Q3 09 Global Market Brief & Labor Risk Index
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Q3 09 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. 2009 Global Market Brief & Labor Risk Index eporT only ampler hodo l ogy s meT 
  • 2. Global Market Brief & Labor Risk Index 2009 This is meThodology sample reporT only. 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: awbari region, syria © 2007 Tobias Helbig 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. © 2009 KellyOCG and Eurasia Group.
  • 4. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic Preface europe Services, first explored developing Published on a quarterly basis, and eurasia middle easT a future-oriented research tool the Market Insights and Labor and aFrica together, we were struck by our Risk Index report is segmented aBouT sponsors ability to create something unique by four geographies: the Americas, in the marketplace. Asia-Pacific, Europe and Eurasia, and the Middle East and Africa, with Leveraging Kelly’s global labor detailed insights for 55 of the world’s market knowledge, Eurasia most important economies. Group’s expertise in political and socio-economic risk analysis has The result, we trust you will agree, delivered a groundbreaking new is a comprehensive overview of key ➔ It is with pleasure that we global trends and developments, resource for companies as they bring you the first quarterly edition of and we look forward to sharing assess investments and global labor the Global Market Brief & Labor Risk future editions with you. This report strategies. By applying Eurasia Index. It has been the culmination represents just one aspect of the Group’s renowned risk assessment of hundreds of work hours, with the KellyOCG / Eurasia partnership – to methodologies to workforces across input of dozens of individuals from find out more about how we can add the globe, we have endeavoured across the globe. more insight to your global planning, rolf kleiner, ian Bremmer, to both elevate Labor to its rightful please contact your KellyOCG or senior Vice-president, president, When Eurasia Group, the leading place in long-term risk assessment, Eurasia representative. kelly ocg eurasia group political risk research and consulting as well as provide organizations the company, and KellyOCG, the ability to ‘peer around the corner’ ■ ■ ■ Outsourcing and Consulting Group and identify potential issues of human resources provider Kelly and opportunities. 
  • 5. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic Methodology europe For all variables, scores range 4 economic human resources, the ability of labor and eurasia middle easT from 1 to 10, where 1 is ‘high risk’ This variable captures the current to engage in collective action, and and aFrica and 10 is ‘low risk’. health of the macroeconomic the potential for the labor regulatory aBouT sponsors environment and the stability environment to change. macro risks of future economic activity by aggregating measures of 7 availability 1 political government fiscal stability, the This variable incorporates migration, This variable captures regime stability monetary environment, national urban population, the size of the by assessing popular legitimacy, account balances, and economic labor force, and the extent to which which is in part influenced by how growth. women participate in the labor force well the government functions, and as a measure of the availability of the regime’s ability to enforce policy 5 policy environment labor in the economy. compliance. ➔ The Global Market Brief & for Foreign investment This variable measures how 8 Quality Labor Risk Index is based on detailed 2 social hospitable the policy and regulatory This variable considers measures analysis of hard metrics of 30 unique This variable captures the extent to environment is for foreign investment of the education and skill level of a labor market, socio-economic, and which ethnic and other minorities are by assessing the extent to which labor force, a measure of the general political factors, layered with localized engaged in social or political conflict, there are barriers to economic health of the population, and labor expertise of in-country consultants. controlling for the mitigating effects activity, particularly cross-border productivity. of the socioeconomic wellbeing of The analysis aggregates the the population and the equality of activity, and the degree to which the 9 (dis)content individual factors into 9 core risk wealth distribution. economy is a destination for foreign This variable examines the variables: 5 macro variables and 4 investment. potential for near-term labor unrest labor variables that are each assigned 3 security by aggregating factors such as a score on a 10-point scale projecting This variable is a function of the laBor risks unemployment and assessments the degree of risk over the next existence or risk of armed conflict 6 Flexibility of the likelihood of labor unrest by 90 days. Each risk variable is also (either domestic insurgencies or This variable considers the flexibility subject matter experts. assessed as to whether it is trending cross-border threats) and internal negative or positive. personal security issues. that employers have in managing ■ ■ ■ 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 gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas overview Overview: risk index mean that labor markets are likely boom years. As a result, they have argentina to remain depressed for the rest of not been able to provide much- Brazil The Americas the year. needed stimulus measures. canada chile colombia A large number of governments—led Some countries will also face the mexico by the US, Canada, Brazil, and difficult task of preserving jobs panama Chile—have embarked on aggressive while at the same time tempering united states ➔ Countries in the Americas countercyclical fiscal policies, labor unions’ demands for higher asia paciFic are in the midst of a severe economic including infrastructure spending and wages. The Argentine and Chilean europe and eurasia contraction that is putting significant tax exemptions for labor-intensive governments, both of which are middle easT pressure on labor markets across industries to weather the storm and facing elections this year, are in the and aFrica aBouT sponsors the region. While there have been buttress economic growth. However, middle of negotiations with union hopeful signs of an incipient recovery other countries—such as Argentina, movements that carry a great deal of during the second quarter of 2009, Colombia, and Mexico—have been political clout. depressed consumer confidence and fiscally constrained by lower-than- ongoing cost-cutting measures in the expected revenues and, in some ■ ■ ■ manufacturing and services sectors cases, their failure to save during the 
  • 7. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas overview The americas – risk index summary TaBle – Q3 2009 risk index argentina macro risks laBor risks Brazil Foreign canada political social security economic Flexibility availability Quality (dis) content investment chile colombia Argentina 6 Y 6 7 5 Y 5 5 6 7 5 Y Y mexico panama Brazil 8 7 6 6 X 6 4 7 5 6 Y united states asia paciFic Canada 9 7 9 7 Y 8 6 8 XX 8 6 Y Y europe and eurasia Chile 9 8 8 7 8 5 6 7 6 Y Y middle easT and aFrica aBouT sponsors Colombia 7 7 4 X 6 7 5 6 6 6 Y Mexico 7 7 5 Y 5 Y 7 3 5 6 7 Y Panama 7 6 7 6 7 3 5 6 6 Y United States 9 8 8 7 9 6 8 8 9 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 gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas overview Canada risk index Sharp falls in output and high that the pace of economic decline argentina inventories are likely to spill into will slow in coming months, and Brazil jobless numbers for months. that consumer confidence may start canada chile The manufacturing sector is bearing turning around as spending improves colombia ➔ Canada’s economy grew for the brunt of unemployment, while and the housing market stabilizes. mexico the first time in 11 months in June, the services sector continues to One of the primary concerns now is panama although not enough to reverse defy the downturn in terms of the strength of the Canadian dollar, united states the quarter’s negative result and labor numbers. But concerns about which has appreciated strongly and is asia paciFic curtailing export growth at precisely europe the country’s worst economy for 20 impending job cuts in the services and eurasia years. Fueled by a substantial drop sector persist because companies the time it is most needed. middle easT and aFrica in business investment and a steep could make a more concerted Lured by the prospect of aBouT sponsors decline in manufacturing, GDP is effort to boost margins by trimming ■ ■ ■ Europe’s growing economic expected to contract further in 2009. employment costs. clout and nervous about “buy- The job market has been depressed, American” sentiments in the with unemployment rising to 8.7% in All things considered, Canada’s future US, Canada has embarked on August, with total employment falling may not be quite as bleak as the bilateral trade talks with the by 387,000 since October 2008. numbers suggest. There is optimism EU, which could open up big opportunities for Canadian exporters. The US currently purchases about 75% of Canadian exports, but rising protectionist sentiments could MACRO RISKS LABOR RISKS low risk 10 cause this number to decline. 9 A Canada-EU free trade 8 7 agreement could increase trade 6 by 20%, but removing trade 5 barriers in the agricultural 4 sector will prove challenging. 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend positive trend negative trend very negative trend 
  • 9. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas overview Mexico risk index The government estimates that to see any signs of a bottom. The argentina the swine flu outbreak deepened lagged effects of the sharp decline in Brazil Mexico’s economic recession. The the early part of 2009 and swine flu canada chile biggest hit occurred in the services are exacerbating Mexico’s economic colombia ➔ The Mexican economy is sector, which account for about two- deterioration. mexico facing a prolonged slowdown that thirds of GDP. Tourism (at a much panama smaller 8% of GDP) was also affected. A recovery is most likely to begin in was aggravated by the recent H1N1 united states Secretary of Finance Agustin the second quarter of 2010, as US asia paciFic virus outbreak. The government Carstens said the overall impact stimulus measures take hold and flow europe projects that the economy will and eurasia of the outbreak could have been through to the broader economy. But shrink by 5.5% in 2009, a sharper middle easT the Mexican labor market is expected and aFrica fall than was expected in the early 0.3% GDP, or $2.3 billion, but other Standard & Poor’s downgraded to remain weak for the foreseeable aBouT sponsors part of the year. Steep declines in economic analysts put the number Mexico’s credit rating from future, and job losses will continue the manufacturing and construction higher at 0.5%. Unemployment is stable to negative in May, based through 2009. sectors, combined with a weak expected to remain at 5% or slightly on concerns about the country’s services sector, are driving the current higher in 2009, likely fueled by further long-term debt. Government ■ ■ ■ outlook as the recession in the US, job losses in the services, agriculture, revenues are falling because Mexico’s largest export market, manufacturing, and construction of the economic downturn continues to take a significant toll. sectors. Looking ahead, it is hard and declining oil receipts. While major fiscal reforms still face stiff opposition in congress, the government will cut spending and is likely MACRO RISKS LABOR RISKS low risk 10 to ramp up tax collections 9 from existing contributors by 8 7 closing loopholes and denying 6 deductions to make up for 5 losses. This could increase the 4 tax bills of some corporations. 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend positive trend negative trend very negative trend 
  • 10. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic Overview: overview In response, China, Japan, Malaysia, reliance on trade. In Japan, the risk index South Korea, and other regional upcoming election could move Tokyo australia Asia Pacific governments have drawn on resources accumulated in recent to increase its focus on consumer interests relative to business interests. china hong kong india years and embarked on large-scale indonesia stimulus efforts, which appear to Asia’s long-term prospects remain Japan have mitigated some of the pain bright, but still-rising unemployment malaysia these economies would otherwise may present political challenges in new Zealand have experienced. In addition to the short term. Countries like China pakistan ➔ As a whole, Asia-Pacific and Indonesia need to maintain high philippines planned stimulus programs, economies remain competitive levels of growth to produce jobs for singapore elections in India and Indonesia south korea and dynamic, and the region is not the large numbers of young workers have injected substantial money Thailand experiencing the worst effects of the entering their workforces each year. into those economies, with positive Vietnam global economic slowdown. But the The developed countries in the europe short-term results. and eurasia region has not been entirely immune, Asia-Pacific region also face middle easT and labor markets in this part of the The economic downturn may also employment challenges that will and aFrica world are undoubtedly suffering. be catalyzing longer-term structural create key political issues in Australia, aBouT sponsors The economies that previously changes. In China, the sharp decline New Zealand, and Hong Kong experienced the fastest export-led in exports has intensified the policy throughout 2009. growth are now undergoing the most debate over rebalancing China’s ■ ■ ■ serious contractions. economy away from its heavy 
  • 11. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic asia paciFic – risk index summary TaBle – Q3 2009 overview risk index macro risks laBor risks australia Foreign china political social security economic Flexibility availability Quality (dis) content investment hong kong india Australia 9 8 Y 9 8 8 X 6 7 8 9 Y indonesia China 5 6 8 6 X 5 Y 5 X 8 5 7 Y Japan malaysia Hong Kong 8 Y 7 9 6 X 10 7 8 8 6 Y Y new Zealand pakistan India 8 5 5 6 5 X 4 5 2 X 9 Y philippines Indonesia 6 X 6 6 5 X 5 3 6 5 6 X Y singapore south korea Japan 8 8 10 7 8 7 6 9 9 Y Thailand Vietnam Malaysia 7 Y 6 Y 8 6 Y 7 7 5 6 8 Y europe and eurasia New Zealand 9 9 10 6 9 7 7 8 9 Y middle easT and aFrica Pakistan 3 Y 4 2 Y 3 5 2 4 2 4 Y Y aBouT sponsors Philippines 5 XX 5 7 5 X 4 4 5 X 6 8 Y Singapore 9 8 9 8 Y 9 10 7 8 9 Y Y South Korea 7 7 6 Y 7 X 7 2 6 7 6 Y Thailand 5 Y 5 7 5 6 Y 6 6 6 8 Y Vietnam 8 7 8 5 X 5 X 6 7 5 8 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 gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic China overview on-year was 6.1%. The government credit is likely to avert any further risk index has encouraged a surge in new bank downturn in the short term. But australia lending and is spending money on without serious reform, China’s china hong kong infrastructure, education, and health reliance on large, developed india ➔ As one of the largest and social services. This will likely countries for economic growth indonesia producers of manufactured goods, boost jobs in the immediate term, threatens to remain a long-term Japan China’s export sector has suffered particularly in the infrastructure and hindrance. Beijing is clearly putting malaysia greatly from the global economic construction sectors. But more than increased resources toward new Zealand six million college graduates enter strengthening the domestic market pakistan downturn. The ensuing domestic philippines slowdown has raised concerns about the job market every year in China. and encouraging the rural citizenry singapore the return of international demand This year, employment opportunities to spend, but the full extent of the The first meeting of a south korea and the worrisome prospect of rising are decreasing and competition is leadership’s success in pursuing this modified US and China Thailand unemployment. fierce. Many graduates are fleeing reform is uncertain. For now, China Strategic and Economic Vietnam to the US to enter universities or are will continue to turn to its major Dialogue will be held in europe and eurasia Some early indicators, however, being pushed toward rural areas to trading partners for export demand. Washington in late July. The middle easT suggest that the economy may be find work. Obama administration hopes and aFrica improving. Beijing’s 4 trillion yuan aBouT sponsors ■ ■ ■ to discuss both geopolitical stimulus package seems to be Policymakers expect that bolstering and economic policies with encouraging stabilization this year: the economy through direct fiscal the Chinese, but economic In the first quarter, GDP growth year- stimulus measures and expanding issues will take center stage during this round. The two sides will likely consider MACRO RISKS LABOR RISKS low risk 10 new mutual trade and 9 investment opportunities, and 8 7 environmental and financial 6 regulations will also be 5 major topics for discussion. 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend positive trend negative trend very negative trend 
  • 13. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic New Zealand overview historically low, but more recent rates since last July are causing a risk index countercyclical fiscal spending is gradual uptick in retail spending australia expected to cause a ballooning of and property sales. Unemployment, china hong kong debt levels that could threaten the however, remains a top concern; the india ➔ New Zealand was an early government’s credit rating. As a government expects it to reach 8% in indonesia casualty in the global downturn, result, the government submitted a 2010, up from 5% in April, with ethnic Japan entering a recession in the first more modest 2009–2010 budget that minorities having a disproportionately malaysia quarter of 2008. The IMF expects focused on curbing new spending higher rate of unemployment. new Zealand Foreign workers, who were in high pakistan real GDP to contract by 2% in and postponed planned tax cuts for philippines 2009, although a gradual recovery 2010 and 2011. Nevertheless, deficit demand during boom times, are now singapore is expected to start in 2010. The spending is expected to persist for being replaced by local workers. The The government recently south korea export sector, in particular, has been the next decade. strict conditions on work permits for announced it would suspend Thailand in a five-year recession because of a foreigners, combined with difficulties payments into the New Zealand Vietnam strong currency and high domestic While consumer and business renewing visas, mean that the Superannuation Fund, the europe and eurasia costs. With heavy reliance on short- confidence continues to be weak, hundreds of thousands of migrants country’s pension fund, for up middle easT term external debt by private banks, deleveraging by heavily indebted living in New Zealand are likely to to a decade, spurring a heated and aFrica aBouT sponsors the country’s sizable current account households would be a positive face employment challenges. debate. Experts were predicting deficit is considered problematic, macroeconomic trend. There are also that the goods and services tax especially in a weak global credit recent indications that income tax ■ ■ ■ (GST) would have to be raised environment. Public debt has been cuts from April and lowered interest from 12.5% to 15% unless the pension entitlement age was increased, but Prime Minister MACRO RISKS LABOR RISKS low risk 10 John Key remains adamantly 9 opposed to raising the age 8 7 requirement. On a positive 6 note, the fund earned a profit 5 in May because of the recent 4 rebound in equities markets, 3 2 which provides temporary relief. 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend positive trend negative trend very negative trend 
  • 14. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic Overview: europe countries with more sustainable Economic slowdown and rising and eurasia overview fiscal outlooks, such as Germany, unemployment will likely lead to Europe and Eurasia Norway, the Netherlands, and even Russia, which is capable of covering tension with migrant communities, with some instances (in Italy, risk index Baltics Belgium its budget deficit with rainy-day Spain, and potentially Russia, Bulgaria reserve funds. for example) already in evidence. czech republic While immigration policy may be denmark ➔ With varying fiscal outlooks The labor implications of this situation France slow to shift, migrants, particularly and demand pictures across could be important. In countries like germany those from eastern Europe, may hungary countries, Europe is likely to Italy, Spain, Portugal, and Ireland— opt to abandon increasingly hostile ireland see an uneven recovery. Several which at some point will be forced environments. This could hinder italy European countries have seen to undertake austerity measures— labor competitiveness in certain luxembourg their sovereign debt downgraded, policy tools may be insufficient to netherlands western European countries. resulting in increasing fears of bond mitigate unemployment. Over the norway Migrants returning to eastern poland defaults and higher interest rates as longer term, though, successful Europe might alleviate labor portugal investors demand compensation for restructuring efforts might actually shortages there, benefitting romania heightened risk. As a result, many lead to gains in competitiveness. recovery in eastern Europe. russia governments may need to undertake Political objection to belt-tightening spain fiscal consolidation measures, limiting is likely to be an important feature ■ ■ ■ sweden the extent of their policy actions to of the political landscape, and will switzerland Turkey support demand. This suggests an further contribute to what is likely to ukraine advantage in terms of recovery for be a very uneven process. united kingdom middle easT and aFrica aBouT sponsors 
  • 15. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology europe and eurasia – risk index summary TaBle – Q3 2009 The americas asia paciFic macro risks laBor risks europe Foreign and eurasia political social security economic Flexibility availability Quality (dis) content investment overview Baltics 8 6 7.5 4 8 4 5.5 X 6 4.5 risk index Belgium 9 Y 7 8 6 9 5 6 X 8 6 Baltics Bulgaria 8 7 6 4 Y 7 4 6 X 6 6 Y Belgium Bulgaria Croatia 8 7 8 5 7 4 6 X 6 6 czech republic Czech Republic 8 X 8 8 6 6 4 6 X 7 7 denmark Denmark 10 8 8 7 9 6 6 X 8 8 France Estonia 9 X 7 8 5 8 4 6 X 6 6 germany France 9 7 7 7 8 4 7 X 8 6 Y hungary Germany 9 Y 8 8 7 8 4 7 X 9 6 Y ireland Hungary 6 Y 8 9 6 Y 8 5 6 7 6 Y italy luxembourg Ireland 9 Y 8 9 6 9 6 7 X 8 7 Y netherlands Italy 8 Y 7 Y 7 5 6 3 6 X 7 5 Y norway Latvia 8 6 7 3 8 4 5 X 6 3 poland Lithuania 8 6 8 5 8 4 6 X 6 6 portugal Luxembourg 9 8 9 8 7 4 5 X 9 8 romania Netherlands 9 7 7 7 8 5 6 X 8 8 russia spain Norway 9 9 8 8 9 5 6 X 9 8 sweden Poland 8 X 8 9 6 Y 8 4 6 7 5 Y switzerland Portugal 9 7 8 5 8 4 6 X 7 5 Y Turkey Romania 8 Y 6 Y 8 4 Y 8 4 6 X 6 4 Y ukraine Russia 4 Y 6 Y 7 5 5 5 8 5 7 Y united kingdom Serbia 7 6 8 4 6 3 5 X 6 4 middle easT and aFrica Spain 9 Y 7 Y 7 6 7 4 X 7 X 7 5 YY aBouT sponsors Sweden 9 9 8 7 8 5 6 X 9 8 Switzerland 10 7 8 7 8 6 6 X 9 10 Y Turkey 6 6 Y 7 6 Y 7 5 6 5 6 Y Ukraine 4 Y 6 8 3 6 5 7 5 6 United Kingdom 9 Y 8 8 6 9 7 7 X 8 8 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 gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic Baltics europe Latvia, that the currency pegs might Central Bank, which are eager to and eurasia overview be abandoned. Such a move would avoid currency crises and keep the risk index initially make Latvian products process of expanding the eurozone Baltics and exports cheaper, but it would moving forward. Belgium ➔ All three Baltic countries precipitate a major credit and Bulgaria liquidity crisis because almost all The EU has already provided financial are expected to eventually adopt czech republic private sector debt is denominated support to Latvia, and it may do denmark the euro, but they must first meet in euros. A devaluation would the same for Lithuania and Estonia. France the Maastricht criteria, which set This support included conditions germany tests for a variety of macroeconomic dramatically increase the borrowing hungary costs for firms and households, as on fiscal consolidation, including indicators. ireland significant wage restraint. While this well as increase the risk of inflation as Controlling inflation has italy As one requirement, Estonia, Latvia, limitation is widely unpopular, it is imports become more expensive. been the most difficult of the luxembourg and Lithuania must participate in the viewed as a less-worse outcome netherlands Maastricht criteria for the exchange rate mechanism (ERM-2), Cognizant of these risks, particularly than a major devaluation. It increases norway Baltic countries to meet. As poland a structure through which their the effect they could have on the likelihood of government small, open economies, they portugal domestic currency is pegged to the firms and households, the Baltic compliance, and suggests a are highly sensitive to energy romania euro at a fixed rate. Under significant governments are seeking to significant decline in wages in the price pass-through, and high russia pressure in terms of their foreign maintain their currency pegs. They Baltics in the near term. oil prices have bolstered spain reserves, however, speculation has are supported by the European sweden inflationary pressures. Estonia, Commission and the European ■ ■ ■ switzerland arisen in each country, particularly however, has recently begun Turkey to show significant progress. ukraine There is a strong chance that united kingdom MACRO RISKS LABOR RISKS low risk 10 it will come into compliance middle easT 9 and aFrica on inflation, and it could aBouT sponsors 8 7 adopt the euro in 2011. 6 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend positive trend negative trend very negative trend 
  • 17. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic Netherlands europe led to a drop in fixed business express confidence that the fall and eurasia overview investment. Household consumption in Dutch GDP will moderate risk index has fallen due to the deterioration and the government seems to Baltics of the Dutch labor market and tight be competently addressing the Belgium ➔ The contraction in the credit. Unemployment has been on financial crisis. Its stimulus package Bulgaria Netherlands economy quickened in an upward trend since December provides for a spending boost czech republic the first half of 2009, with GDP falling 2008, and is expected to continue in 2009–2010, assistance for the denmark France 4.5% compared to 12 months prior. rising considerably. Given the export struggling construction industry, and germany Private consumption fell early in the sector and the integration of the fiscal austerity measures for when hungary year, while government consumption Dutch and German economies, the economy improves. The budget ireland grew and imports dropped global demand is a critical factor that balance is expected to drop into a Dutch and Danish electricity italy noticeably. will shape the timing and nature of deficit in 2009, as revenue is cut, and authorities have signed a luxembourg netherlands recovery. This forecasting uncertainty not to return to surplus until 2013. cooperation agreement for The largest falls in the economy have norway leaves the Dutch government likely But even with cautionary fiscal policy, a new direct connection poland been in exports, fixed investment, to favor fiscal consolidation over the Dutch government has relatively between the Netherlands portugal and household consumption dramatic stimulatory spending. more room to maneuver than many and Denmark, marking a romania spending. Slimming profit margins other EU countries. significant step in enhancing russia and tight credit conditions have On the upside, business surveys ■ ■ ■ energy competition across spain sweden northwest European power switzerland markets. The Cobra cable Turkey project is planned to be ukraine commissioned by 2016–2017 united kingdom MACRO RISKS LABOR RISKS low risk 10 and is in line with the EU’s middle easT 9 and aFrica ambition of creating more aBouT sponsors 8 7 interconnections between 6 European countries. 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend positive trend negative trend very negative trend 
  • 18. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic Overview: europe some anxiety, allowing countries Morocco and Egypt, where large and eurasia middle easT engaged in large-scale infrastructure segments of society depend on these Middle East and aFrica development to continue work in the sources of income. Meanwhile, there overview construction sector, major projects is the risk of social unrest stemming risk index and Africa could still be cancelled or put on hold. As a result, job security for both from higher unemployment and inflationary pressures, particularly in algeria egypt israel native and foreign workers will remain Egypt, Kenya, and South Africa, if the kenya ➔ Countries in the Middle downturn persists. extremely fragile in the medium term, kuwait East and Africa are facing serious particularly in countries like Saudi morocco The key political challenge for challenges, including commodity Qatar Arabia, Kuwait, and the UAE. many Middle Eastern and African saudi arabia price volatility, political instability, countries with critical socioeconomic south africa social discontent, labor risks, and Declining remittances, foreign uncertainties in the short term will united arab budgetary pressures. Natural investments, and export revenues emirates center on budget pressures, and the resources dependent countries such will hurt the entire region. Israel’s aBouT sponsors need for painful cuts. But over time, as Algeria, Qatar, Saudi Arabia, export-oriented sectors have already the regional objective, especially in and South Africa are reevaluating been hard hit by the downturn. A Africa, will be to avoid falling into their budgetary assumptions and sharp decline of migrant workers’ the debt trap. spending patterns. While a recent remittances will have significant rebound in oil prices has soothed consequences on countries such as ■ ■ ■ 
  • 19. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic middle easT and aFrica – risk index summary TaBle – Q3 2009 europe and eurasia middle easT macro risks laBor risks and aFrica Foreign overview political social security economic Flexibility availability Quality (dis) content investment risk index algeria Algeria 3 YY 5 Y 4 Y 5 3 3 5 4 4 Y egypt israel Egypt 7 Y 8 Y 8 Y 5 5 6 5 4 4 Y kenya kuwait Israel 7 Y 8 5 6 Y 7 X 4 6 8 8 Y morocco Qatar Kenya 4 2 5 3 5 6 5 2 7 Y saudi arabia south africa Kuwait 5 YY 5 6 7 5 YY 5 7 7 8 Y Y united arab emirates Morocco 4 Y 5 Y 8 5 Y 6 3 4 3 6 Y aBouT sponsors Qatar 8 8 6 9 8 5 8 7 Y 8 Saudi Arabia 7 4 Y 4 7 5 5 7 7 8 South Africa 7 5 5 X 6 6 3 6 5 3 Y UAE 7 7 7 7 Y 7 5 7 Y 7 9 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 gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic Egypt europe for the average consumer and they seekers and improve unemployment and eurasia middle easT will only increase during Ramadan, numbers. If unemployed workers and aFrica which starts on 22 August. Sustained begin to organize or engage in overview high prices will likely cause public protests, President Hosni Mubarak risk index anger, including sporadic protests and the government will be algeria ➔ Egypt has navigated the egypt global economic crisis better against the government, though the concerned about social tension, but israel than most emerging markets. But authorities will quickly quell them. they will probably not change policy. kenya unemployment, officially reaching The government has the resources kuwait Meanwhile, the government will try to muddle through 2009 without 9.4% in the first quarter of 2009 morocco to play up the positive news that first facing destabilization. Net reserves Qatar (though the actual number is quarter 2009 GDP growth at 4.3% saudi arabia probably much higher), coupled remain healthy, and another round of The government has denied was slightly higher than anticipated. south africa with an expected rise in food prices economic stimulus remains possible. rumors that it was planning united arab Over the past three fiscal years, in August could present temporary If the global economy does not soon to raise high octane gasoline emirates however, the economy has grown in problems for political leaders in begin to show signs of a recovery, prices in order to relieve the aBouT sponsors the 7% range. Without such growth, the next quarter. While overall Egypt will face more serious trouble subsidies burden and boost economists assert that the market inflation—which was a serious in 2010. revenues. It could still happen will be unable to accommodate problem in 2008—is down, food during the summer months, the nearly 700,000 annual new job prices have remained stubbornly high ■ ■ ■ as authorities are weighing the impact of increased oil prices on the cost of subsidies versus the inflationary pressure of raising prices. Many officials MACRO RISKS LABOR RISKS low risk 10 do not think the impact 9 would be as burdensome as 8 7 last year’s gasoline price hike. 6 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend positive trend negative trend very negative trend 
  • 21. conTenTs gloBal markeT BrieF & laBor risk index Q3 2009 preFace meThodology The americas asia paciFic Kuwait europe about Emir Sabah’s intentions, will cause further delays in the and eurasia middle easT especially his decision to reappoint implementation of much-needed and aFrica the same unpopular and ineffective economic reforms and slow the overview prime minister. The feeling in Kuwait country’s long-term infrastructure risk index ➔ Emir Sabah al Sabah’s City is that the emir’s decision development program. Despite algeria egypt decision to reappoint Sheikh Nasser stems from his desire to create stable oil prices, the newly elected israel al Sabah as prime minister following enough political instability to justify parliament will likely remain very strict kenya the 16 May parliamentary elections dissolution of parliament. He wants about the government’s spending kuwait does not bode well for political to suspend it long enough to institute strategy and will oppose any moves morocco stability and the local business needed economic reforms without to revive high-cost and controversial Qatar saudi arabia environment will remain unattractive parliamentary interference. However, projects. The same parliamentary Despite the government’s efforts south africa to international corporations. Despite the emir appears unable to garner forces that have opposed the prime to manage sectarian relations united arab additional pro-cabinet lawmakers enough support from Kuwait’s main minister so vehemently in the past and ensure proper representation emirates being elected, the prime minister tribal and religious leaders for such a are still in place, and more political of the Shia community in aBouT sponsors remains a controversial figure and drastic move. friction is likely to occur. A number of government institutions, Sunni- his management style will continue controversial debates are expected Shia relations remain a source The current financial turmoil and its to be questioned. For the past few to resurface. of long-term risk. The Shia impact on Kuwaiti banks, along with months, there has been a great deal community represents close to the prime minister’s appointment, of incomprehension among Kuwaitis ■ ■ ■ 25% of Kuwait’s population, and it is increasingly sensitive to events affecting its coreligionists in Iraq. Many Shias have MACRO RISKS LABOR RISKS low risk 10 maintained strong family ties 9 in Iran as well, which has raised 8 7 suspicion among Sunni Kuwaitis 6 about their political loyalty. 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend positive trend negative trend very negative trend 
  • 22. gloBal markeT BrieF & laBor risk index Q3 2009 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 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  exiT 
  • 23. gloBal markeT BrieF & laBor risk index Q3 2009 kellyocg.com/marketbrief 