# Presentation: 259091

## THE NEXT DECADE: MEGATRENDS THAT SHAPE GLOBAL “COMMERCIAL” RELATIONSHIPS

- Tradewinds Forum
- 15 May 2007

## The “40/40” Rule - - where are the future Top Corporates coming from?
The “85/15” Rule - - who “works” & who “pays”?
The “New Nationalism” - - it’s more than geo-politics
The “Great Wealth Transfer” - - $220 Bn/yr from US ALONE!
The Energy/Environmental Challenge - - sustainable replacements for hydrocarbons; energy security; See all the above, 1-4!!

- The “85/15” Rule - - who “works” & who “pays”?
- The “New Nationalism” - - it’s *more* than geo-politics
- The “Great Wealth Transfer” - - $220 Bn/yr from US ALONE!
- The Energy/Environmental Challenge - - sustainable replacements for hydrocarbons; energy security; See all the above, 1-4!!

## 6.  What Are Some Key “Execution Points” for the global commercial/diplomatic partnership?

## The 40/40 Rule

-   Every 40 **months** there is a 40% turnover among the members of the Business Week Global 1000.  To be clear, 40% *disappear* and 400 new companies *emerge*.
- 		Why is this important?

## Countries with the Majority of Newly Listed Companies

**Countries with the Majority of Newly Listed Companies**

| Japan |  |
| --- | --- |
| Taiwan |  |
| United States |  |
| South Africa |  |
| Korea |  |
| Russia |  |
| India |  |
| 
Mexico 

China/HK

Brazil      |  |

**Total**

- ^The remaining came from: Belgium (1), Brazil (1), Canada (1), Israel (1), Italy (1), Malaysia (2), Poland (2), and Switzerland (1).

**18**
**18**
**16**
**10**
**10**
**  ****9**
**  ****8**
**  ****6**
**  ****6**
**  ****5**

## Newly Listed Companies in the Americas 

**Newly Listed Companies in the Americas **

- Canada       1
- U.S.          16
- Mexico        6
- Israel           2
- Brazil           5
- Chile            1
**Total          31**

- Israel

## Newly Listed Companies in Asia Pacific

- Japan       		18
- Korea       		10
- China/Hong Kong   	  6
- Taiwan		18
- Thailand       	  3
- Malaysia           	  5
- Indonesia       	  1
**Total          ****	**** 61**

**Newly Listed Companies in Asia Pacific**

## Newly Listed Companies in Europe, Middle East & Africa

**Newly Listed Companies in Europe, Middle East & Africa**

- Ireland         1
- U.K.             3
- Belgium       1
- Germany     2
- France         1
- Spain           1
- Switzerland  1
- Italy              3
- Greece         2

- Russia 	    9
- Poland	    2
- Hungary	    1
- Austria           1
- India               8
- South Africa 10

**Total of EMEA        ****	**** 46**

- 15 “Old Europe”

- 31 “New Europe”

## % Foreign Listings in Each Exchange

-   London: 46%
-   London AIM: 22%
-   Nasdaq: 20%
-   New York: 14%
-   Euronext: 8.5%
-   Frankfurt, Hong Kong and Tokyo: 0%

## Global Foreign Transactions – Number of IPOs

- Key Exchanges*, National v International Listings (January – December 2005)
- Source for all data: Ernst & Young/Thomson Financial
- *Euronext, Frankfurt, Hong Kong, LSE, London AIM, Nasdaq, New York and Tokyo

|  | Foreign | Local | Total |
| --- | --- | --- | --- |
| Transactions | 154 | 1,366 | 1,520 |
| Capital Raised ($M) | 23,748 | 141,670 | 165,418 |

## Euronext:

|  | Foreign | Local | Total |
| --- | --- | --- | --- |
| Transactions | 3 | 33 | 36 |
| Capital Raised ($M) | 2,519 | 21,236 | 23,755 |

## London AIM

|  | Foreign | Local | Total |
| --- | --- | --- | --- |
| Transactions | 55 | 95 | 150 |
| Capital Raised ($M) | 2,835 | 2,856 | 5,691 |

## London

|  | Foreign | Local | Total |
| --- | --- | --- | --- |
| Transactions | 18 | 21 | 39 |
| Capital Raised ($M) | 9,983 | 5,256 | 15,239 |

## New York

|  | Foreign | Local | Total |
| --- | --- | --- | --- |
| Transactions | 9 | 54 | 63 |
| Capital Raised ($M) | 3,689 | 19578 | 23,267 |

## Nasdaq

|  | Foreign | Local | Total |
| --- | --- | --- | --- |
| Transactions | 26 | 102 | 128 |
| Capital Raised ($M) | 2,945 | 10,150 | 13,095 |

## Frankfurt

|  | Foreign | Local | Total |
| --- | --- | --- | --- |
| Transactions | 0 | 23 | 23 |
| Capital Raised ($M) | 0 | 4,707 | 4,707 |

## Hong Kong

|  | Foreign | Local | Total |
| --- | --- | --- | --- |
| Transactions | 0 | 52 | 52 |
| Capital Raised ($M) | 0 | 20,337 | 20,337 |

## Tokyo

|  | Foreign | Local | Total |
| --- | --- | --- | --- |
| Transactions | 0 | 7 | 7 |
| Capital Raised ($M) | 0 | 3,315 | 3,315 |

## The 85/15 Rule

-   The developed world (US/Canada, Western Europe, Japan, Australia/NZ)
-   15% of Population: 85% of usable capital and technology
-   Population is aging/depleting
-  The emerging world
-   85% of Population: 15% of usable capital and technology
-   Population is aging, **but trend is** *20-40 years behind* developed world

## The Most Important Number

- 2.1

## The “Replacement Rate”

-   2.1 is the “Replacement Rate,” or the birth rate required to keep the population constant in a developed country
-   Birth Rates for selected countries, circa 2001
-  Spain 1.1
-  Italy 1.1
-  Germany 1.3
-  Japan 1.3
-  China 1.4
-  Korea 1.5
-  United States 2.0
-  Iran 2.1
-  Turkey 2.3
-  India 2.8
-  Mexico 2.8

## Population Math @ 3.0 Birthrate

- 		Gen 0		Gen 1		Gen 2
- Pop	100mm		150mm		225mm
-  M	50mm		75mm		112mm
-  F	50mm		75mm		112mm

## Population Math @ 1.3 Birthrate

- 		Gen 0		Gen 1		Gen 2
- Pop	100mm		65mm		42mm
-  M	50mm		32.5mm		21mm
-  F	50mm		32.5mm		21mm
- 		(Russia, Spain, Italy, Germany, Japan)

## BRIC and W.Europe Birth Rates

- Source: UN World Population Prospectus 2004

## Future Surplus or Deficit In Working Age Populations In 2020

- 		_Losers_				_Winners_
- US 		-17 million		India 		+47 million
- China 	-10 			Philippines 	+5
- Japan 	-9 			Indonesia 	+5
- Russia 	-6			Mexico 	+5
- Germany 	-3			Egypt 	+4
- France 	-3			Brazil 	+3
- Spain 	-3			Malaysia 	+1
- UK 		-2			Ireland 	0
- Italy 		-2
- Australia 	-0.5

## Some FRIGHTENING CIS Data

-   By 2050, Russia could lose up to 50% of its population
-   First half ’05, Russian population fell by 500K
-   Male life expectancy in Russia is 56 (=Bangladesh)
-   Ten years ago male life expectancy was 63!
-   More abortions than births in Russia every year
-   WHO: “By 2020 more than 1 mn AIDS dead”
-   Due to incredible Hepititis C, alcoholism, etc., 10 mn are infertile
-   25% live below poverty line
-   Russian is expelling 1000’s of “unwanteds”

## “Globalization” is NOT “Optional”

- Movement of capital and technology from the developed to the emerging world, and the movement of people from the emerging to the developed world through exports, offshoring, and migration
***IT IS INESCAPABLE!***

## Nationalism

- Russia’s “national energy policy” (Estonia, Ukraine, Georgia, “Europe”)
- Rejection of EU Constitution
- France sees “yogurt” as a national interest (see also, Arcelor/Mittal; Sarkozy’s “conservative” speeches)
- China and People’s State Assets Committee’s Ownership in so-called “public companies” (see, Occidental Petroleum)

## Iran and Nuclear ambitions

	Where is the strength of “collective action”?
	NATO? UN? EU? OECD?

	What are the implications for the commercial diplomatic partnership?

- 	*Where is the strength of “collective action”?*
*	**NATO? UN? EU? OECD?*
*	**What are the implications for the commercial diplomatic partnership?*

## Wealth Transfer

-   Energy demand has _doubled_ in last 50 years - will continue to increase through 2025
-   85% of energy demand = use of hydrocarbons
-   Oil/barrel 2003 = $25; 2007 = $50-70
*A 260% increase*
-   Every $5 increase in barrel = a $100 million shift in US economy to pay for same amount of oil; *60% of which leaves the US*

##   US ALONE, annual wealth shift of $220 Billion per year - - NOT COUNTING ALL OTHER ENERGY IMPORTERS
  MEGA WEALTH TRANSFER UNDERWAY: Losers - -  US, Western Europe; Winners - - CIS, Middle East

		A very under-publicized process that 	can have devastating long-term 	consequences

-   MEGA WEALTH TRANSFER UNDERWAY: *Losers* - -  US, Western Europe; *Winners* - - CIS, Middle East
- 		***A very under-publicized process that ******	******can have devastating long-term ******	******consequences***

## The Energy/Environmental Challenge

-   Daniel Yergin’s _THE PRIZE_: the story of the last 150 years is all about oil and energy - - *if anything the struggle is only worse now*
-   Issue of “haves” & “have nots” will cause instability both geo-politically and commercially - - *YOU’D BETTER HAVE A STRATEGY*

## The Energy/Environmental Challenge

-   The search for sustainable alternatives - - *Is there a Race?*  If there is, who will win it?  What policies in the US could trigger a Wilsonian (14 Points); Roosveltian (WPA/WWII); Truman-esque (“Marshall Plan”); or Kennedy-esque (“Man on the Moon”) call to action?  Tax Policy? Public-Private Partnership?
-   Environmentalism will only complicate this: China/India/Russia/versus US/Euro view (self-limiting behaviors)

## Execution Points

- Emerging Markets – Looking Ahead
- Globalization is ***irreversible*** – we are linked by our demographic destinies
- The political economy of globalization is well established – a few remaining outcasts and the occasional backlash notwithstanding
- Ability to “use” globalization to drive higher returns depends on good understanding of, and playing in, emerging markets

## Execution Points

- A True Truism:
- If you want to be a LEADER in your business in five years, you’d better have a great strategy to be a market leader in the BRICs **NOW** - - It’s almost too late!

## Execution Points

- Success in Emerging Markets
- Understand the historical & cultural context
- Need to be sure to avoid looking “post-colonialist” or “imperialist”
- Commit resources to develop understanding
- Consistent, long-term presence “in-country” - - a MUST
- Develop locally-based human resources - - the FUTURE
- Critical success factor - - a network of “partners” – but the right ones!!

## Execution Points

- What “Investors” Want
- Predictability
- Stability & Security
- “Even” Playing Field
- Rule of Law/Property Rights (IPR, etc.)
- Control Corruption (or at least one stop shop)
- Transparency
- 	But, we seldom get this; and many are betting against the curve anyway!!!

## Execution Points

- Trade barriers *between* North America and Europe are suicidal in the long-term
- Given demographics and energy sources, NA-Euro trade barriers create a “negative feedback loop” in the wider “global commercial competition” vs China, India & CIS

## Execution Points

- Importance of the “Commercial/Diplomatic Partnership” to result in “long-term change”
- Living *our* values (transparency, fight corruption, protect IPR, share power & knowledge) - - what is good for MNCs in emerging markets is generally good for local population  (e.g. Ukraine)
- Giving voice to the silent local commercial populace (Professor Yassen: real “liberal”, free market in CIS needs CIS commercial leaders to voice the vision; but VERY difficult during a post-imperialist phase) - - It’s not just in Russia & China! (France, Germany, etc.)

## Thank you