The document discusses trends in the global and Asian economies and opportunities for Singapore. In the short term, weaker global growth and risks from Europe, China, and Japan pose challenges. However, long term trends like slowing growth in developed nations, China's economic transition, urbanization and a growing Asian middle class point to continued growth in Asia. Singapore is well positioned to benefit from its role as a regional hub, but must adjust to higher costs and slower growth in the near term.

1. The Global New Normal &
Opportunities for Home Grown
Global Champions
Presentation to CEO Leadership Exchange 2012
23rd May 2012
Manu Bhaskaran
Centennial Group
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2. KEY TAKEAWAYS
Despite risks, Asian surge will continue
 Short term risks: Asia has not decoupled
 Expect bad news
 Long term: changing landscape
 Global trends: Changing growth drivers
 Asian trends: Asian Century or …?
 Singapore as a major beneficiary
 Adjusting to challenges, beneficiary of trends
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3. THE SHORT TERM:
WEAKER GROWTH, NO CRASH
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4. SHORT TERM: RISKS DOMINATE
Caution needed
 Eurozone: recession is unavoidable
 Still largest market; financial shocks too
 China: worrying signs of sharp weakening
 Domestic/external demand falling
 Japan: recovery from disasters but
 Nuclear power shutdown, sales tax fears
 US: not strong enough to offset
 Job/income growth weak  demand weak
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5. THE LONG TERM TRENDS:
GLOBAL ECONOMY
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6. KEY CHANGES IN GLOBAL ARENA
The next decade
 Slower global growth but higher quality
 G-3: deleveraging, not credit fuelled
 China: demographics, up the value chain
 A more volatile world
 Political stresses, energy prices, policy shifts
 Changing structure of competitiveness
 Re-industrialisation of US
 Definancialisation: smaller finance sector
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7. SLOWER GROWTH
G-3 economies’ adjustment
 Deleveraging will take a few years
 Households have to raise savings rate
 Governments cut budgets
 Credit system will take time to heal
 Banks will be wary, borrowers too
 Restrained investment
 To absorb excess capacity in housing etc
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8. SLOWER GROWTH (2)
China will slow significantly
 Demographics – work force growth slows
 Migration of rural workers slowing
 Labour costs rising – wages, social security
 Shifting policy emphasis
 Quality not quantity: environment, inequality..
 Removing hidden subsidies: energy, etc
 Reaction to over-investment
 Especially in housing
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9. PATTERNS OF GROWTH
Substantial volatility, stresses
 Global finance: hard to reform
 Developed: restructuring  stresses
 EMs: high growth cannot be smooth
 Tighter competition for resources
 Importance of resilience
 Balance of shock absorbers, amplifiers
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10. CHANGING STRUCTURES
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11. CURRENCY REALIGNMENTS
Role and value of US Dollar down
 US Dollar - diminished
 Role: no more dominant reserve currency
 Value down as USD holders diversify away
 Asian currencies rise vs USD, EUR
 Winners: RMB, TWD, KRW, SGD, MYR
 RMB will rise vs other Asians
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12. CHANGING COMPETITIVENESS
Don’t under-estimate the US
 USD down, boosting domestic producers
 New energy boom in US  lower costs
 Massive restructuring: efficiency gains
 Clear signs of re-industrialization
 1st refineries, petrochemical in decades
 Chip plants – Intel
 Products with high tech, high tpt costs,…
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13. EMERGING MIDDLE CLASS
Structural shifts in global demand
 Asian middle class grows sharply over next 40 years
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14. CHANGING STRUCTURES (2)
Population shifts
 Migration within country
 - Rapid pace of urbanization
 - From low growth regions
 Migration between countries
 - Legal and illegal
 - Likely large in South Asia
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15. CHANGING STRUCTURES (4)
More Mega Cities in Asia
Top 10 Largest Asian Cities in 2025
Rank Country Urban agglomeration Population (millions)
1 Japan Tokyo 37.09
2 India Delhi 28.57
3 India Mumbai (Bombay) 25.81
4 Bangladesh Dhaka 20.94
5 India Kolkata (Calcutta) 20.11
6 China Shanghai 20.02
7 Pakistan Karachi 18.73
8 China Beijing 15.02
9 Philippines Manila 14.92
10 Japan Osaka-Kobe 11.37
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16. THE LONG TERM TRENDS:
ASIAN CENTURY
OR
MIDDLE INCOME TRAP?
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17. KEY DRIVERS OF ASIAN GROWTH
Complex web, mutually reinforcing
 Dramatic change in mindsets
 New energies, entrepreneurs, open to ideas
 Improving skills, human capital
 Education, improving health
 New competitive advantage
 Eg offshoring, low-end manufacturing
 Rising investment rate
 Domestic and foreign investment
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18. NEW TRENDS IN FUTURE
Recent growth spurring other positives
 Changing relativities
 China slows, India accelerates, …
 Rise of laggards: Phils, Myanmar, Bangladesh
 Changing structure of competitiveness
 China up value ladder; Indian manufacturing
 Increasing integration
 ASEAN Economic Community, Sub-regional
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19. MASSIVE URBANISATION
Asia’s urban population will nearly double by 2050
 Competitiveness, social
and political stability
 Depends on quality and
efficiency of urban areas
 Important to manage
significant risks
 Inequality, slums and
breakdown of social
cohesion
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20. PROJECTIONS
 Singapore’s strengths are durable
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21. ASIAN CENTURY SCENARIO
Asia will account for more than half of
global output in 2050
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22. MIDDLE INCOME TRAP
A majority of Asian economies still have to
demonstrate their ability
 Growth tends to become more
capital and skill intensive
Middle Income Trap
 Unable to compete with low
income, low wage economies
 Unable to compete with advanced
economies in high skill
innovations
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23. SINGAPORE:
NEW PHASE OF ADJUSTMENT
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24. SINGAPORE: NEAR TERM
Restructuring for new phase of growth
 Next 2-3 years: slowing, deflating
 Slow growth in G-3 will hurt
 Labour policy more restrictive
 Real estate cooling measures
 Cost rise temporary, will adjust down
 Costs and SGD have risen, SGD won’t weaken
 Restructuring like 2001-03: wages, rents down
 Relocation of activities to Iskandar Region
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25. SINGAPORE: LONG TERM
Major beneficiary of Asian trends
 Unique positioning
 Unmatched as hub serving India, ASEAN
 Major wealth management centre for Asia
 ASEAN integration boosts S’pore hub
 Increased flow of goods, people, capital
 Govt firm commitment to manufacturing
 Will do max to nurture sector
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26. CONCLUSION
 Near term: risks from global slowdown
 Asian growth virtually unstoppable
 The Asian Century scenario more likely
 Long term trends
 Urbanisation, Middle Class/new rich,….
 Increased integration, rise of the laggards
 Singapore a major beneficiary
 Will adjust its costs down, remain competitive
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27. THANK YOU!
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