outlook is improving, though this campaign finance scandals, both Japan After a severe contraction in 2009, Prime Minister Yukio Hatoyama is more a function of external malaysia some projections now put 2010 and Ichiro Ozawa, the DJP’s key demand, especially from Asia, than new Zealand growth above 2%. However, fiscal powerbroker, face upcoming pakistan it is the result of any increase in deficit projections are near 10% of leadership challenges, but an philippines domestic demand. Japan’s political GDP. The downturn has pushed eventual shake-up, before or after singapore outlook has recently deteriorated On 6 April, a bill was Japan back into deflation, further the July election, is unlikely to derail south korea as maneuvering ahead of a July submitted to the legislature Thailand harming efforts to revive economic the party’s agenda. Indeed, a more election for the upper house of the that would require temporary Vietnam activity. One bright spot is that policy minded successor is likely to legislature has produced splits in staffing agencies (as of 2013) europe unemployment has declined from emerge, who will push ahead with a and eurasia the largest opposition party and to employ on a full-time 5.1% at the end of 2009 to 4.9% as variety of social-spending initiatives middle easT exacerbated tension within the ruling basis the temporary workers and aFrica of April. The DPJ-led government including child care, education, coalition led by the Democratic they dispatch. Though aBouT sponsors focused its early efforts on crafting a and income support, all boosting Party of Japan (DPJ). The election some business concessions fiscal stimulus package and private demand. result will likely sort out the DPJ’s have been eliminated to finalizing its first budget by the appease the party’s coalition leadership problems and produce a close of Japan’s fiscal year on ■ ■ ■ partners, enough DPJ support is likely to push the bill low risk 10 MACRO RISKS LABOR RISKS through by the end of the 9 legislative session in June. 8 An exemption for 29 high- 7 skill occupations will provide 6 5 some relief for staffing firms. 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  • 14. conTenTs 14 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic Overview: europe Commission to impose austerity however, so it remains unclear how and eurasia overview programs, although the $930 sustainable they will be. That said, Europe and Eurasia billion loan guarantee program from the EU and IMF will provide the government moved to increase pensions by more than 6% as of risk index Baltics Belgium financing assistance. However, April 2010, and this fall Moscow Bulgaria businesses and individuals are may also introduce measures to czech republic unlikely to get much relief from denmark cushion the labor market ahead of ➔ European policymakers France their governments—in the form elections. will continue to be constrained germany of tax cuts or expanded social or hungary by the need to strengthen their unemployment benefits—anytime Further signs of recovery are also ireland countries’ fragile fiscal positions. As soon. Fiscal adjustment will emerging in Turkey. The country’s italy eurozone officials were coordinating luxembourg continue within the eurozone, which economy grew in the fourth quarter a response to the Greek fiscal netherlands will threaten growth and possibly of 2009 and unemployment fell at crisis in late April, ratings agencies norway spark further popular unrest. the start of 2010. The employment poland downgraded the sovereign debt outlook, however, remains uncertain portugal ratings of Spain and Portugal due to Russia, meanwhile, showed signs because the labor market remains romania their high deficits and debt levels. of a turnaround in 2010, with russia rigid. A growing budget deficit will Those European countries that have its economy growing in the first spain also constrain reforms, such as a deficits above the EU-mandated quarter and its budget deficit sweden cut in payroll the tax, that would switzerland maximum of 3% of GDP will face and unemployment declining. decrease the cost of hiring workers. Turkey continued and perhaps increased Many of these improvements are ukraine pressure from the European due to rising commodity prices, ■ ■ ■ united kingdom middle easT and aFrica aBouT sponsors 
  • 15. conTenTs 15 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology europe and eurasia – risk index summary TaBle – Q2 2010 The americas asia paciFic europe macro risks laBor risks and eurasia Foreign overview political social security economic Flexibility availability Quality contentment investment risk index Baltics 6 Y 6 8 4 Y 7 3 6 6 2 Baltics Belgium Belgium 5 Y 7 8 6 9 5 5 8 5 Bulgaria Bulgaria 7 5 7 4 8 6 4 6 5 Y czech republic denmark Czech Republic 5 Y 8 8 6 6 6 5 8 5 France Denmark 7 9 7 7 X 9 6 5 9 6 germany France 7 X 8 7 6 8 4 6 8 4 hungary ireland Germany 7 Y 9 8 7 8 3 6 9 4 italy Hungary 6 XX 8 9 5 X 8 6 6 7 4 luxembourg Ireland 6 9 8 5 9 6 6 8 4 Y netherlands norway Italy 5 Y 7 7 6 6 4 5 7 5 poland Luxembourg 7 9 8 6 X 8 4 5 9 7 portugal Netherlands 5 8 8 7 8 Y 3 5 8 7 romania russia Norway 7 9 8 7 X 9 4 5 9 8 spain Poland 6 X 7 9 6 7 6 6 7 5 sweden switzerland Portugal 7 8 7 4 8 2 6 7 3 Y Turkey Romania 7 5 7 4 X 8 4 4 5 4 ukraine Russia 6 Y 6 5 5 X 6 6 7 5 4 united kingdom middle easT Spain 6 Y 7 7 4 7 2 8 8 3 and aFrica Sweden 7 Y 9 8 6 8 4 6 9 6 aBouT sponsors Switzerland 7 8 8 7 Y 8 5 5 9 8 Turkey 7 Y 6 7 6 X 7 5 5 X 5 4 Ukraine 5 X 5 8 3 X 6 6 4 5 5 United Kingdom 6 8 6 6 9 Y 6 6 8 5 For all variables, scores range from 1 to 10, where 1 is ‘high risk’ and 10 is ‘low risk’. very positive trend positive trend negative trend very negative trend 
  • 16. conTenTs 16 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic France europe the dollar is helping manufacturing by the ruling party in March 2010 and eurasia overview firms, declining export strength regional elections. Following these risk index casts a pall over future growth poor results, President Nicolas Baltics prospects. Sarkozy decided to prioritize Belgium ➔ The French economy pension reform. A major proposal Bulgaria Unemployment and its social and is due in September. The new contracted 2.1% in 2009, but is czech republic financial costs remain pressing labor minister, Eric Woerth, is denmark expected to grow about 1.5% in concerns. The 2009 annual France 2010. One reason for France’s coordinating policy with employers germany unemployment rate was 9.5%, and trade unions and may raise economic contraction is that the hungary and the likelihood of continued the legal retirement age from 60 country’s exports continue to face ireland social unrest remains high, as as well as increase the period for A rising budget deficit and italy strong competition from Germany, unemployment is expected to which workers must contribute, government debt that is luxembourg which has held unit labor costs mildly decline starting only in 2011. despite the unpopularity of such projected to reach 93.2% of netherlands flat, largely on the back of strong norway moves. Sarkozy has signaled he GDP by 2013 are pressuring productivity growth. France’s share Like other EU countries, France poland will aim to maintain pensioners’ Paris to cut spending. While of exports to the eurozone fell by portugal aims to reduce its budget deficit, the government has decreased living standards, however, implying romania nearly four percentage points— 4.9% of GDP in 2009, to 3% by that their benefit rates will remain the number of public-sector russia from 16.8% to 13.2%—in 2009. 2013. The government’s reform employees, this may not cut spain untouched. While recovering global demand program experienced a strong enough costs to meet EU rules. sweden and the euro’s depreciation against setback because of losses suffered ■ ■ ■ A recent failure to implement switzerland Turkey a carbon tax has further slowed ukraine measures to raise government united kingdom low risk 10 MACRO RISKS LABOR RISKS revenue. Since Sarkozy has middle easT 9 signaled that taxes will not and aFrica aBouT sponsors 8 be increased, more austere 7 measures may be introduced. 6 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  • 17. conTenTs 17 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic Portugal europe cost of doing business for the transit system. To curb public and eurasia overview foreseeable future. expenditures, the government risk index plans to freeze the pay levels of Baltics Portugal also faces public financing about 700,000 public employees Belgium challenges, exacerbated in April ➔ Portugal’s economic and to hire one civil servant for Bulgaria by the downgrade of its sovereign situation recently deteriorated every two leaving the service. czech republic debt rating. With financial market denmark as the budget deficit was The government also plans to players increasingly concerned France estimated to be even wider than implement a ceiling on government germany about the sustainability of Portugal’s earlier expected: about 9.3% transfers to social security to fund hungary public debt, it is increasingly likely of GDP in 2009. The downturn benefits, which may reduce the ireland that Portugal will seek aid from the Portugal’s minority italy continued through 2009, with GDP consumer demand in the near eurozone and the IMF. Such an government is increasingly luxembourg contracting 2.7%. The 2009 annual term. Tax reforms, moreover, will arrangement could support a long- divided and under netherlands unemployment rate was 9.6%, and cut welfare benefits and cancel norway term adjustment effort. international pressure to there are no indications of a reversal certain tax breaks. Fewer tax poland address the deficit. This in 2010. Portugal lacks obvious portugal The government is already breaks may further strain domestic instability will complicate romania areas of comparative advantage to implementing an austerity plan, demand already threatened by Portugal’s ability to implement russia fuel growth and eastern European which has been met with significant austerity measures the EU unemployment. spain countries are expected to become public protests that may continue and the IMF will demand sweden more competitive in terms of the snarling the country’s public ■ ■ ■ if an aid package proves switzerland Turkey necessary. Elections won’t be ukraine held until 2013, however, united kingdom low risk 10 MACRO RISKS LABOR RISKS meaning that some workable middle easT 9 political arrangement needs and aFrica aBouT sponsors 8 to be struck. An external 7 support package could 6 5 actually help to bring one 4 about, as increased funds 3 might provide the government 2 more room to maneuver. 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  • 18. conTenTs 18 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic Overview: europe the US or Israel in the short term, plans on hold—or might shelve and eurasia middle easT they continue to be wary of their them altogether. In Algeria, the Middle East and aFrica neighbor and its nuclear ambitions. growing hostility between the overview Even if there is no attack on Iran, military and the president could risk index and Africa Tehran does have the capacity to undermine the GCC states. destabilize his administration. South African authorities, meanwhile, are algeria egypt israel Likewise, despite the low likelihood positive about the implications of kenya ➔ The diverse economies of an Israel-Iran confrontation, a successful World Cup in June kuwait of the Middle East and Africa will tension between Hizbullah—Iran’s and July, but are also aware of the morocco enter the second half of 2010 main regional proxy—and Israel far-reaching consequences of a Qatar crime spree and/or terrorist attacks saudi arabia facing various challenges. But as is rising. An Israel-Hizbullah south africa the global recession subsides, the confrontation would destabilize during the tournament. Lastly, in united arab region is poised for steady, if not Lebanon and widen the gulf Kenya, while the adoption of a new emirates spectacular, growth. between the GCC states and Iran. constitution is broadly positive, aBouT sponsors implementation of the newly At this stage, the main threats to As far as Egypt is concerned, decentralized political system could growth are political and security President Hosni Mubarak’s illness fan regional and ethnic rivalries related. While the oil producing and the rise of a formidable around the next national elections. states of the Gulf Cooperation challenger in former International Council (GCC) are operating on the Atomic Energy Agency (IAEA) ■ ■ ■ assumption that there will not be head Mohamed ElBaradei has put military conflict between Iran and the carefully crafted succession 
  • 19. conTenTs 19 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic europe middle easT and aFrica – risk index summary TaBle – Q2 2010 and eurasia middle easT and aFrica macro risks laBor risks overview Foreign risk index political social security economic Flexibility availability Quality contentment investment algeria egypt Algeria 3 YY 4 6 Y 3 3 2 6 3 2 Y israel kenya Egypt 6 5 Y 7 5 5 5 3 2 2 kuwait morocco Israel 7 X 8 X 7 X 8 7 6 6 8 X 7 Qatar saudi arabia Kenya 5 X 3 6 4 X 5 5 4 4 4 south africa united arab Kuwait 6 X 5 7 5 5 X 8 3 7 8 emirates aBouT sponsors Morocco 7 X 7 8 6 X 5 X 5 4 4 5 Qatar 7 7 8 5 X 6 8 3 5 8 Saudi Arabia 6 5 X 7 Y 6 X 6 7 4 6 7 South Africa 6 Y 3 6 5 6 Y 4 6 4 3 United Arab Emirates 7 6 7 Y 5 5 8 3 6 7 For all variables, scores range from 1 to 10, where 1 is ‘high risk’ and 10 is ‘low risk’. very positive trend positive trend negative trend very negative trend 
  • 20. conTenTs 20 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic Egypt europe a concern for the authorities. and its impact on the succession and eurasia and overall stability. Mubarak’s middle easT The government hopes that by and aFrica maintaining social services it can opponents will continue to ratchet overview counter any instability resulting up the pressure on him to clarify risk index ➔ The Egyptian economy will from unemployment. GDP growth a succession plan. The president algeria will ignore any such move because egypt continue its steady if unspectacular in 2010 will probably come in at israel trajectory during the second around 5%, though this is below the it would be taken as a sign of kenya quarter. Inflation has not eased economy’s full potential. weakness, especially now that kuwait as quickly as the government had former IAEA director ElBaradei morocco hoped, and will probably end the The government is likely to boost has returned to Egypt and is Qatar year near 10%. The authorities spending in the run-up to the continuing his vocal criticism of the Despite press reports about saudi arabia government. ElBaradei’s popularity south africa would prefer a lower number but fall parliamentary elections. The a possible reworking of the united arab do not think that price pressure of elections are shaping up to be is growing, and the authorities do water-sharing agreement emirates less open and fair than recent not appear to know how to sideline between countries in the aBouT sponsors this magnitude will be destabilizing. Official statistics indicate that votes, and the government, by him. While tension will rise in the region (notably Egypt, Sudan, unemployment is below 10%, but opening its purse strings, will coming months, destabilizing Ethiopia, Uganda, and Kenya), the real number of unemployed try to undermine opposition violence is unlikely. Neither is the Egypt will aggressively block and underemployed is probably groups considering protests. The government likely to pursue any any change. Its effective much higher, and as in many biggest story in Egypt, however, is radical policy shifts. domination of the Nile and its veto power over upstream water other Arab states, this remains President Mubarak’s recent illness ■ ■ ■ projects is something that all Egyptian political actors believe low risk 10 MACRO RISKS LABOR RISKS is sacrosanct and key to Egypt’s 9 economic well-being. The 8 issue will continue to arise, but 7 it is unlikely that the parties 6 5 will reach a new agreement. 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  • 21. conTenTs 21 | gloBal markeT BrieF & laBor risk index Q2 2010 preFace meThodology The americas asia paciFic United Arab europe media reports were saturated with from a strong economic rebound. and eurasia middle easT often alarmist stories about foreign While Abu Dhabi will continue to Emirates and aFrica workers fleeing the UAE, but the guarantee Dubai’s liabilities, its overview labor force is now stable. In fact, willingness to provide financial risk index many of the people who left Dubai support is waning, making it more algeria ➔ The economy of the United egypt Arab Emirates (UAE) has largely have moved to Abu Dhabi, which is likely that future assistance would israel stabilized since the Dubai crisis. pursuing large-scale infrastructure entail more explicitly commercial kenya After the economy shrank by 3.5% projects. terms. The current plan’s terms kuwait in 2009, authorities now estimate were driven by the recognition morocco The UAE is still dealing with Qatar that Dubai still needs external GDP will grow by about 2.5% in fallout from the Dubai debt crisis, Beginning in late 2010, the saudi arabia financing and that it cannot 2010. This projection is largely in south africa however. Dubai World offered a UAE will allow foreigners to alienate creditors. In addition, Abu line with independent analysis. With broadly generous restructuring united arab Dhabi’s government recognizes the hold controlling ownership emirates oil prices above $80 per barrel, Abu plan that includes full repayment difficulties of separating out Dubai stakes in UAE-based aBouT sponsors Dhabi’s economy will expand and but with extended maturities. The companies, part of a broad World–related credit risk from that will sustain the rest of the emirates. plan provides a short-term fix, but and careful liberalization of the UAE as a whole, and it wants Officials think that inflation could future support from Abu Dhabi process that will likely result to avoid a broader contagion. reach about 2% in 2010. At the may be necessary if Dubai and its in more foreign investment height of the global recession, local real estate sector do not benefit ■ ■ ■ in the UAE. The new law will increase the limit on foreign ownership from the current 49% to as yet an unspecified low risk 10 MACRO RISKS LABOR RISKS percentage, although 9 100% foreign ownership 8 will not be permitted. 7 6 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  • 22. 22 | gloBal markeT BrieF & laBor risk index Q2 2010 About this Report The Global Market Brief & Labor Risk Index is jointly developed by KellyOCG, the Outsourcing and Consulting Group of human resources provider, Kelly Services and Eurasia Group, the global political risk consultancy. The report, a proprietary blend leveraging Kelly’s labor market knowledge with Eurasia Group’s expertise in political and socio-economic risk analysis, delivers a groundbreaking resource for companies as they assess market investments and global labor strategies. Published on a quarterly basis, the Global Market Brief & Labor Risk Index is segmented by four geographies: the Americas, Asia-Pacific, Europe and Eurasia, and the Middle East and Africa, with detailed insights for 55 of the world’s most important economies. About Eurasia Group Eurasia Group is the world’s leading global political risk research and consulting firm. Since 1998, it has helped clients make informed business decisions in countries where understanding the political landscape is critical. The firm’s research analysts are trained social scientists with post-graduate degrees, extensive professional experience, and a diverse range of language capabilities. Headquartered in New York, it also has offices in Washington and London, as well as a network of experts around the world. For more information, please visit www.eurasiagroup.net. About KellyOCG KellyOCG is the Outsourcing and Consulting Group of Fortune 500 human resources solutions provider, Kelly Services, Inc. KellyOCG is a global leader in innovative talent management solutions in the areas of Recruitment Process Outsourcing (RPO), Business Process Outsourcing (BPO), Contingent Workforce Outsourcing (CWO), including Independent Contractor Solutions, Human Resources Consulting, Career Transition and Organizational Effectiveness, and Executive Search. Visit www.kellyocg.com. To Receive this Report This report is available on an annual subscription basis. To access a complimentary report abstract, and for full subscription details, visit www.kellyocg.com/marketbrief More Information To find out more about how the KellyOCG / Eurasia Group partnership can add insight to your global planning, please contact marketbrief@kellyservices.com 
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