Q3 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 3 only hodo l ogy s meT 
  • 2. Global Market Brief & Labor Risk Index 2010 This is meThodology sample reporT only. 3 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 Bangladesh 37 Belgium 63 egypt 10 canada 21 china 38 croatia 64 israel 11 chile 22 hong kong 39 czech republic 65 kuwait 12 el salvador 23 india 40 denmark 66 morocco 13 mexico 24 indonesia 41 France 67 nigeria 14 united states 25 Japan 42 germany 68 Qatar 15 Venezuela 26 malaysia 43 hungary 69 saudi arabia 27 new Zealand 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: Torres del paine, chile © 2009 Gerad Coles 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 Q3 2010 preFace meThodology The americas asia paciFic Preface europe continue to see a slower pace of will need to address stubbornly high and eurasia middle easT recovery, with continued concern unemployment that also threatens and aFrica about European economies facing to spur social tension. aBouT sponsors fiscal crises. There are some prospects for Higher-than-expected growth structural reform in two groups is pushing governments in of countries: those with stronger countries such as Brazil, Argentina, economic performance that have India, Indonesia, Vietnam, and seen recent leadership changes Nigeria to turn their attention and those countries still under toward managing inflation while pressure from fiscal problems. In maintaining growth. Rising inflation the first category, governments in ➔ Heading into the second has been accompanied by pressure Japan, Australia, Malaysia, and New half of 2010, emerging markets for higher wages, which had been Zealand have announced major continue to lead the global reforms, including of tax policy. held stable during the worst of the economic recovery; there are some Meanwhile, governments in the economic crisis. Governments will clouds on the horizon, however, eurozone, especially Spain, Italy, also be monitoring the prospects for including rising inflationary Greece, and Portugal, are under labor and social unrest through the pressures and labor unrest. It pressure to push through labor and rest of the year. Recently, there have rolf kleiner, ian Bremmer, pension reforms as part of their appears that many countries been strikes at factories in China senior Vice-president, president, broader austerity measures. While kellyocg eurasia group in the Asia-Pacific region and and Bangladesh, and union protests there are implementation risks, such the Americas are going to have are expected in South Korea reforms are necessary to improve higher-than-expected growth, but over the next few months. As the long-term competitiveness. unemployment will be the main euphoria of a successful World Cup issue in Africa. Developed countries subsides, South Africa’s government ■ ■ ■ 
  • 5. conTenTs 5 | gloBal markeT BrieF & laBor risk index Q3 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 Q3 2010 preFace meThodology The americas overview Overview: risk index are all expected to post impressive inflationary pressures in some argentina growth rates this year. The US states. Argentina is suffering an Brazil The Americas recovery has been slower, and many critics have begun to question increase in inflation expectations, and prices in Venezuela continue to canada chile el salvador its durability given the growing increase thanks to highly restrictive mexico political resistance to maintaining price and foreign-exchange united states stimulus spending. At the other end controls. Meanwhile, throughout Venezuela ➔ The region is experiencing of the spectrum, El Salvador has the region growth has yet to asia paciFic steadfast growth, confirming signs produce many new jobs. Indeed, europe struggled to recover due to its lack and eurasia of a recovery at the start of this of policy flexibility since it adopted Canada and Chile are two of the middle easT year. Brazil is leading the recovery only countries in the Western and aFrica the dollar as its currency in 2001, aBouT sponsors with 9% GDP growth year-on- while Venezuela remains stuck hemisphere that have enjoyed year in the first quarter, thanks to firmly in recession thanks to high meaningful job growth; almost sustained government spending inflation and stifling regulations. everywhere else, unemployment in the run up to October’s general has been stagnant or worsened elections. Chile has enjoyed an Despite the general optimism slightly in recent months. impressive recovery after February’s produced by strong growth in ■ ■ ■ devastating earthquake, and the region, the outlook has been Argentina, Canada, and Mexico clouded somewhat by rising 
  • 7. conTenTs 7 | gloBal markeT BrieF & laBor risk index Q3 2010 preFace meThodology The americas overview The americas – risk index summary TaBle – Q3 2010 risk index argentina macro risks laBor risks Brazil Foreign canada political social security economic Flexibility availability Quality contentment investment chile el salvador Argentina 5 7 8 4 5 5 4 7 4 Y Y mexico united states Brazil 7 6 6 7 5 Y 3 6 5 6 Y Venezuela asia paciFic Canada 9 8 10 7 8 7 6 Y 8 6 X Y europe and eurasia Chile 7 6 9 7 X 7 7 5 8 6 Y middle easT and aFrica aBouT sponsors El Salvador 6 6 5 Y 5 6 6 4 4 6 Y Mexico 6 6 5 Y 6 X 7 Y 4 4 5 6 Y United States 8 Y 8 9 7 8 8 9 9 7 Y Y Venezuela 5 4 5 3 2 Y 2 Y 4 4 2 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 
  • 8. conTenTs 8 | gloBal markeT BrieF & laBor risk index Q3 2010 preFace meThodology The americas overview El Salvador risk index forced the government to run a a difficult spot. His government argentina high deficit (estimated to reach published a Five Year Plan in April Brazil 4.7% of GDP) and to take on new 2010, which emphasized education, canada chile debt (estimated to hit 50% of GDP) healthcare, housing, public security, el salvador ➔ El Salvador was hit hard by this year. Inflation has remained and economic stimulus programs. mexico the downturn in the US economy low, however, coming in at 0.6% on In order to finance this plan, the united states and continues to struggle, even an annual basis in June. In another government will propose new fiscal Venezuela compared with its regional peers. positive development, remittances reform measures, the details of asia paciFic which will likely be unveiled at the europe Growth is expected to rebound from abroad—which account for and eurasia about 17% of GDP—have begun end of the year, aimed at raising middle easT to only 0.5%–1% this year, while and aFrica the projected average in Central to increase, up 2.6% in the first five revenue from 14%–17% of GDP by In April, the ruling National aBouT sponsors America and the Caribbean is months of 2010 compared to the 2014. Funes is likely to have trouble Action Party and the same period in 2009. getting all these reforms through opposition Institutional 3.3%. As El Salvador’s economy congress, but he will probably Revolutionary Party passed is based on the US dollar, the Still, the tough economic conditions get at least some of the measures government can only use fiscal antimonopoly legislation and the need to invest in economic passed. policy to manage the economy. in the lower chamber development, public security, The fall in economic activity and and social initiatives have left the ■ ■ ■ of congress. The bill government tax revenues have government of Mauricio Funes in strengthens the Federal Competition Commission’s capacity to investigate and sanction dominant low risk 10 MACRO RISKS LABOR RISKS market players or those 9 engaged in monopolistic 8 7 business practices. The 6 level of proposed sanctions 5 was reduced during the 4 legislative process and will 3 2 be reduced further in order 1 to gain approval in the high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment senate, probably this fall. 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 Q3 2010 preFace meThodology The americas overview United States risk index hopes of propping up the recovery. next year will be spending the 40% argentina Inflation is not a near-term concern of the American Recovery and Brazil since it is expected to stay below Reinvestment Act that has yet to be canada chile 2% through 2011. disbursed. el salvador ➔ While many analysts mexico While the budget deficit is Meanwhile, failing new action by continue to worry about the united states expected to decline from 10.2% Congress, a host of tax breaks durability of US recovery, the Venezuela last year to 9.1% by the end of will automatically expire at the numbers suggest that the asia paciFic this year, popular opposition to end of the year. While Congress europe economy is in fact stabilizing. and eurasia government spending is limiting is expected to extend much of GDP is expected to grow by 3% in middle easT Washington’s ability to provide any the income, dividend, and capital and aFrica 2010. That said, unemployment is President Obama is trying additional stimulus. In the wake of gains tax breaks for all but the aBouT sponsors expected to rise to 9.6% this year, to tie export promotion to the healthcare battle and in the run wealthy, uncertainty and questions up 0.3% from last year. This will job creation by doubling up to the mid-term Congressional about timing may be preventing continue to be a drag on consumer US exports over five years. election, Republicans are fighting to some employers from hiring due demand. The Federal Reserve is While Obama has recently to fears of the tax impact on their expected to hold its Federal Funds score points by painting Democrats consumers and investors. claimed progress on this target rate between zero and as profligate spenders. As a result, front, the government in 0.25% through the end of 2010 in the likely extent of stimulus into ■ ■ ■ fact expects the doubling to occur as a function of global economic recovery, not any new policies. The president MACRO RISKS LABOR RISKS low risk 10 may move forward on free 9 trade agreements with 8 7 South Korea, Panama, and 6 Colombia, but the aggregate 5 impact of these deals on US 4 labor will be negligible due 3 2 to the relatively small size of 1 these economies compared high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment to the US economy. 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 Q3 2010 preFace meThodology The americas asia paciFic Overview: overview toward managing risks related The region’s strong economic risk index to overheating—most notably growth will also create space for australia Asia Pacific inflation and labor unrest. There are early signs that, for many of these governments to pursue important Bangladesh china structural reforms, particularly in hong kong economies, managing inflation countries that are less burdened india and the consequences of higher by rising inflation or labor indonesia inflation will soon become top Japan unrest. Elections, or leadership macroeconomic policy priorities. malaysia transitions, in Australia, Japan, In India, Indonesia, Singapore, new Zealand ➔ The Asia-Pacific region, led and the Philippines will boost the philippines and Vietnam, for instance, higher by China, India, and Indonesia, is prospects for positive changes singapore than expected growth in 2010 has in economic policy, including on south korea expected to continue to fuel the raised questions about how to keep Thailand global economic recovery over inflation in check while sustaining taxation. Incumbent governments Vietnam the coming quarter, although growth in 2011. Managing labor in Malaysia and New Zealand have europe and eurasia concerns that the region’s growth unrest will also be a major concern. also announced plans for dramatic middle easT could be affected by a slowdown In China, Bangladesh, South economic reforms, but it is less and aFrica in demand for the region’s exports Korea, and Hong Kong, there are clear if these governments have the aBouT sponsors remain. Policy priorities among increasing concerns about labor political will to push the changes most of the nations with the fastest issues, such as the minimum wage, through in the coming quarter. growing economies have squarely that are likely to raise business costs shifted from accelerating growth and disrupt operations. ■ ■ ■ 
  • 11. conTenTs 11 | gloBal markeT BrieF & laBor risk index Q3 2010 preFace meThodology The americas asia paciFic asia paciFic – risk index summary TaBle – Q3 2010 overview risk index macro risks laBor risks australia Foreign Bangladesh political social security economic Flexibility availability Quality contentment investment china hong kong Australia 7 8 10 7 X 9 7 7 8 7 india Bangladesh 5 5 Y 4 3 X 4 3 5 1 4 Y indonesia Japan China 7 5 8 7 Y 6 5 7 Y 6 4 Y malaysia new Zealand Hong Kong 7 7 10 6 9 Y 8 6 8 7 Y philippines India 7 4 7 6 XX 5 X 5 4 2 4 singapore south korea Indonesia 6 6 6 6 X 5 X 3 5 4 4 Y Thailand ▼ Vietnam Japan 6 9 10 7 X 7 6 7 9 8 europe and eurasia Malaysia 5 3 8 7 X 5 6 4 6 Y 6 Y middle easT and aFrica New Zealand 7 8 10 6 9 Y 7 7 8 7 aBouT sponsors Philippines 6 X 5 6 4 X 5 5 5 4 7 Singapore 8 ▼ 7 8 8 XX 9 6 6 8 7 Y South Korea 8 9 7 8 X 7 3 5 7 6 Y Thailand 4 4 6 5 X 7 6 5 Y 4 8 Vietnam 6 5 9 4 X 6 5 5 Y 5 6 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 Q3 2010 preFace meThodology The americas asia paciFic India overview sale of 3G and broadband wireless wage demands, as many salaries risk index spectrum auctions adding over are linked to the consumer australia $20 billion in revenue. As a result, price index. Bangladesh china the government will likely meet or The government plans to introduce hong kong ➔ The economy expanded beat its projection of a fiscal deficit india new legislation on corporate and by 8.6% in the first quarter of of 5.5% of GDP for fiscal indonesia income taxes this year. Strong 2010, propelled by strong growth year 2010–2011. Japan industry and political opposition malaysia in investment and exports. Solid The major cloud on the horizon resulted in the draft tax code new Zealand growth has created a strong published in June with more philippines environment for hiring, but the is inflation, which exceeded singapore 10% in May in annualized terms. exemptions and preferences than Although there is no government is still concerned south korea Worryingly, the rise in inflation the previous version. The difficulties immediate threat to the about potential headwinds from Thailand may result in the finance ministry ruling Congress-led United Vietnam the global economy, which could appears to be broad-based, rather not being able to cut the corporate europe cause exports and capital inflows to than driven by food or fuel, as had Progressive Alliance (UPA), and eurasia tax rate from 30% to 25% as moderate. As such, the government been the case in recent months. At some of its allies and middle easT originally proposed. Overall, the and aFrica is only gradually pulling back the same time, industrial production supporters in parliament aBouT sponsors code is positive for the fast-growing fiscal and monetary stimulus. growth has picked up sharply; have deserted it, leaving the infrastructure sector, which is Government revenue is high, with in April 2010 it grew by 18% coalition with only a slim becoming a major employer. robust economic growth resulting compared with the year prior. High majority. The government in strong tax collections, and the inflation is likely to feed through to ■ ■ ■ now can only push through legislation that is not low risk 10 MACRO RISKS LABOR RISKS polarizing or by expending 9 large amounts of political 8 7 capital. Under these 6 conditions, controversial 5 reforms, such as changes 4 to India’s highly restrictive 3 2 labor laws, are unlikely. 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 Q3 2010 preFace meThodology The americas asia paciFic South Korea overview raise rates, albeit gradually, over the and the particular union). risk index course of the year. australia Some companies have already Bangladesh Labor unrest is almost certain struck collective bargaining deals china to grow during the summer with their unions, and others may hong kong ➔ South Korea’s robust decide to pay union representatives india given the 1 July implementation economic recovery is accelerating, indonesia of a law curbing the power of under the table. On balance, with the IMF now raising growth Japan however, companies will tread trade union representatives at malaysia projections for 2010 to 5.8%, carefully given that the government Korean companies. Korea’s 1997 new Zealand before a slight moderation back has threatened violators of the Labor Act banned companies philippines to 5% in 2011. Economic activity so-called time off rule with jail and singapore from paying full-time trade Opposition victories in is increasingly led by the private fines. The Korea Confederation of south korea unionists, but many of these union the 2 June provincial and Trade Unions and the Korean Metal Thailand sector. A national debate will representatives have continued intensify about whether, when, and Workers Union have promised municipal elections have Vietnam to enjoy payroll and benefits europe how to roll back the expansionary strikes in July. Kia Motors, which rejuvenated the opposition and eurasia packages paid by firms. Under policies pursued by President Lee pays more than 100 full-time trade and will further increase middle easT the revision to the law, employers union representatives, is the most and aFrica Myung-bak. The Bank of Korea, policy gridlock in a system aBouT sponsors must now cap the number of union prominent target of protests and which in mid-July raised interest already plagued by political representatives at 24 (although potential strike actions. rates from their all-time low of 2% infighting. Lee’s ruling some variation is permitted based to 2.25%, will probably continue to Grand National Party on the size of both the workforce ■ ■ ■ performed poorly outside the capital region. Lee’s MACRO RISKS LABOR RISKS low risk 10 signature projects are all 9 in jeopardy, including 8 7 administrative reforms, a 6 major waterways project, 5 and a development 4 plan for Sejong City. A 3 2 cabinet reshuffle is likely 1 and may include the high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment replacement of Prime Investment Minister Chung Un-chan. 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 Q3 2010 preFace meThodology The americas asia paciFic Overview: europe Italy (where excessive bureaucracy recent quarter, while rising retail and eurasia sales further demonstrated a overview hurts the business environment) Europe and Eurasia and Greece would help boost economic growth and improve recovery in domestic demand. Nevertheless, the price of oil risk index Baltics Belgium the employment outlook. Aging and possible tax hikes on the Bulgaria economically vital oil and gas czech republic populations are also a concern sectors are points of uncertainty in denmark throughout most of Europe, and ➔ Europe presents many the near-term growth outlook. France many countries are considering or germany concerns, with EU authorities implementing pension reforms. The Positive economic trends are also hungary continuing to monitor the effects of these kinds of structural ireland evident in Turkey. The economy trajectory of the eurozone crisis italy changes on business activity grew during the first quarter of and the fiscal consolidation and luxembourg and growth have been lagging, 2010 compared to the same period netherlands austerity plans of many European however, and political instability in a year ago, and unemployment has norway economies. A longer-term concern Spain, Italy, Germany, and Portugal been declining. If implemented poland looms, however, particularly for effectively, a new fiscal rule will be a portugal may jeopardize implementation of the southern European nations of positive long-term driver of growth. romania these reforms. russia Italy, Greece, and Portugal: Their As is the case in Russia, a boost spain competitiveness is challenged by Russia’s situation is, however, in public expenditure ahead of sweden inflexible labor markets and tax more positive. Increased industrial upcoming elections could support switzerland environments that have stunted output, manufacturing, and fixed public sector workers and social Turkey business activity. Spain has passed investments were positive drivers initiatives. ukraine united kingdom labor reforms, and similar efforts in for the economy during the most ■ ■ ■ middle easT and aFrica aBouT sponsors 
  • 15. conTenTs 15 | gloBal markeT BrieF & laBor risk index Q3 2010 preFace meThodology europe and eurasia – risk index summary TaBle – Q3 2010 The americas asia paciFic macro risks laBor risks europe and eurasia Foreign political social security economic Flexibility availability Quality contentment overview investment risk index Baltics 6 6 7 4 7 X 4 6 7 3 Y Baltics Belgium 4 7 Y 8 7 8 Y 5 6 7 5 Y Belgium croatia Croatia 6 7 8 5 8 3 5 7 3 Y czech republic Czech Republic 6 8 8 6 6 X 7 6 8 5 denmark France Denmark 8 9 8 7 9 6 5 8 5 Y germany France 7 8 7 6 8 X 4 6 8 4 Y hungary Germany 6 8 8 6 7 Y 3 6 9 5 ireland italy Hungary 6 X 8 9 5 7 Y 6 6 7 4 luxembourg Ireland 6 9 8 5 9 6 7 8 3 Y netherlands Italy 5 Y 7 Y 7 6 6 Y 4 6 8 4 norway poland Luxembourg 7 9 8 7 8 X 3 X 5 9 7 portugal Netherlands 6 8 8 6 7 Y 3 5 8 6 romania Norway 7 9 8 7 Y 8 4 5 9 8 russia spain Poland 8 X 7 9 6 7 6 6 Y 7 5 sweden Portugal 7 8 7 5 7 Y 3 6 7 3 switzerland Turkey Romania 6 5 7 4 Y 7 4 5 6 4 ukraine Russia 7 7 6 6 X 6 6 7 5 4 united kingdom Spain 6 Y 7 Y 7 4 7 Y 3 8 8 2 middle easT and aFrica Sweden 7 Y 9 8 7 8 4 6 9 6 aBouT sponsors Switzerland 8 8 8 7 Y 8 5 5 9 8 Turkey 6 Y 5 5 Y 6 7 4 6 5 4 Ukraine 6 5 Y 8 3 X 5 6 4 5 4 United Kingdom 7 8 7 6 Y 9 7 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 Q3 2010 preFace meThodology The americas asia paciFic Italy europe EU authorities, Italy announced EU authorities may consider that and eurasia overview austerity measures in May intended insufficient, raising the possibility of risk index to halve its deficit to 2.7% of GDP future tax hikes. Baltics by 2012. Rome will freeze public Belgium The government has sought ➔ The Italian economy sector wages and hiring for three croatia to boost competitiveness by continues to struggle, with growth years, and decrease funding to czech republic establishing so-called zero denmark of just 0.5% year-on-year in the first Italy’s regions and cities. That may bureaucracy zones in the country’s France quarter of 2010, and unemployment force local governments to lower south, significantly cutting red tape germany for the same period at 9.1%. Italy’s healthcare spending and raise taxes, hungary in order to foster entrepreneurship. public deficit, however, is not in as which in turn may constrain regional ireland Many Italian firms employ few dire a situation as those of Spain or business activity, especially in the General elections are not italy workers, so this may not significantly Greece. Market pressure remains a already stagnant south. Collectively, due until 2013, but early luxembourg increase employment. The failure to netherlands concern and a source of uncertainty these measures will probably hurt deal effectively with competitiveness elections are increasingly norway for the business environment and domestic demand by decreasing likely and could be is one of the main obstacles to poland employment situation. government spending and triggered if Italy’s public portugal employment and economic growth household consumption. The current in Italy. debt becomes an acute romania Public debt is estimated at 120% plans do not yet, however, include russia problem for markets. A spain of GDP. To calm markets and tax increases, and the markets and ■ ■ ■ sovereign debt downgrade sweden could precipitate a further switzerland Turkey loss of public confidence in ukraine the government of Prime united kingdom MACRO RISKS LABOR RISKS low risk 10 Minister Silvio Berlusconi, middle easT and aFrica 9 which is already suffering 8 aBouT sponsors 7 in the polls. Left-wing 6 Democratic Party leader 5 Pier Luigi Bersani is 4 aggressively opposing current 3 2 austerity plans, attempting 1 to align his party with the high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment angry popular mood. 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 Q3 2010 preFace meThodology The americas asia paciFic Turkey europe in March dropped by 2.1 While monetary tightening is and eurasia delayed, fiscal tightening is already overview percentage points year-on-year to risk index 13.7%. Inflation is also declining. In underway. The government aims Baltics June, annualized inflation dropped to pass legislation that introduces Belgium ➔ Turkey’s economy remains to 8.4%, a decline of just over half a new fiscal rule before the 2011 croatia strong, though it does face some a percentage point from the May budget is implemented. If followed czech republic obstacles. GDP grew by 11.7% numbers. A 2.5% slide in food rigorously, the law could encourage denmark fiscal prudence in the absence of an France in the year ending in March 2010 prices was the main factor behind germany compared to the same period in IMF program. Currently the central the falling inflation, with lower hungary 2009, but there was a considerable government is outperforming the energy prices also contributing. ireland slowdown in the quarter-on-quarter budget targets due to a strong The heated campaign ahead italy Lower inflation prompted the growth rate. GDP grew by 1.7% cyclical recovery and tax hikes. central bank to announce that it of the 12 September public luxembourg in the fourth quarter of 2009 In the first quarter, the central netherlands will probably maintain interest referendum will mark the compared to the third quarter, but government budget deficit was norway rates at current levels in order to beginning of a long battle poland output remained broadly flat in 4.7% of GDP. Between January the first quarter of 2010 compared support the economic recovery. and May, the central government leading into the general portugal to the three months ending in Analysts expect the central bank to deficit declined by slightly more elections. The declining romania russia December. start tightening in September and than half compared to the same popularity of the ruling spain to increase the weekly repo rate, Justice and Development period in 2009. sweden Other macroeconomic indicators currently at 7%, by 100–125 basis Party (AKP) may lead the switzerland were also positive. Unemployment points by the end of the year. Turkey ■ ■ ■ party to resort to populist ukraine election spending, reducing united kingdom low risk 10 MACRO RISKS LABOR RISKS the incentives for compliance middle easT and aFrica 9 with the new fiscal rule. 8 aBouT sponsors 7 The parliament has already 6 approved the government’s 5 proposal to create 70,000 4 new posts for teachers, 3 2 30,000 for the police, 1 and 15,000 for clerics. 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 Q3 2010 preFace meThodology The americas asia paciFic Overview: europe but incentives among power enjoys new financial leverage and eurasia middle easT brokers in both countries to retain over its sister emirate. Middle East and aFrica the status quo are strong. Egypt overview faces a number of challenges Employment will be a priority risk index and Africa both politically and economically that could be aggravated by the across the African continent in 2010. Unemployment continues algeria egypt israel sudden death of President Hosni to dog Morocco, and despite kuwait ➔ As the world economy Mubarak, while Saudi Arabia’s aging high government spending, new morocco emerges from recession, the princes are likely to compromise jobs will hinge largely on the EU’s nigeria Middle East and Africa present on a successor, leaving most of the economic recovery. Algeria faces Qatar both ongoing political instability saudi arabia opportunities for growth but also squabbling behind closed doors. south africa carry stability risks. and a rocky investment climate in united arab The Gulf Cooperation Council 2010, with rising food prices and emirates Regional tensions remain a concern. (GCC) countries are slowly high unemployment, while Nigeria aBouT sponsors The precarious situation between recovering from the economic crisis, faces high inflation and demands Iran and Israel is unlikely to affect with Qatar projecting outstanding for an increase in public-sector growth in Israel, however, barring growth numbers for 2010 and wages. After a successful World military conflict. Egypt and Saudi Kuwait expecting another budget Cup, South Africa must address job Arabia, which are the West’s surplus coupled with healthy GDP creation to mitigate the possibility primary Muslim allies in the region, growth. The United Arab Emirates of social unrest caused by crippling are both led by aging leaders and (UAE) has emerged from the worst double-digit unemployment rates. face possible successions in the phase, but Dubai’s debt issues near term. Volatility is a concern, are not over yet and Abu Dhabi ■ ■ ■ 
  • 19. conTenTs 19 | gloBal markeT BrieF & laBor risk index Q3 2010 preFace meThodology The americas asia paciFic europe middle easT and aFrica – risk index summary TaBle – Q3 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 4 Y 5 4 Y 3 2 5 4 1 israel kuwait Egypt 6 Y 5 Y 8 5 Y 5 5 4 2 2 morocco nigeria Israel 7 7 Y 7 8 7 5 5 7 7 Qatar saudi arabia Kuwait 7 6 7 Y 6 X 5 9 4 7 8 south africa united arab Morocco 7 6 Y 8 5 5 4 4 3 5 emirates aBouT sponsors Nigeria 5 X 2 5 4 X 5 4 4 1 2 Qatar 7 6 8 6 X 5 7 4 5 7 Saudi Arabia 6 Y 6 6 Y 6 X 6 7 4 6 6 South Africa 6 Y 3 6 5 6 4 Y 6 4 2 Y United Arab Emirates 7 6 7 Y 6 5 8 4 7 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 Q3 2010 preFace meThodology The americas asia paciFic Israel europe central bank chief, Stanley Fischer, Despite economic stability, political and eurasia middle easT is high. The two-year budget uncertainty in Israel is growing. and aFrica passed earlier this year means that Following the poor handling of the overview any fiscal controversies have been pro-Gaza Turkish flotilla, as well risk index ➔ Israeli markets escaped as US pressure to extend a freeze algeria postponed. Israel also signed an egypt much of the fallout from the ascension agreement with the on settlements in the West Bank, israel Greek crisis and remain strong, OECD in June. Membership in the Prime Minister Benjamin Netanyahu kuwait following the country’s relatively has multiple interests to balance. elite group, one of Fischer’s long- morocco steady economic trajectory His political coalition is unlikely to nigeria running efforts, is taken in Israel as collapse in the coming quarter, as Qatar during the global financial crisis. approval of the country’s long-term saudi arabia The Israeli Central Bank recently he will likely look to placate the While Israel’s engagement economic policies and will likely south africa raised growth forecasts for 2010 rightwing elements that are wary with Hamas and Hizbullah mean more foreign investment in united arab of the government acquiescing remains tense, and emirates to 3.7% from 3.5% and lowered Israeli markets. Some people are to pressure from the Obama aBouT sponsors the unemployment forecast for concerned, however, that Israel meaningful talks with the administration on settlements and the end of the year to 7.0% from has moved from being one of the Palestinian Authority are territorial concessions. 7.4%. Inside Israel, there is growing most dynamic emerging markets unlikely, Israel’s relationship confidence that the country has to being one of the smallest ■ ■ ■ with Turkey and Iran are escaped the global slowdown developed markets. of even more concern. and, accordingly, confidence in the The government appears unsure of how to reverse its deteriorating relations low risk 10 MACRO RISKS LABOR RISKS with Turkey. And while the 9 chances of an Israeli strike 8 7 on Iranian nuclear facilities 6 remain small, if international 5 sanctions fail to influence 4 Tehran’s behavior, hawks in 3 2 Israel could start pushing 1 for a preemptive attack. 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 Q3 2010 preFace meThodology The americas asia paciFic Saudi Arabia europe and Saudi youths in particular have government’s continued spending and eurasia middle easT a hard time getting jobs. Saudi on infrastructure. Although Saudi and aFrica Arabia’s human capital problem will authorities previously stated overview not be resolved in the short term, that the country would focus on risk index algeria ➔ With oil above $70 a and the country will continue to developing solar rather than nuclear egypt barrel, the outlook for the Saudi depend on foreign workers for both power, King Abdullah in April israel economy is rosy. The budget is on its unskilled and skilled labor needs. announced the establishment of a kuwait track for another surplus, and the morocco new nuclear and renewable energy country will continue its aggressive Saudi Arabia is embarking on nigeria center, indicating that Saudi Arabia an ambitious plan to develop Qatar spending on infrastructure projects, will pursue nuclear power as well. saudi arabia focusing on transportation and alternative energy sources, King Abdullah is 85 and From a political perspective, the south africa utilities. This could push GDP intended both to create jobs and succession could soon become united arab pace at which Saudi Arabia moves growth above 3% in 2010. Riyadh to address Saudi Arabia’s long-term an issue. Although the emirates forward on its nuclear program will aBouT sponsors wants to have infrastructure in energy needs. Electricity generation powerful Saudi princes have be driven by the progress of Iran’s place for its growing economy and exhausts around three-quarters a competitive relationship, nuclear program, as well as the population, and remains confident of Saudi Arabia’s domestic oil, they want to ensure Saudi programs of the other GCC states. about the direction of its economy. and strong oil export revenues stability and the continuation But unemployment remains high, will be necessary to support the ■ ■ ■ of the Saud family dynasty. So while there could be intense political jockeying immediately following MACRO RISKS LABOR RISKS low risk 10 Abdullah’s death, the princes 9 will rally around whomever 8 7 the Allegiance Council 6 selects as the next king. 5 That choice will have a big 4 impact on the pace of social 3 2 reform in Saudi Arabia. 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 Q3 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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