Dr' Balbir Bhasin

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SACRED HEART UNIVERSITY IFCC
Global Trends Opportunities for Europe in
Emerging Asia - Tuesday May 30th, 2006

• Dr. Balbir Bhasin
• Associate Professor of
• International Business
• John F. Welch College of Business

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Global Trends Population Perspective Top 15

• Largest Populations
• China (1,300)
• India (1,100)
• USA (300)
• Indonesia (245)
• Brazil (188)
• Bangladesh (147)
• Pakistan (143)
• Russia (143)
• Nigeria (132)
• Japan (127)
• Mexico (107)
• Philippines (89)
• Vietnam (84)
• Germany (82)
• Egypt (79)

• Asian Populations
• China (1,300)
• India (1,100)
• Indonesia (245)
• Bangladesh (147)
• Pakistan (143)
• Japan (127)
• Philippines (89)
• Vietnam (84)
• Thailand (64)
• South Korea (49)
• Burma (47)
• Afghanistan (31)
• Nepal (28)
• Malaysia (24)
• Taiwan (23)

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Global Trends Asias Rise

• Asias rise is the fourth big transformation in
  relative economic power since the industrial
  revolution
• Early 19th century rise of the UK
• Late 19th and early 20th centuries rise of US
  and Germany
• Post-second world war Japanese miracle
• 1970 onwards rise of the rest of Asia, including
  China and India

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What Caused Asias Rise?

• Asias success due to Deregulation,
  Liberalization and Reform same as US Europe
• South Korea and Taiwan
• Hong Kong and Singapore
• ASEAN 5 Thailand, Malaysia, Indonesia,
  Philippines
• China, India, Vietnam
• Problems in Bangladesh, Pakistan, Nepal, Sri
  Lanka, Burma

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2004
2025
2050
Source Business Week Special Issue, China/India
2005
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Global Trends A New World Economy

• Based on the IMFs World Economic Outlook
  database, The Economist concluded that In 2005
  the combined output of Emerging Economies rose
  above half of the global total
• In 2005, their combined GDP grew in current
  dollar terms by
• 1.6 trillion, more than the 1.4 trillion
  increase of developed economies
• Their share of exports has jumped from 20 in
  1970 to 42 last year over the past five years,
  they have accounted for more than half of the
  growth in world exports
• Emerging economies are now sitting on two-thirds
  of the worlds foreign exchange reserves
• Developed economies trade with developing
  countries is going twice as fast as their trade
  with one another
• The EU exports twice as much to the emerging
  markets as it does to America and Japan combined
• Source Emerging
  Economies Climbing Back The Economist 19
  January 2006.

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Global Trends Outlook for Major Economies
Source Asian Development Outlook 2006, Asian
Development Bank, ISBN 971-561-603-8
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Global Trends Outlook for Asia
Source Asian Development Outlook 2006, Asian
Development Bank, ISBN 971-561-603-8
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Trends in Asia

• China is poised to overtake the US as the major
  trading partner of Japan. China is now Japans
  largest source of imports
• South Koreas prime export market is China
• China-India trade growing Hand Across the
  Himalayas
• 10 years ago - 100 million
• 2002-2003 - 7.6 billion (up 3.6)
• 2004 - 10 billion
• 2005 - 15 billion
• ASEAN (500 million population) and China agreed
  to set up a Free Trade Area by 2010

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Global Trends Developments in Emerging Markets

• Growth in current account surpluses
• Rise in capital inflows
• Substantial rise in international reserves
• Improved domestic fundamentals and liquidity

• Rising demand for energy, food, and raw materials
  by 2.5 billion Chinese and Indians is already
  having ripple effects worldwide
• The US still consumes three times as much grain
  per person as China and five times as much as
  India
• Will this lead not to a global resource squeeze?
• Source World-watch Institutes
• State of the World 2006 Report

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Why Asia Holds a Special Interest

• Asia market growth emergence of worlds largest
  new middle class
• Asia as a source of highly educated, skilled
  labor (at low cost up to now)
• Result Asia has special place in business
  globalization (supply chains)
• Result Asia is becoming a world incubator for
  new high-tech businesses

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Changing Trends in Asia

• Increasing Affluence rising middle class,
  disposable income, consumption patterns,
  services, convenience, luxury items
• Rising Educational Standards leads to changes
  in demand for goods and services
• Increasing Number of English speakers better
  able to trade and participate in business
  activities
• Improving Infrastructure information through
  television, print media, internet, and travel
• Increasing Availability better distribution,
  packaging, advertising, standardization

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Growth Industries in Asia

• Legal, Banking and Finance
• Consumer Goods
• Infrastructure Development
• Building and Construction Materials
• Tourism and Hospitality
• Communications
• Health Care
• Marketing and Management
• Entertainment
• Contract Manufacturing

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Emerging Asian Countries with Potential

• China and India one third of the worlds
  population 2.5 billion!
• Annual Growth Rates 810 through 2010
• Asian Tigers Taiwan, South Korea, Singapore,
  Hong Kong newly affluent
• Asian Non-Tigers Indonesia, Malaysia, Thailand,
  Philippines, Vietnam 400 million

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Europes Advantages in Asia

• Long history established presence and trade
• Better understand cultures and social structures
• language, food, religion
• Better at relationship building
• Transfer of technology high demand
• Resources to compete with North America

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Asia Europe Ties Progress? Asia Europe Meeting
(AEM)

• Proposed by Singapore in 1994 means for
  breaking deadlock between ASEAN and Europe.
  Established in 1996 EU and 13 countries.
• ASEM a means of promoting an imaginary of Europe
  in Asia to maintain economic presence
• ASEM to be a project of common grandeur
• Vehicle for widening involvement and expanding
  cooperation in new areas
• Lack of progress due to disagreements over human
  rights and neo-liberal globalization
• Main components of ASEM process political
  dialogue, security and the economy, education and
  culture

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Concerns for Asia

• Need to check Inflation - due to rising prices,
  especially energy, transportation, labor
• Need to check Debt while at the same time
  improving public service and infrastructure
• Need to boost consumer buying power education,
  healthcare and pensions needed improvements so
  that people could reduce their saving
• Bird flu could represent the biggest risk to the
  region, depending on how well the region is
  prepared - something which has not yet been
  tested
• Need to discuss how to stop currency turmoil and
  strengthen their financial systems
• Source IMF May 2, 2006 (BBC Report)

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Asian Development Bank

• Established in 1966 aim to help build Asia
• Owned by 66 member countries 45 from within the
  region and 19 from outside
• Japan and USA hold 12.9 of voting power each
• 17 European countries hold 17.6 cumulative
  voting power
• European member countries recently contributed
  32.5 of replenishment to Asian Development Fund
• At the European Banking Congress in Frankfurt,
  ADB VP described relationship as European Bull
  meets Asian Tiger
• Need to cooperate!

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Asian Development BankUnique Opportunity for
Europe

• 17 February 2006 Speech by Haruhiko Kuroda,
  President, Asian Development Bank in Washington
  D.C. to the Council on Foreign Relations.
• Meeting was chaired by Gerald Seib, Washington
  Bureau Chief, Wall Street Journal
• Message Asias growth over the past
  half-century has been dramatic. This provides
  challenges and opportunities. Asia is full of
  money, but Asian countries need support various
  know-how and technologies.

• 18 January 2006 Speech by Phillipe Benedic,
  Resident Director General, European
  Representative Office, Asian Development Bank at
  the Colloquium Humanum, Bonn, Germany
• Title Asia The New Economic Competitor of
  Europe, Risks and Opportunities
• Message Asias economic strength is also a
  great opportunity for Europe.

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Asian Development Bank Opportunities for Europe

• Asia offers huge unsaturated export markets with
  over 4 billion consumers and growing income
• Cheap labor calls for sourcing for sourcing from
  and investing in the region
• Manufacturing (in China) and Services (in India)
  now represent over 50 GDP
• The demand for technology and know-how from
  Europe is tremendous.
• The competitiveness of European companies
  includes among others cutting edge in science and
  technology, infrastructure, energy, water,
  transport, environment, and financial services
• Source ADB, European Representative
  Office, 18 Jan 2006

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Asian Development BankLoss of Jobs or Benefits
to Europe?

• European companies investing in Asia improve
  their global competitiveness save European jobs
• Low costs lower prices control inflation and
  keep interest rates moderate, boost demand in
  Europe
• Asian countries sell and also buy goods and
  services in Europe
• Many Asian companies owned in whole or in part by
  European companies. Earnings are repatriated and
  invested in Europe supports economic growth.
• Productivity gains new jobs with higher value
  added. Taking advantage of their comparative
  strengths
• Through Joint Ventures, European and Asian
  companies can step up exports to third
  countries in the region
• Rise in standards of living in Asia will result
  in rise in cost of labor and reduce the gap
  compared with European labor cost
• Source ADB, European Representative Office,
  18 Jan 2006

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European Bull and the Asian TigerWhat Must
Europe and Asia Do?

• Europe must help develop Asia.
• Long industrial tradition and efficient system
  for keeping a free market economy
• Europe has a strong banking sector, a strong
  corporate governance system, legal stability and
  a welfare system allowing the population to
  benefit from economic success
• Asia can and wants to learn from Europe.
• Learn to combine rapid economic growth with
  environmental protection, energy efficiency,
  balanced urban growth and sustainable rural
  development
• Learn to strengthen resilience from external
  shocks and build regional economic programs
• Learn to better use its huge foreign exchange
  reserves and regional savings for creating global
  balances
• Source ADB, European Representative Office,
  18 Jan 2006

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Asia-Invest II 2003-2007 EU-Asia business
co-operation
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What is Asia-Invest II?

• Opportunities for EU-Asia business co-operation
• Primary initiative to support business
  co-operation between the EU and Asia
• Strengthen the EUs political and economic
  presence across Asia
• Raise awareness of Europe in Asia and vice versa
• Strengthen mutual trade and investment flows
• Reinforce Asian private sector and new business
  development opportunities
• Support new business partnerships
• Enhance export capabilities and foreign direct
  investment prospects of the less prosperous
  countries in Asia
• Promote the integration of Asia into the
  Information Society

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Asia-Invest II

• Asia-Invest I 1997, Commission contribution of
  32m
• Asia-Invest II 2003 to 2007, Commission
  contribution of 35m
• More than 260 projects supported to date across a
  range of sectors, involving hundreds of
  organizations

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EU and Asia Eligible countries
EU Austria Belgium Cyprus Czech Republic
Denmark Estonia Finland France Germany Greece Hun
gary Ireland Italy Latvia Lithuania
Luxembourg Malta Netherlands Poland
Portugal Slovakia Slovenia Spain Sweden United
Kingdom
Organizations from Brunei, Hong Kong, Macao and
Singapore can fully participate in projects as
associates, provided they do not receive
Commission financing
ASIA Afghanistan Bangladesh Bhutan Cambodia China
East Timor India Indonesia Lao
PDR Malaysia Maldives Mongolia Nepal North
Korea Pakistan Philippines Sri Lanka Thailand Viet
nam
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Global Trends A New World with Asian
Characteristics?

• Westernization, particularly Americanization, was
  a distinct feature of the 20th Century
• Western domination prevalent in music, clothing,
  entertainment, fast-food, language
• The 21st Century Global Village will have Western
  and Asian characteristics
• 30 million non-Chinese are learning Mandarin.
  Chinese is already the second language on the
  Internet 100 million Chinese netizens
• In vogue now Asian food, fashion, music, martial
  arts, yoga, movies, religion
• Adapted from David Gosset, Asia Times Online, 7
  April 2006

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SACRED HEART UNIVERSITY IFCC
Global Trends Opportunities for Europe in
Emerging Asia - Tuesday May 30th, 2006

• Dr. Balbir Bhasin
• Associate Professor of
• International Business
• John F. Welch College of Business