The global new normal & opportunities for home grown global champions 23 may12
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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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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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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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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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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