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

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1 The Global New Normal & Opportunities for Home Grown Global Champions Presentation to CEO Leadership Exchange 2012 23 rd May 2012 Manu Bhaskaran Centennial Group

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

Page 1: The global new normal & opportunities for home grown global champions 23 may12

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The Global New Normal & Opportunities for Home

Grown Global Champions

Presentation to CEO Leadership Exchange 2012 23rd May 2012

Manu BhaskaranCentennial Group

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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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THE SHORT TERM:

WEAKER GROWTH, NO CRASH

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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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THE LONG TERM TRENDS:

GLOBAL ECONOMY

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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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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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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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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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CHANGING STRUCTURES

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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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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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EMERGING MIDDLE CLASS

Structural shifts in global demand

Asian middle class grows sharply over next 40 years

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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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CHANGING STRUCTURES (4)

More Mega Cities in Asia

Top 10 Largest Asian Cities in 2025Rank Country Urban agglomeration Population

(millions)

1 Japan Tokyo 37.092 India Delhi 28.573 India Mumbai (Bombay) 25.814 Bangladesh Dhaka 20.945 India Kolkata (Calcutta) 20.116 China Shanghai 20.027 Pakistan Karachi 18.738 China Beijing 15.029 Philippines Manila 14.9210 Japan Osaka-Kobe 11.37

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THE LONG TERM TRENDS:

ASIAN CENTURY

OR

MIDDLE INCOME TRAP?

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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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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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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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PROJECTIONS

Singapore’s strengths are durable

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ASIAN CENTURY SCENARIO

Asia will account for more than half of global output in 2050

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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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SINGAPORE:

NEW PHASE OF ADJUSTMENT

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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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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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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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THANK YOU!