Q1 2011 Global Market Brief & Labor Risk Index
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Q1 2011 Global Market Brief & Labor Risk Index



Brief and Labor Risk Index is joint production between KellyOCG and Eurasia

Brief and Labor Risk Index is joint production between KellyOCG and Eurasia



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Q1 2011 Global Market Brief & Labor Risk Index Q1 2011 Global Market Brief & Labor Risk Index Presentation Transcript

  • Think ouTside.GlobalMarket Brief& Labor Risk Index l ogy s ampler 2011 eporT 1 onlymeT hodo 
  • Global Market Brief & Labor Risk Index 2011This is meThodology sample reporT only. 1To subscribe to the global market Brief & labor risk index, visit kellyocg.com/marketbrief
  • conTenTs3 preface: rolf kleiner, senior Vice-president, kelly ocg & ian Bremmer, president, eurasia group4 methodology72 about sponsors The Americas Asia Pacific Europe and Eurasia Middle East and Africa6 overview 17 overview 34 overview 60 overview7 risk index 18 risk index 35 risk index 61 risk index8 argentina 19 australia 36 Baltics 62 algeria9 Brazil 20 china 37 Belgium 63 egypt10 canada 21 hong kong 38 Bulgaria 64 israel11 chile 22 india 39 czech republic 65 kenya12 colombia 23 indonesia 40 denmark 66 kuwait13 mexico 24 Japan 41 France 67 morocco14 panama 25 malaysia 42 germanu 68 Qatar15 united states 26 new Zealand 43 hungary 69 saudi arabia 27 philippines 44 ireland 70 south africa 28 singapore 45 italy 71 united arab emirates 29 south korea 46 luxembourg 30 sri lanka 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 kingdomcover: horseshoe Falls, niagara Falls, ontario, canada © 2006 Frank LeungThis 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 commercialinvestment, trade matter, or issue, and should not be relied upon for such purposes. Eurasia Group is a private research and consulting firm. © 2011 KellyOCG and Eurasia Group. 
  • conTenTs4 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFicPreface europe some convergence, the variation populations and possibly incite and eurasia middle easT in growth rates will lead to unrest. China, for instance, has and aFrica different economic and labor already begun to tighten monetary aBouT sponsors policy concerns. policy, and will likely continue to do so in 2011. The Asia-Pacific region, led by China, continues to grow strongly. In developed markets the risks In addition, most of the emerging will come from weak economic economies in the Americas, Middle recovery or continued high East, and Africa appear set for unemployment despite economic continued growth—although growth. And throughout much the protests in Egypt and other of Europe, austerity measures ➔ The coming year is likely countries are causing instability and will continue to weigh on growth to see a continuation of the two- could dampen growth prospects. prospects. This is particularly true in As a result, labor markets in some the eurozone periphery—Greece, speed economic recovery of 2010 countries are tightening and there is with emerging market nations set Ireland, Portugal, and Spain— upward pressure on wages. In some to again outperform developed where austerity is likely to be the cases, such as Brazil, governments economies. However, growth rates most severe. On the bright side, will likely take an active role in are likely to converge somewhat although potential labor marketrolf kleiner, ian Bremmer, negotiating wage contracts in 2011. reforms may spark social unrest insenior Vice-president, president, in 2011, as growth in emerging Governments in strong-growth the short-term, they could improvekellyocg eurasia group markets is likely to moderate while countries will also be concerned competitiveness and prospects for the recovery in some developed with controlling inflation— long-term growth. markets—such as Norway and the especially if it threatens to hurt US—may gain traction. Despite the purchasing power of poorer ■ ■ ■ 
  • conTenTs5 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFicMethodology 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. 
  • conTenTs6 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas overview Overview: risk index wages in Argentina, Brazil, and Growth in the US and Canada is argentina Chile. In other countries, such as expected to remain in the low single Brazil The Americas Colombia, Canada, and the US, digits. While Canada outperformed the US in 2010, its growth rate is canada chile high levels of unemployment have colombia continued to plague governments now expected to lag as officials in mexico that have struggled to foster more Ottawa begin to tighten fiscal policy panama job creation. In Argentina, Brazil, and tapped-out consumers start to united states ➔ Many countries in the rein in their spending. Meanwhile, asia paciFic and Colombia, governments will Americas outperformed economic europe likely take an active role in helping in the US, an $858 billion tax-cut and eurasia expectations in 2010, though growth compromise hashed out by the middle easT to negotiate next year’s wage and aFrica is expected to slightly moderate White House and Republicans is agreements with labor unions. aBouT sponsors in 2011 as governments tighten expected to boost the economy by monetary policies, cut back on Despite pressures from unions for as much as an additional percentage spending, or manage the impact higher pay, most governments point of GDP. of recent natural disasters. Strong will show some restraint as they growth and an uptick in inflation try to keep inflation and spending ■ ■ ■ have led to some labor shortages pressures in check and address and increased demands for higher concerns from the private sector. 
  • conTenTs7 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas overviewThe americas – risk index summary TaBle – Q1 2011 risk index argentina macro risks laBor risks Brazil Foreign canada political social security economic Flexibility availability Quality contentment investment chile colombia Argentina 6 X 7 8 4 X 5 5 4 7 4 mexico panama Brazil 8 6 6 X 7 5 X 4 5 5 6 united states asia paciFic Canada 7 8 10 5 Y 8 7 7 9 5 europe and eurasia Chile 7 6 9 7 X 7 7 5 8 6 Y middle easT and aFrica aBouT sponsors Colombia 8 5 3 6 Y 6 7 6 X 6 5 Mexico 6 6 5 Y 6 X 7 5 5 6 7 Panama 8 Y 6 7 6 7 4 4 5 4 United States 8 X 8 9 8 X 9 8 9 9 7For 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 
  • conTenTs8 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas overview Brazil risk index in the first quarter of 2011. But pay scale. Rousseff will likely argentina more moderate growth projections restrain the minimum wage hike Brazil of 4.5% for 2011, coupled with for 2011, or grant a small real canada chile President Dilma Rousseff’s increase in exchange for a smaller colombia ➔ Economic growth in commitment to more austere fiscal amount in 2012. mexico 2010 likely exceeded earlier GDP policies for this year, could detract panama growth forecasts of 7.5%, while the from labor’s negotiating power. Nonetheless, the overall context of united states central bank increased its inflation high growth and labor shortages asia paciFic A key policy decision that will affect will favor labor in wage negotiations europe expectations for the year from 5.85% and eurasia to 5.88% in a survey released on wage pressure is the debate over during Rousseff’s first year in office. middle easT and aFrica 17 December. Sectors as varied the minimum wage. Government Private companies will continue In an effort to control the aBouT sponsors as finance, engineering, and economists view the minimum wage to struggle to find adequate labor pace of current expenditure construction are experiencing labor as a driver for inflation in service supply, while the government growth, Rousseff will shortages, helping push down the sector wages. Despite the fact will move forward with ambitious push for approval of a unemployment rate in November that fewer workers in the country’s infrastructure projects, potentially reform that would limit to a record low of 5.7%, from 6.1% more prosperous southern region further strengthening labor’s hand. the real rate of public in October. All of these factors are actually paid the minimum servant salary increases will contribute to labor pressure wage, any increases have a ripple ■ ■ ■ to 2.5% per year. Wages for significant real wage increases effect at the higher end of the for public servants have risen at an unsustainable pace in recent years, and MACRO RISKS LABOR RISKS low risk 10 Rousseff ’s economic team 9 believes restraining such 8 7 growth is crucial to its 6 efforts to roll back the 5 pace of spending and 4 executing other government 3 2 priorities such as increasing 1 public investment. 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 
  • conTenTs9 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas overview United States risk index forecasts. Before the tax deal was This provision makes an incremental argentina reached, the consensus forecast was difference in each paycheck, which Brazil for 2.6% growth and it is now firmly makes it more likely to be spent canada chile over 3%. right away. colombia ➔ Congress’s approval of an mexico The unemployment insurance On other indicators, forecasts are $858 billion tax-cut compromise panama extension ($56 billion) and payroll holding steady. Unemployment negotiated between President united states tax cut ($112 billion) will provide dropped to 9.4% in December 2010 asia paciFic Barack Obama and Republicans an immediate infusion of cash to and is expected to fall slightly in europe in December spurred the upward and eurasia consumers. The unemployed tend 2011. The Federal Reserve is likely revision of forecasts for 2011 middle easT and aFrica economic growth. In return for a to spend their money right away to keep its Federal Funds target rate The federal deficit— aBouT sponsors on basic goods, while workers between zero and 0.25%, and it around 9% of GDP—will two-year extension of the Bush-era will see more money in their said in a 14 December statement constrain the ability of the tax cuts, Obama secured 13 extra paychecks as a result of reduced that the recovery has been government to provide months of unemployment insurance Social Security withholding. A disappointingly slow. Inflation is additional stimulus in as well as a one-year payroll tax cut projected to stay below 2%. 2011. Republicans won for workers, from 6.2% to 4.2%. Both worker earning $50,000 could see measures were unexpected and as much as $1,000 more this year, ■ ■ ■ control of the House of their stimulative nature resulted in while someone earning twice that Representatives in part by most economists upping their 2011 much would see around $2,000. pledging to cut spending; both sides are wary of adding to the deficit MACRO RISKS LABOR RISKS low risk 10 given public concern. 9 As a result, Congress is 8 7 unlikely to pass additional 6 stimulus—and may begin 5 to cut programs—given 4 political concern about 3 2 the US fiscal position. 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 
  • conTenTs10 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic Overview: overview countries such as Indonesia and the A bright spot for growth appears risk index Philippines are still contemplating to be continued investment australia Asia Pacific action, while Thailand maintains price caps on certain food and upgrading of infrastructure, china hong kong particularly in Southeast Asia, india essentials and commodities. China, and India. Malaysia and indonesia Indonesia, for instance, want to Japan This bout of inflation is the malaysia vigorously jumpstart investment consequence of robust growth new Zealand in infrastructure, as their current in much of the region last year. philippines ➔ With the notable exceptions Healthy domestic demand, rising deficiencies could eventually limit singapore of Japan and New Zealand, economic activity. For Beijing, its south korea commodity prices, and stimulus sri lanka numerous Asia-Pacific countries are initiatives buoyed regional growth. massive investment in rail projects, Thailand beset by inflationary pressures and China continues to lead the way, including high-speed lines, will Vietnam expectations at the outset of 2011. but countries ranging from South proceed apace, with an estimated europe and eurasia As a result, the policy emphasis—at Korea to Australia also put up solid $100 billion in 2011. These projects middle easT least in the first quarter—will growth numbers in 2010. Although will provide a new source of jobs and aFrica aBouT sponsors focus more intensively on taming countries are projecting lower at a time when some countries are inflation, especially in countries growth rates for 2011, the slowdown facing upward wage pressures in that have large, poor populations. so far seems modest. The question traditional manufacturing sectors. While China has already hiked for this year, then, is whether Asia interest rates twice, Southeast Asian will remain a global growth engine. ■ ■ ■ 
  • conTenTs11 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFicasia paciFic – risk index summary TaBle – Q1 2011 overview risk index macro risks laBor risks australia Foreign china political social security economic Flexibility availability Quality contentment investment hong kong india Australia 7 Y 9 9 8 9 8 7 9 8 indonesia China 7 5 8 7 Y 6 4 X 6 Y 6 5 Japan malaysia Hong Kong 8 7 10 7 Y 10 7 6 Y 8 7 new Zealand philippines India 7 4 7 6 XX 5 5 5 1 3 singapore Indonesia 7 6 7 5 4 3 5 3 4 Y south korea sri lanka Japan 6 9 9 Y 5 7 5 6 8 Y 7 Thailand Vietnam Malaysia 6 Y 4 9 6 7 6 4 6 6 europe and eurasia New Zealand 7 9 10 6 8 7 7 8 7 Y middle easT and aFrica Philippines 6 X 4 7 5 X 4 4 5 4 6 aBouT sponsors Singapore 9 8 9 8 10 6 5 Y 8 8 South Korea 7 9 6 Y 7 7 3 5 7 6 X Sri Lanka 7 X 4 8 5 X 5 6 4 5 5 Y Thailand 5 Y 4 7 5 7 7 5 4 8 Vietnam 7 X 5 8 4 5 6 5 4 6 YFor 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 
  • conTenTs12 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic Japan overview of measures that will promote through the opposition-controlled risk index domestic growth. Unemployment upper house of parliament. Kan’s australia rose slightly in October to 5.1%, legislative agenda will remain close china hong kong but a mild downward trend is likely to the DPJ’s consumer-oriented india ➔ Growth in 2011 is projected in 2011, with consensus projections social objectives and growth indonesia to slow to 1.5% or below, in well below 5%. Prices declined strategy. That strategy seeks to Japan contrast to 2010 growth that should 0.5% in the fourth quarter of 2010 bolster welfare spending, end malaysia exceed 3.5% once final numbers year-on-year and deflation could deflation, rationalize the regulatory new Zealand and tax system, promote trade, philippines are released. The economy is persist through 2011, while slowly singapore also projected to contract 1.5% in fading. The Bank of Japan is promote fiscal consolidation, and south korea the fourth quarter, reflecting the adopting more aggressive policies support strategic sectors. For now, Tax policy will receive sri lanka expiration of various tax incentives to stave off government legislation the welfare goals and sectoral considerable attention in Thailand that brought consumer spending that would mandate such policies. support are being held in check 2011. A five-percentage- Vietnam by fiscal constraints. Progress is europe forward into the third quarter, when point reduction in the top and eurasia Prime Minister Naoto Kan faces more likely in four areas: deflation, it registered higher than expected corporate tax rate is highly middle easT ongoing political challenges. He deregulation, tax policy, and, and aFrica growth of 4.5%. likely, along with reductions must perform an intricate political aBouT sponsors though slowly, trade. Exports are driving the economic dance in 2011 in order to avoid a in some corporate tax breaks. recovery, but the ruling Democratic DPJ schism and make the necessary ■ ■ ■ Additionally, tax hikes on oil Party of Japan (DPJ) plans a variety cross-party appeals to push bills and coal are likely. Longer term, a taxpayer ID system to reduce tax avoidance and low risk 10 MACRO RISKS LABOR RISKS a consumption tax hike to 9 shore up social spending are 8 7 likely to be discussed in 2011, 6 but the government probably 5 will not move on these issues 4 until 2012 at the earliest. 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 
  • conTenTs13 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic Thailand overview higher inflation in the first quarter. and commodities, so these firms risk index First, a tight labor market led to need administrative approval to australia wage hikes in early December, raise them. The government, facing china hong kong when the government granted possible elections and worried india ➔ Thailand’s exports surged an increase in the daily minimum that rising inflation might force it indonesia in November, raising expectations wage by an average of 6.7% to raise interest rates (which would Japan that exports for 2010 could reach nationwide to 176.30 baht ($5.84). further strengthen the baht), will malaysia $90 billion, about 27% more than The move, which was largely likely freeze the prices of several new Zealand politically motivated, will further philippines 2009 and almost 10% more than products (or allow for only minimal singapore 2008, before the financial crisis add to investor complaints of increases). But the manufacturers’ south korea fully hit Western demand. The rising labor costs in Thailand. requests reflect the wider price General elections scheduled sri lanka export sector’s strong performance Second, manufacturers in industries pressures in the economy. The for 2011 may reignite Thailand will help Thailand reach 8% such as auto batteries, electrical higher prices may eventually cause political turmoil. If allies Vietnam wires, steel, chemical fertilizer, europe growth for 2010. With economic Thai authorities to raise interest of former prime minister and eurasia expansion remaining robust, the palm oil for cooking, and pork, rates, which could slow demand in Thaksin Shinawatra poll well middle easT submitted applications for price and aFrica government’s attention is likely to the industrial sector and weaken the ahead of the election, then aBouT sponsors hikes ranging from 3% to 25%. turn to rising prices. outlook for manufacturing jobs. speculation will mount about The government sets price caps the military’s reaction. It may, Two factors could contribute to for several types of basic goods ■ ■ ■ with the help of the current civilian government, find a way to maneuver an election low risk 10 MACRO RISKS LABOR RISKS defeat for Thaksin’s allies or 9 even prevent the election 8 7 from taking place. Any sense 6 that the government was 5 undermining the elections 4 would likely bring the 3 2 opposition out into the 1 streets in large numbers. 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 
  • conTenTs14 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic Overview: europe likely increase social unrest Hungary might undermine and eurasia overview and political instability in the investor confidence. Europe and Eurasia European periphery (Greece, Ireland, Spain, and Portugal). In contrast, steady growth will likely risk index Baltics Belgium boost political stability in Eurasian Meanwhile, Germany’s export- Bulgaria countries. In the case of Russia, czech republic based growth will continue to the government will face minimal denmark make it the economic locomotive ➔ The situation in Europe internal frictions, as the risk of France of the continent, with some help will remain complicated. Many germany social unrest that rose following from the Nordic nations. Eastern hungary countries will enact austerity the financial crisis recedes. Stability Europe presents a mixed outlook. ireland measures that will not support will be also the norm for Turkey italy While economic prospects are growth and employment. because the government will luxembourg positive for almost all countries, Furthermore, several governments try to avoid any move that may netherlands these are dependent upon the norway will likely face funding constraints undermine its popularity ahead of wider eurozone. Therefore, poor poland in financial markets, which might parliamentary election to be held performance in some western portugal prompt the activation of additional in June. Finally, Ukraine will likely romania European economies might EU/IMF rescue packages, requiring russia also profit from a continued surge undermine growth momentum further cuts. spain in domestic demand, although a in the entire region. Moreover, sweden reform of the labor code might The implementation of structural unemployment will remain switzerland cause social instability. Turkey reforms in areas such as labor elevated and economic measures ukraine regulations and pensions will taken by countries such as ■ ■ ■ united kingdom middle easT and aFrica aBouT sponsors 
  • conTenTs15 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodologyeurope and eurasia – risk index summary TaBle – Q1 2011 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 Baltics 7 7 8 5 X 7 5 6 7 4 Belgium Belgium 4 6 8 5 Y 7 5 6 7 4 Bulgaria Bulgaria 6 7 7 4 7 6 X 5 6 4 czech republic denmark Czech Republic 7 7 Y 9 7 6 8 X 7 7 5 France Denmark 7 Y 9 8 6 9 6 5 8 5 germany France 7 8 7 6 8 4 6 8 3 Y hungary ireland Germany 6 Y 9 8 6 8 3 6 9 5 italy Hungary 5 6 9 4 YY 6 YY 6 6 7 5 luxembourg Ireland 4 Y 8 8 4 8 6 7 8 2 netherlands norway Italy 5 Y 8 8 5 6 4 6 7 4 poland Luxembourg 7 9 8 6 X 9 4 5 9 6 portugal Netherlands 5 7 8 6 8 3 5 Y 7 5 romania russia Norway 8 9 8 7 X 8 3 5 8 7 spain Poland 8 8 9 5 Y 6 Y 6 6 8 5 sweden switzerland Portugal 5 Y 8 8 4 Y 7 4 X 6 6 3 Turkey Romania 5 6 6 5 X 7 5 5 7 4 ukraine Russia 6 5 Y 5 5 6 5 7 5 6 united kingdom middle easT Spain 6 6 7 X 5 7 4 X 7 7 2 and aFrica Sweden 6 8 8 7 8 4 6 8 6 X aBouT sponsors Switzerland 8 9 9 7 Y 8 6 5 9 8 Turkey 6 5 7 7 X 6 5 5 X 5 6 Ukraine 6 5 8 4 X 6 5 6 5 4 United Kingdom 9 8 Y 8 6 9 7 6 Y 9 6 YFor 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 
  • conTenTs16 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic Ireland europe of an economic and financial a virtual wipeout in this year’s and eurasia overview adjustment package to correct early elections (which will take risk index Ireland’s significant fiscal deficit of place in late February), while Baltics 14.4% of GDP. opposition parties Fine Gael and Belgium ➔ The Irish economy Labor will very likely form the next Bulgaria These conditions are reflected in government. These two parties czech republic expanded only 0.5% in the third the budget for 2011, which the have backed the radical fiscal denmark quarter of 2010 compared to the parliament is currently discussing retrenchment, but insist that they France previous quarter after contracting germany and which will likely be passed will not be bound by the strict 1% in the previous quarter, and it hungary in the first quarter. The four-year terms and conditions attached continued to have the third highest ireland austerity plan includes €15 billion to the EU/IMF bailout. A more unemployment rate in the eurozone The reforms agreed under italy of budget cuts by 2014, of which significant risk will be the ability at 14.1% in October. Moreover, the EU/IMF bailout will luxembourg €6 billion (equivalent to about 4% of the new coalition government netherlands concerns about the solvency of Irish likely spark more protests of GDP) will be implemented as to implement the reforms that the norway banks led the government to apply IMF and EU have asked for. The from trade unions. The poland early as 2011. for external financial assistance in public backlash against the rescue government is expected portugal November. The approval of an €85 The country will probably undergo package could break the unity of to adopt new legislation romania russia billion bailout by the EU and the a major political shift in 2011. the incoming government. in May to reduce the spain IMF was subject to the adoption The ruling Fianna Fail could face ■ ■ ■ national minimum wage sweden by €1.00 per hour and switzerland Turkey reform unemployment ukraine and welfare benefits united kingdom low risk 10 MACRO RISKS LABOR RISKS systems. Furthermore, it middle easT and aFrica 9 will also have to present 8 aBouT sponsors 7 plans to increase state 6 pension eligibility to 5 66 years in 2014, 67 in 4 2021, and 68 in 2028. 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 
  • conTenTs17 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic Ukraine europe Natural gas tariff increases in the for small- and medium-sized and eurasia overview spring and fall will be one of the enterprises. Protests against the risk index main factors to affect prices. The tax code in November caught Baltics IMF will require the National Bank the government by surprise, and Belgium ➔ There is little concern of Ukraine to further liberalize its will affect how it approaches Bulgaria among outside observers that exchange rate policy as part of its czech republic upcoming changes to the pension denmark Ukraine’s economic recovery will $15 billion loan program with the system and the labor code. France slow this year. Estimates of GDP government. This will make the Nevertheless, these developments germany growth range from 3.7% to above hryvnia potentially more vulnerable are considered necessary—pension hungary 4%. A revival in domestic demand to exchange rate fluctuations. ireland reform is a requirement of the is expected to continue, a factor There are many reservations italy IMF loan—and likely will be that may help the government The government will engage in about the government’s luxembourg implemented in early 2011. Large netherlands address unemployment a series of reforms in 2011 that proposed labor code, unveiled and small businesses alike will norway that remains around 9% by will affect all employers. Tax this fall. Unions argue the be affected by the restructuring, poland International Labor Organization reform, which went into effect law weakens their rights and portugal though the full impact will not (ILO) standards. Inflation will be on 1 January, is generally those of employees and does romania be clear until the cabinet and russia lower than before the financial positive for Ukraine’s largest not meet ILO standards; parliament finalize the proposals. spain crisis, but estimates for 2011 are employers, who will enjoy meanwhile some businesses sweden generally between 10% and 11%. lower tax rates, while it is mixed ■ ■ ■ claim the law expands switzerland Turkey the rights of employees ukraine at their expense. Fears of united kingdom MACRO RISKS LABOR RISKS low risk 10 demonstrations were likely middle easT and aFrica 9 behind the decision to delay 8 aBouT sponsors 7 consideration until this year. 6 Regardless of whether officials 5 revise the bill in response to 4 the complaints, a vote is likely 3 2 in the first half of 2011. 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 
  • conTenTs18 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic Overview: europe countries will benefit from more many countries in the Middle and eurasia East and Africa will succeed in middle easT robust hydrocarbon exports given Middle East and aFrica the more stable outlook of the addressing structural problems in overview global economy. 2011, such as corruption and the risk index and Africa Across Africa and the Middle East, lack of democracy, and most also have difficult policy choices to algeria egypt israel domestic politics and policies will make. Egypt had weathered the kenya ➔ The Middle East and drive growth. For instance, Qatar’s global financial crisis relatively well, kuwait winning bid to host the 2022 and was poised to benefit from Africa entered 2011 in a profound morocco FIFA World Cup will help spur the the global recovery. But the mid- Qatar state of disarray as protests shook construction and infrastructure January fall of the Tunisian president saudi arabia the region and long-entrenched pushed rising social discontent south africa sectors, as well as the tourism dictators wobbled and fell. united arab to the fore as protests shook the industry. And in Kenya, effective emirates Despite this, the two regions are regime of President Hosni Mubarak; monetary policies have supported aBouT sponsors broadly poised for growth barring the Egyptian stock market tanked economic growth. further dislocation. Many of the as the military nervously stood energy-dependent economies are But, as recent events have shown, between protesters and the regime. diversifying in order to address politics can also delay and even If Mubarak falls, it will have serious longer-term socioeconomic consequences for Egypt and for the derail the limited successes that concerns such as unemployment. broader Middle East. many of these emerging markets And in the short term, these have achieved. It is unlikely that ■ ■ ■ 
  • conTenTs19 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic europemiddle easT and aFrica – risk index summary TaBle – Q1 2011 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 4 Y 4 YY 4 Y 3 3 2 5 5 1 Y israel kenya Egypt 6 Y 6 YY 8 Y 5 5 4 4 2 2 kuwait morocco Israel 7 6 Y 7 7 Y 8 5 6 Y 8 7 Qatar saudi arabia Kenya 6 2 X 6 5 X 6 X 6 5 4 4 south africa united arab Kuwait 6 X 6 Y 7 6 5 8 4 7 7 X emirates aBouT sponsors Morocco 6 5 Y 8 4 5 3 4 2 4 Qatar 8 X 6 8 7 XX 6 7 5 7 6 Y Saudi Arabia 7 6 Y 7 6 X 6 7 4 5 5 South Africa 6 Y 3 6 6 X 7 4 Y 7 4 2 United Arab Emirates 8 7 6 7 X 6 X 6 6 7 7 XFor 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 
  • conTenTs20 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic Israel europe could stoke inflation and will likely Illegal immigration will remain an and eurasia middle easT push the Bank of Israel to raise important political issue, with the and aFrica interest rates. number of Africans crossing into overview Israel from Egypt likely to increase risk index ➔ Israel’s economic outlook Housing prices have soared beyond the current 13,000 per algeria dramatically over the last five egypt remains relatively strong, though year. These illegal laborers are israel growth is expected to be weaker years, spurring concerns about a needed in the southern resorts and kenya in 2011 than had been previously possible real estate bubble. Prime in construction work, but the calls kuwait expected. Recent estimates put Minister Benjamin Netanyahu for curbing migrants will grow as morocco GDP growth at 3.2%, more than recently highlighted the issue, the unemployment rate is at 6.6%, Qatar saudi arabia one percentage point down from linking the hike in prices to the high by Israeli standards. Efforts The Netanyahu government south africa the 4.5% estimated for 2010. limited supply of land for residential in 2010 to reform employment is relatively stable. While united arab construction and low interest rates. and labor laws will continue in coalition politics are an emirates There are two causes for the 2011, but will remain contentious. aBouT sponsors moderate slowdown: Slower The central bank, however, says ongoing source of policy Nevertheless, the central bank growth of the global economy is there are signs that the housing volatility, a government expects unemployment to return to adversely affecting export growth (a boom is slowing. Officials will watch collapse is unlikely in the the 5%–6% range in 2011. principal driver of Israel’s economy), late 2010 and early 2011 housing near term. Authorities are while a developing housing bubble numbers carefully. ■ ■ ■ likely to use this stability to focus on the economy, while avoiding serious engagement in the peace low risk 10 MACRO RISKS LABOR RISKS process. If the government 9 does run into trouble, 8 7 Netanyahu could look to 6 the centrist Kadima party 5 for support, though such 4 a move would necessitate 3 2 greater engagement in 1 the peace process. 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 
  • conTenTs21 | gloBal markeT BrieF & laBor risk index Q1 2011 preFace meThodology The americas asia paciFic Qatar europe State spending for the fiscal and small- and medium-sized and eurasia middle easT year 2010–2011, which started enterprises will represent tangible and aFrica in April, is expected to increase challenges. Government policy overview to $32.4 billion. Expenditure on will continue to emphasize the risk index Qatar’s economic prosperity expansion of educational and algeria ➔ infrastructure projects is projected egypt continues to exceed market to account for 40% of the budget research institutions along with on- israel expectations. GDP is projected through 2016. the-job training programs. kenya to grow 18.5% in 2010 and 20% kuwait Human capital development will Labor laws are currently under morocco in 2011. Natural gas continues to likely be a central theme in the review, but no change is expected Qatar play a critical role in the country’s in 2011. The sponsorship system, saudi arabia government’s future economic Qatar will spend about economic plans with LNG which restricts job transfers south africa and social development policy. In $57 billion over the next production capacity reaching united arab the first quarter of 2011, Qatar is without consent of the current decade for infrastructure emirates 77 million tons per year. In 2011, employer, remains the foundation aBouT sponsors expected to accelerate the rollout developments related to the the government will likely expand of its National Development for employment contracts. Qatar’s 2022 World Cup. Project economic diversification projects Strategy (2011–2016). Building successful 2022 soccer World Cup bid will heighten pressure to work in preparation for the to enlarge the non-oil and gas domestic labor capacity, expanding modernize the legal code, although event presents a lucrative sector share of GDP (particularly the private sector’s role in the no changes are anticipated in 2011. investment opportunity for in finance, industry, construction, economy, and facilitating the large-scale multinationals. and real estate). growth of entrepreneurship ■ ■ ■ The infrastructure, hospitality, and real estate low risk 10 MACRO RISKS LABOR RISKS sectors are expected to be 9 the biggest beneficiaries. 8 7 Over the next few years there 6 will be an incremental rise 5 in the number of migrant 4 construction workers. 3 2 Market research and 1 financial feasibility studies high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality Contentment for pipeline projects are Investment expected to begin in 2011. very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  • 22 | gloBal markeT BrieF & laBor risk index Q1 2011 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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