the global new normal & opportunities for home spring may 12
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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!
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