Q4 09 Global Market Brief & Labor Risk Index


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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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Q4 09 Global Market Brief & Labor Risk Index

  1. 1. Think ouTside. Global Market Brief & Labor Risk Index 2009 eporT 4 only ampler hodo l ogy s meT 
  2. 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. 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 croatia 64 israel 11 chile 22 india 39 czech republic 65 kuwait 12 el salvador 23 indonesia 40 denmark 66 morocco 13 mexico 24 Japan 41 France 67 nigeria 14 united states 25 malaysia 42 germany 68 Qatar 15 Venezuela 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 kingdom cover: pudong district, shanghai, china © 2009 Alex Nikada 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. 4. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas asia paciFic Preface europe management of labor pools and Argentina and Venezuela risk labor and eurasia middle easT expectations of future labor markets. tension in the face of inflation and and aFrica real wage destruction. Russia’s aBouT sponsors On the upside, Japan, Australia, economic turnaround is dependent China, and India all sidestepped the on oil prices instead of real reforms, worst of the downturn. Germany with unemployment potentially and France beat the US to show rising again. The same trend is at economic improvement, but the US work in Africa where resource-rich and Canada now appear on track for countries used the downturn as an a protracted recovery. Aggressive excuse to avoid making difficult fiscal spending backed by strong decisions to improve labor markets. domestic demand and lowered Asian economies by and large have ➔ While the global macroeconomic vulnerabilities has spent their way out of the crisis and macroeconomic picture may look perhaps put Brazil in the best position chose to put off structural reforms for for recovery, while African and Middle sunnier days, which means that the more stable, labor markets are still Eastern countries are also responding coming year will be characterized by on shaky ground. Many of the world’s positively to the turnaround in continued labor market inflexibility. economies are navigating out of commodity demand from the world’s Lastly, the US’s labor markets will the economic downturn, with some leading economies. remain fragile for the foreseeable tentatively swinging upward and rolf kleiner, ian Bremmer, future, while Europe is still very senior Vice-president, president, others just now bottoming out. But However, arriving at this point has vulnerable to credit and liquidity kellyocg eurasia group many of the strategies deployed to revealed structural shortcomings risks, with subsequent risks to weather the recession have strained and exposed the reluctance of labor markets. underlying structural fundamentals governments to undertake reforms, particularly in labor markets. and squeezed countries’ ■ ■ ■ 
  5. 5. conTenTs gloBal markeT BrieF & laBor risk index Q4 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 economy 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 Market Brief & Labor for Foreign investment This variable measures how 8 Quality 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. 6. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas overview Overview: risk index government’s stimulus efforts and double-digit inflation. The recovery argentina a pickup in commodity prices. The of the labor market will go hand-in- Brazil The Americas US and Canada are also showing positive signs of a turnaround, but hand with the scope and size of the economic recovery throughout the canada chile el salvador a fragile labor market in the US region. While unemployment levels mexico and subdued manufacturing and are already beginning to decline united states exports in Canada will likely translate in Brazil and Canada, they remain Venezuala ➔ Most countries in the into a more modest, protracted stubbornly high elsewhere in the asia paciFic Americas appear to have reached economic recovery. At the other Americas. Labor tension is also on the europe and eurasia or are approaching bottom after end of the spectrum, Argentina rise in some of the region’s economic middle easT several quarters of economic decline, and Venezuela, while also showing laggards, particularly Argentina and and aFrica aBouT sponsors and are beginning to show tentative signs of bottoming out, are likely to Venezuela, where both the Cristina signs of economic recovery. Brazil struggle to restart economic growth de Kirchner and Hugo Chavez appears to be the best positioned because of their negative policy administrations are struggling to of all, with GDP growth projected mixes, which continue to discourage increase wages alongside inflation. to be flat this year and as much investment and have produced as 4.5% in 2010, thanks to the heavy economic distortions such as ■ ■ ■ 
  7. 7. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas overview The americas – risk index summary TaBle – Q4 2009 risk index argentina macro risks laBor risks Brazil Foreign canada political social security economic Flexibility availability Quality (dis) content investment chile el salvador Argentina 5 Y 6 8 4 5 Y 4 6 7 4 Y mexico united states Brazil 7 6 7 5 X 5 Y 3 6 5 6 Y Y Venezuala asia paciFic Canada 6 Y 8 10 7 X 8 7 8 9 6 Y europe and eurasia Chile 7 6 9 6 X 7 5 5 8 6 Y middle easT and aFrica aBouT sponsors El Salvador 6 6 5 5 X 7 4 4 5 6 Y Mexico 6 6 5 X 5 X 7 3 X 4 6 6 Y Y United States 8 8 Y 7 6 Y 9 7 7 8 7 Y Y Venezuela 7 5 6 3 2 2 5 5 1 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. 8. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas overview Argentina risk index elections, had pushed to delay provinces are among the most active argentina annual wage negotiations between in Argentina, but conflict intensified Brazil companies and unions. Following the this year as oil production dropped canada chile vote, the government announced a along with the decline in oil prices el salvador ➔ According to recent 21% increase in the minimum wage. and the deteriorating regulatory mexico indicators, Argentina’s economy has Earlier in June, the local teamsters environment. In another sector, a united states hit bottom and may soon experience and metal workers—considered conflict involving Kraft Foods turned Venezuala a mild recovery, helped by improving the labor movement’s benchmark violent in late September, after the asia paciFic company refused to reinstate 157 europe global economic conditions. But negotiators—had obtained 17% and and eurasia political uncertainty and pressures on 16.5% wage increases, respectively. workers fired in July. These types middle easT and aFrica the private sector will put a limit on of protests will likely continue as The Cristina Fernandez de aBouT sponsors its recovery. For example, a recent Elsewhere, labor tension continues unemployment and inflation remain Kirchner administration round of wage increases confirms to rise. Massive violent protests high in spite of the country’s mild emerged weakened from its that labor activism remains high. The erupted in the oil and gas producing economic recovery. defeat in the June elections. government, which was keen to keep provinces of Santa Cruz and Chubut The government, however, labor tension at a minimum before in August and September. The ■ ■ ■ has resisted pressures to the 28 June midterm legislative oil workers’ unions in these two adjust to economic policy. In fact, it has intensified its battles with the media and the farming sector. Political tension will increase further in March 2010 when the newly low risk 10 MACRO RISKS LABOR RISKS elected congress is installed. 9 8 7 6 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  9. 9. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas overview United States risk index are improving, financial markets reflected by an unanticipated argentina are rebounding, and residential jump in layoffs in September and a Brazil construction and home sales are contraction in the labor participation canada chile recovering—though this is partially rate, as discouraged workers el salvador ➔ A gradual and tentative due to government support drop out of the labor market. This mexico recovery is gathering pace in the programs like Cash for Clunkers and could put pressure on the Obama united states US, but there is some doubt about a generous homebuyer tax credit. administration and Congress to show Venezuala the economy’s underlying strength The recent bounce in the equities that the costly stimulus package asia paciFic is working or to pursue additional europe and durability. Nevertheless, the markets might portend a wider and eurasia steep decline in GDP halted mid- recovery. stimulus measures. On current trends, middle easT and aFrica year, bringing an end to the worst an economic recovery will be modest A bumpy and uneven aBouT sponsors single-year performance in the However, the unemployment rate in the latter half of 2009 before economic recovery seems to postwar era. The improved result is approaching 10% and there is increasing to a 2%–3% GDP growth be emerging in the US as was propelled by modest business concern that the pace of recovery will range in 2010. businesses resume production and consumer spending, and an not be enough to reduce the large and consumers open their end to the rundown in inventories. number of job seekers. The labor ■ ■ ■ wallets. Financial markets Corporate and consumer confidence market remains extremely fragile— are stabilizing and credit risk normalized, but a glut of unemployed and under- employed mean the broader recovery will be painstaking. MACRO RISKS LABOR RISKS low risk 10 9 8 7 6 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  10. 10. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas asia paciFic Overview: overview the global economic downturn, and National politics are also affecting risk index growth projections across Asia have economic prospects in Asia. On the australia Asia Pacific been bumped upwards. upside, political stability in Malaysia and a strong mandate for the china hong kong Going forward, however, some india incumbent president in Indonesia will indonesia Asian governments may be hard- allow these governments to focus on Japan pressed to maintain their current fostering economic growth. On the malaysia spending levels—particularly if the downside, continuing political chaos new Zealand US and other foreign markets do not in Thailand is hampering effective philippines ➔ The Asia-Pacific region pick up significantly in 2010. Much singapore policymaking. Perhaps the biggest showed concrete signs of recovery of Asia’s recent growth has been south korea political story in recent months is sri lanka in the second quarter. Among the supported by government stimulus the victory of the Democratic Party Thailand region’s largest economies, Japan spending, rather than a recovery of Japan (DPJ) in recent elections, Vietnam returned to positive growth and in the region’s export markets. The europe ending decades of rule by the Liberal and eurasia China accelerated by almost two global downturn has also highlighted Democratic Party (LDP). The new DPJ middle easT percentage points. Australia avoided a range of structural problems in the and aFrica government is likely to move ahead a technical recession with just one Asian economies, including inflexible aBouT sponsors with stimulus plans to boost social quarter of negative growth, and labor markets. As a rule, Asian spending in a long-term effort to its central bank has been the first governments prefer to spend money increase private consumption. Many to raise interest rates among the at home and hope for a recovery countries in Asia could benefit from industrialized countries. Meanwhile, abroad rather than tackle politically similar goals. India remained very little affected by difficult reforms. ■ ■ ■ 
  11. 11. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas asia paciFic asia paciFic – risk index summary TaBle – Q4 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 8 9 9 7 8 7 7 Y 8 7 Y indonesia China 7 6 8 6 X 6 5 7 6 7 Y Japan malaysia Hong Kong 7 Y 8 10 6 X 10 7 6 8 7 Y new Zealand philippines India 7 5 5 5 X 5 5 5 3 5 Y singapore Indonesia 7 X 6 8 XX 5 4 X 3 6 4 5 Y south korea sri lanka Japan 8 X 9 10 6 8 X 5 Y 5 9 9 Y Thailand Vietnam Malaysia 7 4 Y 7 4 Y 7 X 5 4 7 7 Y europe and eurasia New Zealand 8 9 10 6 8 Y 7 7 8 7 Y middle easT and aFrica Philippines 4 XX 4 X 8 5 X 3 X 4 X 6 5 7 Y aBouT sponsors Singapore 9 Y 8 Y 8 6 Y 9 7 6 8 8 Y South Korea 7 X 9 7 X 7 X 8 4 X 6 7 6 Y Y Sri Lanka 6 4 Y 8 4 Y 5 Y 5 4 4 6 Y Y Thailand 4 X 5 8 4 X 7 5 5 6 7 Y Vietnam 8 6 8 4 X 6 X 5 6 X 5 7 Y 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. 12. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas asia paciFic Australia overview was shorter and shallower than consumer spending. The government risk index forecasted, with just one quarter is so far resisting political pressure to australia of negative economic growth. The china withdraw spending from its February hong kong Reserve Bank predicts a return to 3% stimulus package, worth some 42 india ➔ Australia’s central bank GDP growth in 2010 and has also billion Australian dollars ($27 billion). indonesia became the first in the industrialized cut the forecast for unemployment, Japan It is under no fiscal pressure to reduce world to raise official interest rates in originally expected to reach 8.5%. malaysia spending given that the country’s what is seen as a harbinger of a fuller new Zealand and more widespread economic The better than expected outlook debt-to-GDP ratio is roughly 14%, a philippines has been helped by continuing singapore recovery. The Reserve Bank was level that is modest by in comparison south korea one of the swiftest in cutting rates strong export demand from China, to other developed economies. Now The latest investment sri lanka in the immediate aftermath of especially for major resources such as the task at hand is to manage the announcements by developers Thailand the global financial crisis. And in iron ore and coal. The government’s economic recovery, which will likely of the massive Gorgon LNG Vietnam October it raised the cash rate from spending initiatives—targeted at low- field in Western Australia europe include further interest rate hikes. and eurasia 3.00% to 3.25%. Australia is one of to middle-income households, the highlight the bullish sentiment middle easT the few nations to narrowly avoid building and construction sector, and ■ ■ ■ surrounding Australia’s LNG and aFrica an economic recession, at least major infrastructure projects—have sector, which is expected aBouT sponsors in a technical sense. Its downturn also helped sustain business and to be a massive job creator in Western Australia and Queensland. The greatest risks to developers are environmental activism and low risk 10 MACRO RISKS LABOR RISKS Australia’s emissions trading 9 program that covers the LNG 8 sector. Nevertheless, state 7 governments are actively 6 promoting development of 5 4 gas fields, thereby moderating 3 regulatory threats. 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  13. 13. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas asia paciFic Singapore overview is in place. The property market of December 2009, although at risk index improved in July, and there has been stepped-down rates of 6% and australia an increase in the number of new 3% respectively for the next two china hong kong business startups. quarters. Despite the wage credits, india ➔ Singapore is showing the manufacturing industry continues indonesia Singapore has seen fewer layoffs to see job losses, although the rate promising signs of a return to strong Japan growth. The country’s economic and more job openings over the has slowed. Employment in the malaysia rebound, which began in the second past quarter. Unemployment has construction and services industries new Zealand quarter of 2009, is expected to remained lower than expected, at has slowly begun to improve. philippines singapore continue for the remainder of the about 3%, due in part to the 4.5 Nevertheless, any sustainable south korea year, although overall growth for billion Singapore dollars put into the recovery in Singapore’s economy will One growing concern is sri lanka 2009 is expected to remain negative. government’s Jobs Credit Scheme. rely on the return of global demand. the rapid population increase Thailand There has been some improvement Under the scheme, the government Singapore remains one of the most over the last two years, to Vietnam in the manufacturing sector, has paid employers 12% of each trade-dependent economies in the 5 million. Foreigners make up europe and eurasia which accounts for a quarter of employee’s monthly wages, up to world, with a trade-to-GDP ratio of 1.25 million of that number— middle easT Singapore’s economy. Electronics and 2,500 Singapore dollars per month. more than 300%. an increase of 500,000 from and aFrica pharmaceuticals in particular have The government has extended the 2008—and the number of aBouT sponsors ■ ■ ■ shown signs of improvement. Other scheme for an additional six months permanent residents has risen indicators also suggest a recovery beyond the previous deadline to a total of 533,000. Further rapid increases in population size in the near term would put excessive strain on the country’s low risk 10 MACRO RISKS LABOR RISKS current infrastructure. Existing 9 government projections only 8 plan for the population to 7 hit 6.5 million in the 6 next 20 years. 5 4 3 2 1 high risk 0 Political Social Security Economic Foreign Flexibility Availability Quality (Dis)content Investment very positive trend current quarter positive trend prior quarter negative trend current quarter very negative trend prior quarter 
  14. 14. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology The americas asia paciFic Overview: europe in the private sector, as banks use than an underlying improvement in and eurasia overview ECB funds to purchase government the economic environment, have Europe and Eurasia debt. The future tax policy consequences of these responses supported employment levels and that unemployment may begin to rise risk index Baltics Belgium are uneven, but increases are likely again toward the end of the year. croatia almost everywhere. czech republic In Turkey, growing debt and deficits denmark ➔ Strains in the financial and Similar risks are evident in Russia, are a major concern. However, a France real economy are evident across though there have been some new stand-by agreement with the germany hungary Europe and Eurasia, despite data recent bright spots—notably a IMF would provide cheap financing ireland showing slight growth in some key decline in unemployment, which and leave more room for private italy countries. In eastern Europe, credit has been well received by Russian borrowing in domestic debt markets. luxembourg and liquidity factors are worse than policymakers. However, the Russian Still, budget cuts are a major political netherlands in western Europe, and the health economic recovery remains tentative challenge because the government norway poland of the banking sector is an ongoing and fragile. The economy is highly is wary to take such measures in portugal uncertainty. The European Central vulnerable to a correction in oil prices advance of the 2011 election. romania Bank’s liquidity-boosting operations and to any return of the global credit russia ■ ■ ■ seem to have helped minimize squeeze that plagued markets in spain sovereign financing risks, but this may early 2009. Additionally, there are sweden result in a crowding out of investment concerns that seasonal factors, rather switzerland Turkey ukraine united kingdom middle easT and aFrica aBouT sponsors 
  15. 15. conTenTs gloBal markeT BrieF & laBor risk index Q4 2009 preFace meThodology europe and eurasia – risk index summary TaBle – Q4 2009 The americas asia paciFic europe political social security economic Foreign Flexibility availability Quality (dis) content and eurasia overview Baltics 7 7 8 4 7 3 5 7 3 risk index Baltics Belgium 6 7 8 6 8 5 6 8 6 Belgium Croatia 6 X 8 8 5 7 5 6 7 4 croatia Czech Republic 5 Y 9 8 6 6 Y 6 6 8 6 czech republic denmark Denmark 7 9 8 7 9 6 5 8 6 France France 7 8 7 6 8 4 6 8 5 germany Germany 7 X 9 8 6 8 X 5 6 9 3 hungary ireland Hungary 5 Y 7 9 4 X 8 6 6 7 4 italy Ireland 6 9 8 6 9 6 6 8 5 luxembourg netherlands Italy 7 8 7 6 6 4 6 8 5 norway Luxembourg 7 9 8 7 7 5 5 9 7 poland Netherlands 6 8 8 6 8 5 5 8 8 portugal romania Norway 7 9 8 6 9 4 5 9 8 russia Poland 6 X 7 9 5 X 7 X 5 6 7 5 spain Portugal 7 8 7 6 7 Y 2 6 X 7 5 sweden switzerland Romania 6 Y 6 7 3 6 4 5 6 3 Turkey Russia 7 Y 6 Y 6 6 X 6 6 7 6 5 Y ukraine Spain 7 7 Y 7 6 7 2 8 8 3 united kingdom middle easT Sweden 8 9 8 7 8 4 6 X 9 6 and aFrica Switzerland 7 9 8 7 8 6 5 9 8 aBouT sponsors Turkey 6 6 5 4 X 7 4 X 5 5 4 Ukraine 4 Y 6 X 7 2 5 6 6 5 5 United Kingdom 7 8 6 6 9 6 6 8 5 For all variables, scores range from 1 to 10, where 1 is ‘high risk’ and 10 is ‘low risk’. very positive trend positive trend negative trend very negative trend 